On 4 November 2024, the United States Securities and Exchange Commission vide its order granted an extension of time for Pinnacle Investments, LLC, to comply with the Commission’s requirements regarding a Proposed Plan of Distribution. This extension, requested by the SEC’s Division of Enforcement, now sets a deadline of 1 July 2025 for the plan’s submission. The extension order underscores the SEC’s commitment to ensuring full regulatory compliance in the distribution of funds to affected investors.
The case against Pinnacle Investments began on 5 May 2023, when the US SEC issued an Order Instituting Administrative and Cease-and-Desist Proceedings against the firm. According to the US SEC, from January 2015 to October 2022, Pinnacle Investments, a registered investment adviser and broker-dealer, engaged in multiple regulatory violations. These violations included making false and misleading statements in US SEC filings concerning advisory client account reviews, failing to disclose conflicts of interest linked to an investment adviser representative’s activities with an affiliated fund, and inadequately implementing policies to prevent similar breaches. Furthermore, Pinnacle Investments failed to provide clients with required information regarding advisory personnel.
Following these findings, the US SEC ordered Pinnacle Investments to pay $488,717 in combined disgorgement, prejudgment interest, and civil penalties. Additionally, the SEC established a Fair Fund under the United States Sarbanes-Oxley Act of 2002 (Section 308(a)), pooling the collected funds with accrued interest to compensate investors harmed by Pinnacle’s actions. This fund, amounting to $495,087.68, was deposited in a Commission-designated account at the United States Department of the Treasury.
On 17 June 2024, the United States SEC issued an initial Extension Order, granting the Division of Enforcement until 4 November 2024 to submit the Proposed Plan of Distribution. However, due to delays in appointing administrators, finalising the distribution methodology, and completing the plan’s details, the Division of Enforcement requested further time. Consequently, the United States SEC has now extended the deadline to 1 July 2025.
The United States SEC identified multiple regulatory breaches by Pinnacle Investments, citing specific provisions under United States securities law:
Section 15(b) of the United States Securities Exchange Act of 1934: This section governs the registration, regulation, and oversight of broker-dealers. Pinnacle’s failure to ensure accurate reporting and transparency in client account reviews and conflict of interest disclosures contravened its obligations under this provision.
Sections 203(e) and 203(k) of the United States Investment Advisers Act of 1940: These sections require investment advisers to adopt adequate policies to prevent violations of the Advisers Act, particularly concerning client account reviews and disclosures of conflicts. Pinnacle’s lack of sufficient safeguards in these areas directly breached these requirements.
In its May 2023 order, the SEC imposed a combination of financial penalties on Pinnacle Investments, amounting to nearly half a million dollars. The penalties included:
- Disgorgement of $83,462.00.
- Prejudgment interest of $11,874.00.
- A civil money penalty of $393,381.00.
These penalties collectively formed the Fair Fund, intended for distribution to Pinnacle’s affected clients. Through this extension order, the United States SEC seeks to ensure that Pinnacle Investments fulfils its obligations, enabling the fair and timely distribution of funds to the investors impacted by its violations. The United States SEC’s extension order indicates the agency’s determination to see Pinnacle complete the plan for fund distribution, ensuring that the proposed methodology and processes meet the necessary regulatory standards to protect investor interests effectively.
(Source: https://www.sec.gov/files/litigation/admin/2024/34-101508.pdf)
