Adviser Found to Operate an Unregistered Adviser

July 6, 2017

The SEC brought an enforcement action against Landwin Management LLC, an unregistered investment adviser, and Martin Landis, Landwin’s indirect majority shareholder and principal officer, for operating a fund that should have been registered with the SEC as an investment company pursuant to the Investment Company Act of 1940, as amended. The SEC further added that Landwin and Landis used assets of Landwin Partners Fund I, LLC (Fund), a proprietary real estate investment fund, in a manner not authorized by the Fund’s operating documents.

According to the SEC, the Fund was to acquire a portfolio of real estate and/or real estate-related investments. Yet from June 2011 through August 2014, Landwin and Landis also purchased for the Fund securities in publicly-traded bonds and stocks unrelated to real estate. Although the Fund’s financial statements included a line item for securities, Landwin and Landis did not disclose to investors that the securities were stocks and bonds unrelated to real estate. As a result of this conduct, the SEC found that Landwin and Landis violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8. Additionally, from at least January 2011 through September 2015, the SEC found that the Fund operated as an investment company as defined by Section 3(a)(1)(C) of the 1940 Act without being registered with the SEC. The Fund engaged in the business of investing and trading in securities, and more than 40% of the Fund’s total assets (other than Government securities and cash items) were securities interests, including limited partnership interests, loan notes, and publicly-traded stocks and bonds. As a result, the Fund violated Section 7(a) of the 1940 Act because it did not register with the SEC as an investment company, and Landwin and Landis caused the Fund’s registration violation.

Click here to access the enforcement action.