Former Wealth Management Luminary Charged With "Secretly" Investing Client Cash

Eliane Chavagnon

18 May 2012

Mark Spangler, former chairman of the National Association of Personal Financial Advisors, has been charged by the Securities and Exchange Commission for investing $47.7 million into two “risky start-up companies” which he co-founded, without informing investors, the regulator said.

Separately, the US Attorney's Office for the western district of Washington announced separate criminal charges against Spangler.

From about 2003 – without notifying investors - Spangler and his advisory firm, The Spangler Group, began deflecting the “majority of client money” into the two private technology companies, despite his saying that he would invest principally in public-traded securities, according to a statement from the SEC today.

Spangler, who served as chairman and chief executive of one of the now-bankrupt companies, raised over $56 million for several private investment funds he managed since 1998, according to the SEC’s complaint, filed by federal court in Seattle.

One of the companies received nearly $42 million from the funds before going bust. “It had long been a cash-poor company with a history of net losses, generating less than $100,000 in revenue during its 11-year history. Yet Spangler continued to treat the funds as the company’s piggy bank,” the SEC said.

Moreover, the SEC alleges that Spangler did not inform investors that The Spangler Group collected fees for “financial and operational support” from these companies, in turn secretly harvesting $830,000 - on top of any management fees that the group received from clients.

Spangler disclosed his activities after placing The Spangler Group and the funds he managed into state court receivership in 2011. He is charged with violating - among other things - the anti-fraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940, the SEC said.