Scott Wolfrum

Date:

May 10, 2021

Type of alert:

SEC Cease-and-Desist  

On March 24, 2021, the Securities and Exchange Commission (SEC) filed cease-and-desist proceedings against investment adviser Scott Wolfrum of Indianapolis, Indiana for failing to disclose conflicts of interest when making investment recommendations to clients from December 2015 to June 2018.

During this time, Wolfrum was associated with two broker dealers in Indianapolis that are registered with the SEC and FINRA. Wolfrum was associated with David A. Noyes & Company from May 2013 to January 2018 and Huntleigh Securities Corporation from January 2018 to September 2019.

During this time period, Wolfrum provided investment advice to clients under Wolfrum Capital Management, an unregistered investment adviser that he solely owned, and through these registered firms. In February 2018, Wolfrum became 50% owner of Foundry Capital Group (FCG), and by July 2018, Wolfrum became 100% owner of FCG.

According to the SEC Order, Wolfrum sold over $20 million in interests in Foundry Mezzanine Opportunity Fund (FMOF), a private fund that provides lending to and invests in small businesses, without disclosing to these investors that FCG is the general partner for FMOF. Wolfrum also failed to disclose that he and his family had 7.5% equity interest in two of FMOF’s holdings and that he received $140,125 in finder’s fees for facilitating two FMOF investments.

As a result of the foregoing, Wolfrum violated Section 206(2) of the Advisers Act, which prohibits investment advisers from engaging “in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.” Anticipating the SEC Order, Wolfrum presented an Offer of Settlement and agreed to cease-and-desist from further violations of relevant securities laws, a bar from serving as a broker, dealer, investment adviser, or other position directly related to the securities industry. The SEC also ordered Wolfrum to pay disgorgement of $140,125, prejudgment interest of $21,354, and $75,000 in civil penalties to the SEC.

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