SEC bars owner of investment advisory firm for misusing $2.2 million in client funds

The Securities and Exchange Commission barred the sole owner of a California-based registered investment adviser for misleading investors and making trades in risky stock options.

From at least June 2014 to August 2015, Caleb R. Overton and his firm, Biltmore Wealth Management, raised about $2.2 million from 10 investors for a private fund called Biltmore Capital.

While Mr. Overton claimed the fund would invest primarily in leading growth stocks, he and his firm instead made substantial trades on the SPDR S&P 500 ETF, which attempts to replicate the returns of the S&P 500.

After placing a series of trades in SPY options in August 2015, Mr. Overton decimated the private fund, which lost nearly all, or more than 98%, of its value and held approximately $34,000 at the end of that month.

Following the losses, Mr. Overton closed the fund and distributed the remaining balance to investors. The fund was canceled by California in November 2015.

Mr. Overton and Biltmore could not be reached for comment.

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Of the 10 investors, eight were pre-existing clients, seven were 60 years or older, six invested funds from retirement savings and four were unaccredited. Biltmore earned fees for the fund approximating $22,580.

While Mr. Overton told investors that the fund’s risk would be mitigated by “stops,” which would cap losses at 7% to 8%, the fund often exceeded those limits. In monthly letters to investors, they failed to disclose the fund’s options trading, like SPY options.

Biltmore has about 190 clients and $30 million in total client assets.

Biltmore and Mr. Overton are liable for disgorgement of $23,043 to be paid over the next two weeks. They have also been fined a civil penalty of $160,000, which will be paid over the next year.

Related Topics: Securities and Exchange Commission