Litigation Release No. 25010 / January 19, 2021
Securities and Exchange Commission v. Michael Sztrom, David Sztrom, and Sztrom Wealth Management, Inc., Civil Action No. 21-CV-00086-H-RBB (S.D. Cal. filed January 15, 2021)
The Securities and Exchange Commission charged father and son investment advisers, Michael and David Sztrom of Rancho Santa Fe, California, and their company Sztrom Wealth Management, Inc., with defrauding advisory clients by creating the false impression that Michael Sztrom was associated with registered investment adviser Advanced Practice Advisors, LLC (APA).
The SEC’s complaint alleges that, from November 2015 through March 2018, David and Michael Sztrom provided investment advice to clients through Sztrom Wealth Management (SWM). As alleged, David and Michael Sztrom concealed from clients that Michael Sztrom was not associated with APA or any registered investment adviser and was not subject to compliance oversight by APA or any other firm. As alleged in the complaint, David, without any disclosure to clients, also allowed Michael to use APA’s clearing broker for client transactions. Furthermore, and again without disclosure to clients, Michael impersonated David on telephone calls with the clearing broker on at least 38 separate occasions, leading the clearing broker to terminate its agreement with APA. The Sztroms’ and SWM’s deception and multiple failures to disclose breached their fiduciary duties to clients. The complaint also alleges that David Sztrom allowed Michael Sztrom to access to confidential client information and to use his personal cell phone, instead of APA’s email system, to text advisory clients about their investments.
The SEC’s complaint, filed in federal court in the Southern District of California, charges Michael Sztrom, David Sztrom, and Sztrom Wealth Management, Inc. with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The complaint further charges David Sztrom with aiding and abetting APA’s books and records violations of Section 204(a) of the Advisers Act and Rule 204-2(a)(7) thereunder. The SEC seeks permanent injunctions and civil money penalties against all defendants.
The SEC’s investigation was conducted by Teri M. Melson and supervised by Victoria A. Levin of the SEC’s Los Angeles Regional Office. The litigation will be led by Michael Sew Hoy and supervised by Amy J. Longo. The SEC examination that led to the investigation was conducted by Emanuel Asmar and Yasin Shah and supervised by Christopher Martinez and Christine Connolly.