The SEC charged a former investment advisor with defrauding clients and breaching his fiduciary duty by, among other things, over-concentrating portfolios in Rite Aid securities and misrepresenting the security and safety of those assets even after a planned acquisition of the drug store chain fell apart.
Jacob Glick, 36, allegedly placed clients in unsuitable and risky investments over a two year period that resulted in substantial losses, purportedly misappropriated some client funds for his own options trading, and allegedly misappropriated hundreds of thousands of dollars from an elderly widow, according to the SEC.
The regulator filed its case in federal court in Arizona and is seeking permanent injunctions, disgorgement, and civil penalties against Glick.
Glick’s attorney, Mark Chester, says his client has cooperated with the SEC’s investigation and disputes the allegations. “There’s no fraud involved or deceit,” Chester says.
He says much of the alleged misconduct according to the SEC stems from Glick investing his clients in Rite Aid in anticipation of a planned merger with rival drug store Walgreens that eventually fell through. “He thought, as many did, that the merger would go through and he positioned his clients to benefit from that. He was wrong,” the attorney says.
Rite Aid
Glick started his advisory career at JPMorgan in 2010. The SEC says that many of his clients at the bank were senior citizens and retirees who had conservative investments. The clients were generally not sophisticated investors and had moderate or conservative risk tolerances.
After leaving the bank in 2015, the Scottsdale, Arizona-based Glick opened Independent Fiduciary Group and partnered with Advanced Practice Advisors, an existing RIA.
There, Glick began putting his clients in riskier investments, including stock options for Rite Aid Corporation, according to the SEC. Glick breached his fiduciary duty to clients by failing to disclose and explain to them the risks of investing in stock options, the regulator alleges. Many of his clients allegedly ended up with portfolios heavily concentrated in just one security.
Glick should have obtained new risk assessments for his clients when he moved to Advanced Practice Advisors, per the firm’s policies, but he did not, alleges the SEC. The regulator says Glick wrote in an email to a colleague “it doesn’t matter” as long as “you produce the 7%-12%” per year.”
Acquisition collapses, stock plummets
One of Glick’s alleged victims, a retired widow in her 70s, had an account balance of over $721,000 prior to transferring her assets to Glick’s new firm in 2015, according to the SEC. Beginning in 2016, Glick began purchasing Rite Aid securities in her account using his discretionary authority. A year later, he had allegedly invested more than $450,000 in Rite Aid securities even though the client’s investing goals were the security and safety of her assets.
After a planned acquisition of Rite Aid by Walgreen’s fell apart in 2017, Rite Aid stock plummeted, dropping 26% on June 29, 2017, and prompting worry among Glick’s clients, according to the SEC. Glick “continued to mislead” clients by making misrepresentations about Rite Aid’s stock, telling one client who suffered a loss of $30,000 via text message that it would bounce back within a month, according to the SEC.
In February 2017, the CCO and CEO of Advanced Practice Advisors met with Glick and “told him to liquidate the [Rite Aid] positions in his client accounts, which Glick agreed to do,” according to the SEC. However, Glick did not do so and allegedly purchased more Rite Aid stock options in two client accounts, the SEC says.
Advanced Practice Advisors terminated him for “reckless disregard for determining client suitability” and failure to follow firm policies and procedures, according to the SEC’s Investment Adviser Public Disclosure database.
The RIA ended its registrations with the SEC and California in 2018 and 2021, respectively. In January, the RIA and its CEO settled an SEC case over alleged disclosure, supervisory, and compliance failures. Without admitting or denying the findings, Advanced Practice Advisors and its CEO agreed to the entry of a cease-and-desist order, civil penalties in the amount of $20,000, and limitations that prevent the chief executive from acting in a supervisory capacity.
Glick’s investments in Rite Aid resulted in over $1 million in realized and unrealized losses for clients, according to the SEC.
Chester, Glick’s attorney, says he kept his clients informed as to the investment in Rite Aid and that he sought no financial gain beyond helping his clients.
“He made a bad judgment call on the Rite Aid Walgreens merger, but to call it fraud, we don’t think it bears out,” Chester says.
Not suitable?
Even after his termination, Glick allegedly continued to advise the elderly widowed client who gave him $675,000 to invest on her behalf in a real estate venture, according to the SEC, which describes the investment as “an illiquid, extremely long-term real estate investment that was not suitable for a widow in her 70s.”
While Glick used some of the funds to invest in commercial real estate, he used other funds for his personal benefit and to pay back other investors “in Ponzi-like fashion,” according to the regulator. Those other investors, also former Glick clients, had given him $250,000 to invest in a private placement offering, but he instead used the funds to cover personal expenses and “to make unsuccessful trades in RAD,” the SEC claims.
When the widowed client suffered a stroke in 2018, her brother assumed her acting power of attorney. The brother allegedly met with Glick to find out about his sister’s assets, but, according to the SEC, Glick falsely said that he had stopped advising the widow in 2017 and that he had no knowledge about her assets or investments.
Chester, Glick’s attorney, says the SEC is mischaracterizing the situation, and that the widowed client was a close friend of Glick’s. “She gave him a gift. And the SEC is coming back and saying you took advantage of this person,” Chester says, adding that this is not the case.
“We’ll respond to the lawsuit and contest it and hopefully reach an amicable resolution with the SEC,” Chester says.
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