A Bay Area investment adviser agreed to pay nearly $500K to settle SEC charges they switched clients between 2 related investments without informing them that the switch would boost the commissions they had to pay.  San Ramon, CA-based Valentine Capital Asset Management (VCAM) and principal John Leo Valentine are alleged to have failed to disclose material conflicts of interest when they advised clients to exchange one series of an investment fund for another series in the same fund.  The transactions increased commission revenue to VCAM and Valentine.  They'll pay restitution of more than $400,000 and a fine of $70,000.

    Conflict of Interest Violations.  Valentine allegedly advised clients in mid-2005 to invest in Series A of a managed futures fund, which carries a 4% annual commission - which they'd stop paying once 10% had been paid, after about 2½ years.  In December 2007, when many clients had reached or were close to reaching the 10% threshold, Valentine began advising them to exchange at least some portion of their Series A holdings for Series B of the same fund - a largely identical investment but with higher leverage. Except, VCAM and Valentine didn't clearly disclose to the clients that, by making the switch, they'd have to restart the process of making 4% annual commission payments.  Approximately 140 clients made the switch. 

VCAM and Valentine breached their fiduciary duties to their advisory clients.   [SEC PR 10-174, 9/29]