July 1, 2022/US SEC
The Securities and Exchange Commission yesterday charged Eric Hollifield of Winder, Georgia, with misappropriating at least $1.7 million from two advisory clients and one brokerage customer and using the funds to pay for personal expenses, including the purchase of a home.
The SEC’s complaint alleges that, beginning no later than January 2020, Hollifield transferred client assets to an outside business over which he maintained control and, without the clients’ permission, subsequently directed a portion of those funds to his own accounts, which he used to pay personal expenses. The complaint also alleges that, on August 11, 2020, Hollifield used investor funds to purchase a 37-acre home in Winder, Georgia for approximately $1.7 million. Specifically, the complaint states that Hollifield moved at least $425,000 of client funds through the outside business and used a portion of that money as a partial payment for the property. At that same time, Hollifield sold securities in a brokerage customer’s account and recommended that the customer transfer $1.24 million to another financial institution to accrue higher interest. According to the complaint, after receiving the customer’s permission for the transfer, Hollifield instead sent the money immediately to a real estate closing agent to complete the purchase of his home.
The SEC’s complaint, filed in federal district court in Gainesville, Georgia, charges Hollifield with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks permanent injunctions and monetary relief.
In separate settled administrative and cease-and-desist proceedings, the SEC charged Hamilton Investment Counsel, LLC (“HIC”), the investment adviser Hollifield co-owned, and Jeffrey Kirkpatrick, HIC’s Chief Compliance Officer, for failing to implement the firm’s policies and procedures by inadequately responding to numerous red flags surrounding Hollifield’s outside business activities.
The SEC’s order finds that HIC violated Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and that Kirkpatrick willfully aided and abetted and caused HIC’s violations. Without admitting or denying the SEC’s findings, HIC agreed to a censure, a cease-and-desist order, and a civil penalty of $150,000. Without admitting or denying the SEC’s findings, Kirkpatrick agreed to a cease-and-desist order, a civil penalty of $15,000, and the imposition of a five-year limitation on his ability to act in a supervisory or compliance capacity with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.
The SEC’s investigation was conducted by Joshua Hess and Kyle Bradley and was supervised by Natalie Brunson and Justin Jeffries of the Atlanta Regional Office. The litigation will be led by W. Shawn Murnahan, under the supervision of Graham Loomis. The examination that led to this enforcement action was conducted by Deborah Shaw, Jamika Hilliard, Gannon Lasseigne, Lisa Cimino, Jonathan Swankie, and John Sweeney of the SEC’s Division of Examinations.