SEC Charges Foxborough Investment Adviser With Fraud

FOXBOROUGH, MA — The Security and Exchange Commission charged a local investment firm and its head man with defrauding clients by failing to disclose conflicts of interests related to the company's recommendations for investments. Kristofor Behn, of Foxborough, who heads Fieldstone Financial Management Group, recommended that retail clients invest in securities issued by affiliates of Oregon-based Aequitas Management LLC without disclosing Aequitas gave Fieldstone a $1.5 million loan and a $2 million line of credit, SEC officials said. Officials said Behn also used about $500,000 from one investor for personal expenses.

According to the SEC officials, from 2014 to early 2016, 40 clients of Behn and Fieldstone invested more than $7 million in Aequitas securities. Given the loan and line of credit Aequitas gave Fieldstone, Behn and Fieldstone "created a significant financial incentive" to recommend clients invest with Aequitas, SEC officials said.

Within days of receiving a $1 million investment from one client, Behn took $500,000 of the investment to pay his personal taxes and make other payments to himself, officials said. An SEC order also found that Behn and Fieldstone made misstatements and omissions in reports filed with the Commission, including false representations that the repayment terms of the loan from Aequitas were not contingent on Fieldstone clients investing in Aequitas.

"Behn flagrantly disregarded his most basic duties as an investment adviser by concealing the significant financial incentives he and his firm would receive by recommending investments in Aequitas," said Erin E. Schneider, Director of the SEC’s San Francisco Regional Office. "The Commission is committed to rooting out breaches of fiduciary duty to retail investors."

Without admitting or denying the SEC’s findings, Fieldstone and Behn consented to the issuance of the order, which finds they violated federal anti-fraud laws. Fieldstone was ordered to cease and desist from future violations and pay about $1.3 million in fines. Behn was also permanently barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or nationally recognized statistical rating organization.