Financial adviser Steven Kobayashi, who had worked in the Walnut Creek, CA, office of UBS Financial Services LLC, was charged with misappropriating $3.3 million from clients who had invested in a private investment fund he established.  He faces both civil and criminal charges filed by the SEC and the U.S. Attorney’s Office for Northern District of California, respectively.

Kobayashi allegedly created a pooled investment fund to invest in life insurance policies.  Instead, he stole much of the money to support an extravagant lifestyle.  He then concealed the fraud by liquidating his customers’ securities and funneling the money back to the fund and its investors. 

     Specific SEC Allegations.    Kobayashi established Life Settlement Partners LLC, a fund that invested in life settlement policies.  He raised several million dollars from his UBS customers for the fund.  Kobayashi began misappropriating money from the fund's bank accounts in early 2006.  Total unauthorized withdrawals reached at least $1.4mn before he made an attempt to repay the fund and its investors before they might discover his theft. 

Kobayashi later induced several of his other UBS customers to liquidate securities in their UBS accounts and transfer the proceeds of those sales to entities that he controlled.  This provided him with an additional $1.9mn to steal.  

Kobayashi agreed to settle the SEC’s charges - among other things, he'll be permanently barred from the industry, and will be required to repay ill-gotten gains and monetary penalties, which will be determined by the court at a later date.    [SEC PR 11-60, 3/3]