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Monday, June 22, 2015

SEC CHARGES OWNER AND FIRM WITH MOVING $17 MILLION IN CLIENT MONEY INTO STOCKS WHERE OWNER HAS UNDISCLOSED INTERESTS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
06/17/2015 09:35 AM EDT

The Securities and Exchange Commission announced fraud charges against a Massachusetts-based investment advisory firm and its owner for funneling more than $17 million in client assets into four financially troubled Canadian penny stock companies in which the owner has undisclosed business and financial interests.

The SEC alleges that clients at Interinvest Corporation may have lost as much as $12 million of their $17 million investment based on the recent trading history of shares in the penny stock companies, some of which are purportedly in the business of exploring for gold or other minerals.  Interinvest’s owner and president Hans Peter Black has served on the board of directors of these companies, which have collectively paid an entity he controls approximately $1.7 million.  Black’s involvement with these companies and his receipt of payments from them created a conflict of interest that he and Interinvest failed to disclose to their advisory clients.

The alleged violations were first identified in an SEC examination of the firm.  The SEC’s complaint filed late yesterday in federal court in Boston alleges that Interinvest and Black have stonewalled the SEC’s investigation.  The SEC is seeking a court order to freeze Interinvest’s assets and prohibit the firm and Black from continuing to exercise investment authority over client assets under management.  As of April 2015, Interinvest purported to manage almost $95 million.

“Investment advisers have a duty to put their clients’ interests first and fully disclose all conflicts of interest,” said Paul G. Levenson, Director of the SEC’s Boston Regional Office.  “We allege that Interinvest and Black violated that duty by investing client money in companies where he has a stake without fully disclosing that conflict to clients.”

The SEC’s complaint filed alleges that Interinvest and Black violated the antifraud and related provisions of the federal securities laws.  In addition to emergency relief, the SEC’s complaint seeks to permanently enjoin Interinvest and Black from violating the securities laws and require them to repay allegedly ill-gotten gains with interest and penalties.

The SEC’s investigation was conducted by Michael Vito, Peter Moores, John McCann, Chip Harper, and Celia Moore of the Boston office.  The SEC’s examination of Interinvest was conducted by Raymond G. Titus, Paul Prata, Daniel B. Wong, and Melissa Clough of the Boston office.