One of the challenges that consumers face when dealing with a financial adviser is what it means to be a “financial adviser.” The terms financial planner, wealth consultant, stockbroker, investment adviser, financial consultant, and others get thrown around, leaving you how that person gets paid for helping you with your money. A fraudster may sling around those terms and get paid by taking your money instead of investing it.
What to do when someone claims his firm is “an accredited investment and consulting firm specializing in wealth creation and preservation”? I know to run to FINRA’s BrokerCheck and the SEC’s Investment Adviser Search for diligence. In this case, you find red flags.
The Securities and Exchange Commission alleges that Scott Valente and his firm The ELIV Group LLC fraudulently raised more than $8.8 million from 80 clients by falsely claiming they achieve consistent and outsized positive returns coupled with misrepresentations about the safety of the investments. Valente and the firm are challenging the accusation, so we only have the SEC’s view of the case.
The other view is the FINRA history. Broker Check can be controversial because brokers have a hard time fighting back against customer accusations. There is one brightline in BrokerCheck and Valente has it on his report. Valente is barred from association with any FINRA member. He was kicked out of the brokerage industry.
Apparently, he decided to switch over to “wealth creation and preservation”, instead of merely selling securities, and formed ELIV Group.
According to the ELIV website, it invests 40% of the assets into “initial public offerings.” But it then goes on to say to that “We are able to buy privately held companies before they go public at very low prices.” Well that does not sound like an IPO. That sounds live private equity or venture capital investing to me. But maybe I’m just being overly technical.
The second method is E-mini S&P 500 Futures. That’s a risky investment that requires constant trading, unlike the bread and butter S&P index funds and ETFs.
ELIV’s third method is options. Again, another volatile trading strategy.
The fourth strategy is currency trading, using seven currencies.
That’s a lot of trading and a lot of different areas of expertise. The website claims a five year average annual return of 34.5%. That’s a great result, especially considering that the firm has been around for less than five years.
Perhaps Mr. Valente can pull it off. However, the SEC says that Valente generated losses and stole money from his investors (? … clients?… victims?). The SEC claims that Mr. Valente withdrew over $2 million to pay his personal expenses, far in excess of the 1% management he was entitled to.
According to the SEC complaint at least some of the ELIV clients were Mr. Valente’s clients while he was a broker. There is the problem for consumers. How are they supposed to conduct diligence on a financial adviser when the securities laws, licensing requirements, and disclosure information sites are fractured into so many parts?
References:
- SEC v. Scott Valente complaint (.pdf)
- SEC Charges Albany, N.Y.-Based Investment Adviser with Defrauding Clients
- Head of an Albany investment firm accused of $8.8 million fraud by SEC by David Robinson in the Albany Business Review
- BrokerCheck Report for Scott Valente