SEC Charges New Jersey Man With Fraudulently Causing Advisory Firm to Overbill Clients

The Securities and Exchange Commission today filed charges against the former chief operating officer (COO) of a Commission-registered investment adviser for aiding and abetting the advisory firm’s actions to overbill its clients as part of a fraudulent scheme to improperly inflate his own pay.

According to the SEC’s complaint, between 2011 and December 2018, former COO Richard T. Diver, a resident of Spring Lake, New Jersey, engaged in an illicit scheme to steal approximately $6 million from his employer. Diver, whose duties included managing the advisory firm’s payroll and client billing functions, allegedly inflated his salary by hundreds of thousands of dollars per year. As part of this scheme, Diver defrauded investors by causing the investment adviser to overbill more than 300 investment advisory client accounts by approximately $750,000, for the purpose of generating additional revenue. As alleged in the complaint, Diver used this revenue to finance his inflated salary and when confronted by the investment adviser’s CEO in December 2018, Diver confessed to having carried out the scheme.

Marc Berger

“As alleged, Diver lined his own pockets by stealing from hundreds of advisory clients, until his scheme was exposed by an investor who asked the right questions about charged fees,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “When the scheme came to light, we took swift action to ensure that there was no further investor harm.”

The SEC’s complaint, filed in federal district court in Manhattan, charges Diver with aiding and abetting the investment adviser’s violations of the antifraud provisions in Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC is seeking a judgment ordering permanent injunctive relief, disgorgement plus prejudgment interest, and civil monetary penalties against Diver.

After conducting a swift investigation, the Commission staff referred Diver’s misconduct to the U.S. Attorney’s Office for the Southern District of New York, which separately announced criminal charges against Diver today.

The SEC’s investigation has been conducted by Gerald Gross, James Hanson, and Paul Gizzi of the New York Regional Office, and the litigation will be handled by Messrs. Gizzi and Hanson. The case is being supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the U.S. Postal Inspection Service.