by Brian Mahany
The U.S. Securities and Exchange Commission has started a “cease and desist” proceeding against a Chicago investment adviser firm, Calhoun Asset Management LLC, and its principal, Krista Ward. The complaint was filed on December 29th. The SEC says that the firm deceived investors by “grossly exaggerating” assets under management and making misleading statements about its due diligence process.
The SEC says Ward started two hedge funds in 2006, one of which is based in the Caymans. They say she told at least one person that her company had $237 million under advisement when actually she had just $3 million at most.
They say she also showed a power point presentation detailing a 10 year track record of one of her funds that touted an 11+% rate of return. The fund, however, had only existed for a couple years and the records were so disorganized that it was hard to determine the true rate of return.
This case is significant for investors.
The SEC has said it will be cracking down on investment firms that exaggerate or mislead investors. The public often has no way of knowing how successful a firm is other than what the firm tells people and reports to the SEC. Obviously, many investors would be very hesitant to turn over their hard earned money to an adviser with little experience or into a fund with almost no history.
The case against Ward and Calhoun Asset Management is not criminal. If the SEC prevails, however, the firm will likely go under. As for all the investors in Ward’s funds, they have a claim but may find it difficult to collect if the funds do not perform. Customers who purchased her funds from another broker or investment adviser may have a better chance of collecting.
According to the SEC, neither Ward nor Calhoun have any prior disciplinary history. Start-ups or businesses with no prior problems make due diligence tricky. At least the SEC appears to be checking into claims, however.
One thing an investor can do is seek audited financials before investing. (We acknowledge that sometimes the auditors appear be involved in the fraud too – think Bernie Madoff and his auditors, Friehling & Horowitz.)
If you are the victim of an investment fraud or other type of securities fraud by a stockbroker or investment adviser, call us. Our fraud lawyers have helped people get back their hard earned money all across the nation. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and now, Minneapolis, Minnesota. Services in most locations.