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WealthWise owner Jeffrey Forrest barred from acting as an investment adviser by the SEC

6/16/2009

The Tribune

Jeffrey Forrest can’t act as an investment adviser or work with broker-dealers

A San Luis Obispo man charged with fraud by the U.S. Securities and Exchange Commission has been barred from acting as an investment adviser.

Jeffrey Forrest, owner and principal of WealthWise LLC, will not be allowed to associate with any broker-dealer or be an investment adviser for five years, at which time he will be able to reapply with the SEC or the Financial Industry Regulatory Authority (an independent regulator of U.S. securities firms) to work for a broker-dealer or investment adviser.

Forrest also has agreed to a permanent injunction ordered by a federal court, which prevents him from committing acts of fraud in the future, according to the commission.

Forrest did not return calls or respond to an e-mail message from The Tribune on Monday. But Andrew Petillon, regional director for the SEC, said Forrest’s consent to be barred from practicing as an adviser and prohibited from violating federal securities laws is bringing to a close the commission’s case against him. The federal courts must still decide on a monetary judgment, which could go to investors.

“The final money amount has to be determined,” Petillon said. “That will be up to the court to set a schedule for that.”

What he did

Forrest had recommended that more than 60 of his clients, including dozens of county residents, invest

$40 million in the Apex Equity Options Fund, a highly speculative investment that promised to protect investor principal while generating

3 percent monthly returns, according to the SEC.

Among the investors was a quadriplegic man, a retired nurse, a stay-at-home mom, a software consultant, a retired telecommunications technician and practicing physicians. They invested their savings, in some cases borrowing against the value of their homes. The investors allege that Forrest repeatedly assured them that the principal invested was safe in a money market account.

But Forrest failed to properly disclose that he had a “significant conflict of interest” in recommending the investment to clients, SEC documents state. Forrest entered into a “side agreement” with the president of Salt Lake City-based Thompson Consulting, a hedge fund manager, in which he would receive a portion of the performance fees from Thompson, according to the SEC.

Investments from WealthWise clients made up more than 90 percent of Apex’s assets, and between April 2005 and September 2007 the firm received more than $388,000 in fees from Thompson, according to SEC documents.

The Apex fund collapsed in August 2007 as a result of “TCI’s risky trading strategy,” the commission said, causing local investors, many of whom had invested considerable savings, to lose millions of dollars.

Judgments reached

More than $8.8 million was awarded in March to a group of investors (about 16 local households), primarily in San Luis Obispo County. A FINRA panel found that Forrest, who had been a broker with El Segundo-based Associated Securities, steered clients to the Apex fund, misrepresenting the safety and liquidity of their investments in that fund.

“The arbitration panel gave them 100 percent of their Apex losses and also found fraud,” said Phil Aidikoff, an attorney for the Beverly Hills law firm Aidikoff, Uhl & Bakhtiari, which represented the investors. “And that is a clear indication that the system works.”

Associated Securities and Forrest filed a petition to vacate on that case, but the petition was dismissed by a federal court judge in June, Aidikoff said. Forrest has filed an appeal of the denial, but Aidikoff expects the court to throw it out.

Three other arbitration cases have settled, and clients have received damages, Aidikoff said, noting that he cannot comment on the amount of damages because of confidentiality agreements reached as part of the settlements.


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