SEC Charges Advisory Firm Bruderman Asset Management and its Principal for Failing to Disclose Misuse of Investment Funds

The Securities and Exchange Commission (SEC) has made an official announcement regarding the resolution of charges against New York-based Bruderman Asset Management LLC (BAM) and its principal, Matthew J. Bruderman. The charges stem from their failure to disclose the improper use of proceeds obtained from investment advisory clients and their failure to implement adequately designed written policies and procedures concerning the disclosure of conflicts of interest.

According to the SEC’s order, spanning from at least February 2017 through August 2021, BAM and Bruderman provided advice to a minimum of 13 clients, advising them to invest at least $6.1 million in three companies where Bruderman had a significant ownership stake and decision-making authority. The SEC’s order asserts that BAM and Bruderman neglected to inform these clients that their investments would be temporarily diverted for other purposes, including funding BAM’s payroll and repaying loans owed to Bruderman or affiliated companies. Additionally, the SEC’s order states that BAM, through Bruderman, failed to establish reasonably designed written policies and procedures concerning the disclosure of conflicts of interest.

Sheldon L. Pollock, Associate Director of the SEC’s New York Regional Office, emphasized the importance of full disclosure in protecting investors, stating, “Full disclosure of conflicts of interest is a central safeguard for investors who place their trust in investment advisers. Our program remains focused on ensuring that investment advisers make full and complete disclosures in order to increase investor confidence.”

In response to the SEC’s findings, BAM and Bruderman, without admitting or denying the allegations, have consented to an order that mandates them to cease and desist from causing or committing violations of various provisions outlined in the Investment Advisers Act of 1940. The order also imposes a censure on both BAM and Bruderman and requires them to jointly and severally pay a civil penalty amounting to $250,000.