The Corporation Commission ordered respondent AE Wealth Management, LLC to pay $1,159,400 in restitution to 240 former clients in the Tucson area and a $150,000 administrative penalty for committing investment advisory fraud.
AE Wealth Management is a registered investment adviser with the U.S. Securities and Exchange Commission. In November 2016, AE Wealth Management and Smith & Cox, LLC, an Arizona licensed investment adviser, agreed to become co-investment advisers to Smith & Cox’s clients in southern Arizona.
In March 2018, the Commission’s Securities Division filed an enforcement action against Smith & Cox and other respondents concerning their sales between 2013 and 2015 of U.S. military veterans’ retirement and disability benefits payments to investors. In September 2019, AE Wealth Management learned of that enforcement action and that Smith & Cox had concealed it from AE Wealth Management.
The Corporation Commission found that, instead of terminating its relationship with Smith & Cox and disclosing the 2018 enforcement action to their clients, AE Wealth Management deceived its clients and allowed Smith & Cox to continue to act for eight more months as the clients’ investment adviser.
In settling this matter, AE Wealth Management admits the Commission’s findings, including that it committed investment advisory fraud, for the purpose of this proceeding and agrees to the entry of the consent order. As part of the consent order, AE Wealth Management will pay the $1,159,400 restitution directly to the 240 former clients.
The case involving the remaining respondents—Cornerstone Wealth Management, LLC, Nathaniel S. Barnhart, Christopher Spence Cox, William Andrew Smith and Smith & Cox, LLC—is still pending.
All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov
and entering docket number S-21104A-20-0103.