Philly RIA to return $11M to clients

A Philadelphia registered investment adviser has agreed to return nearly $11 million for misappropriating funds from clients who were told their money would support socially conscious investments, while it really went to pay the adviser's debts and for other purposes, according to federal regulators

A Philadelphia registered investment adviser has agreed to return nearly $11 million for misappropriating funds from clients who were told their money would support socially conscious investments, while it really went to pay the adviser’s debts and for other purposes, according to federal regulators.

From 2002 through October 2010, Otto Sam Folin and his RIA firm, Benchmark Asset Managers LLC, misrepresented how $8.7 million that he took in from advisory clients, friends and family would be spent, according to a Securities and Exchange Commission complaint. He sold some interests in Safe Haven Investment Portfolios LLC, a group of pooled investment vehicles Benchmark created, managed and advised, according to the complaint. He also sold Benchmark notes and notes in Harvest Managers LLC, which acted as a parent to Benchmark.

Among other uses, Mr. Folin spent the funds to pay back some investors from a failed business venture from 1999 for which he raised money from religious organizations and issued promissory notes representing investments and microfinance loans to South African causes, the SEC said. The money also was used to pay other investors, to buy homes and cover operating expenses, the SEC alleged.

“PRECARIOUS’ POSITIONS

Mr. Folin promised to generate guaranteed above market returns and failed to disclose Benchmark’s “continually precarious financial positions,” according to the complaint.

Mr. Folin’s attorney, Richard Levan, did not return an e-mail seeking comment and couldn’t be reached by phone.

In addition to agreeing to pay $8.7 million and $1.45 million in interest, he will pay a $725,000 penalty, according to the settlement filed July 28 in U.S. District Court for the Eastern District of Pennsylvania in Philadelphia. The SEC also revoked Benchmark’s investment adviser registration.

Under the settlement, Mr. Folin neither admitted nor denied the SEC allegations.

Email Liz Skinner at [email protected]