The SEC on Friday charged Houston-area businessman Daniel Frishberg with fraudulent conduct in connection with promissory note offerings made to clients of his investment advisory firm which, once again, illustrated the risks of "talk radio."  What you hear is not necessarily what you get.  

Daniel Frishberg Financial Services ("DFFS") is alleged to have advised clients to invest in notes issued by Business Radio Networks ("BizRadio"), a media company founded by Frishberg where he hosts his own show under the nickname "The MoneyMan."  Frishberg failed to tell his clients about BizRadio's poor financial condition or his significant conflicts of interest with the note offerings that helped fund his salary at BizRadio.  To settle the SEC charges, Frishberg agreed to pay a $65K penalty and be barred from associating with any investment adviser.

    Detailed Allegations.   According to the SEC, at least $11 million in promissory notes were issued by BizRadio and Kaleta Capital Management (KCM), which is owned by Frishberg's associate Albert Fase Kaleta.  Frishberg and Kaleta jointly controlled BizRadio.  The SEC charged Kaleta and his firm with fraud in 2009, and the court appointed a receiver to marshal the assets of KCM and relief defendants BizRadio and DFFS.

Nevertheless, Frishberg authorized Kaleta to recommend the notes to DFFS clients, and clients were not provided with critical disclosures.  They weren't told of BizRadio's poor financial condition and the likely inability of KCM and BizRadio to repay the notes.  Nor were they informed about Frishberg's significant conflicts of interest in the note offerings because the proceeds funded his salary as a BizRadio talk show host.  Furthermore, Frishberg chose Kaleta to recommend the BizRadio notes even though he was aware of complaints about Kaleta's lack of truthfulness in sales presentations regarding other investments.   [SEC News Release 11-72, 3/25]