True Cresset Fined by SEC for Unregistered Broker Activities

The Securities and Exchange Commission (SEC) has imposed a fine of over $800,000 on True Cresset, formerly known as True Capital Management, for operating as an unregistered broker.

Background:

True Cresset, which recently merged with Cresset Asset Management, has long been registered with the SEC as an investment advisor. However, it has never obtained registration as a broker. Serving an extensive clientele that includes athletes, entertainers, and entrepreneurs, True Cresset has allegedly been collecting transaction-related fees for brokerage services over a span of nine years.

Settlement and Response:

True Cresset has reached a resolution with the SEC regarding the allegations, stating, "We are pleased to have resolved this matter with the Securities and Exchange Commission."

True Cresset settled the SEC's claims without admitting or denying any misconduct during the proceedings.

Unregistered Broker Activities:

Alongside its traditional investment-planning services, True Capital had a diverse range of alternative products, several of which were distributed through funds established and advised by True.

According to the SEC, since at least 2012, True Capital has been receiving payments from single-purpose companies that promote individual real estate properties. These payments were made when True facilitated equity purchases in these properties for its clients. The SEC notes that sometimes the property owners would pay True percentages based on the capital invested by True's clients. In other instances, True would charge a fee to the funds it was advising instead of receiving direct payments from sellers.

Conclusion:

True Cresset's failure to register as a broker has resulted in a significant fine from the SEC. Despite the allegations, True Cresset remains committed to providing quality services to its high-profile clientele.

True Capital: A Trustworthy Intermediary

The Securities and Exchange Commission (SEC) identifies True Capital as an "intermediary" that bridges the gap between its clients and real estate sellers.

In early December 2021, True Capital, after undergoing a thorough examination by SEC examiners, made the decision to no longer accept transaction-based compensation. In addition, the firm voluntarily repaid a portion of the fees it had received to its fund clients.

It's worth noting that prior to this year's acquisition, Cresset had already established a relationship with True Capital. The firms had previously collaborated on a deal in February 2020, where Cresset took a minority stake in the Registered Investment Advisor (RIA).

During its due diligence process in exploring the purchase of True Capital, Cresset was aware of the SEC investigation. However, given the relatively small amount of money involved and the fact that True Capital had ceased transaction-based compensation and committed to repaying the fees, Cresset remained undeterred.

True Capital is firm in stating that the activities in question took place before Cresset's acquisition in May 2023. Moreover, the SEC's findings did not allege any malicious intent, misrepresentation, or fraud on the part of True Capital or its employees.

The company asserts, "As highlighted in its settlement order, the commission took into account True Capital's complete cooperation, as well as its prompt actions to rectify the situation, including issuing voluntary refunds to affected clients, beginning in 2021."