Adviser Charged with Disseminating False and Misleading Advertisements Through Newsletters that It Acquired

January 30, 2014

The SEC brought an administrative action against Navigator Money Management, Inc. (NMM), and Mark A. Grimaldi, its president, majority owner, and chief compliance officer, alleging that from 2008 through at least January 2012, NMM and Grimaldi directly and indirectly through an affiliated Grimaldi-owned entity, issued false and misleading advertisements concerning:

  • NMM’s investment advice,
  • the performance of a mutual fund managed by NMM (the “Mutual Fund”), and
  • the performance of model portfolios recommended by Grimaldi.

The SEC found that Grimaldi selectively touted the past performance of the Mutual Fund and specific securities recommendations to clients, cherry-picking the best recommendations and ignoring less favorable recommendations.

In June 2004, Grimaldi arranged for an entity he controlled, Prestige, to purchase a 50% interest in the publisher of three monthly newsletters, called Fidelity Navigator, Sector Navigator and No-Load Navigator. In February 2011, Grimaldi and Suze Orman, an author and host of a show on the television network CNBC, co-founded a new monthly investment newsletter, called The Money Navigator, which is also published through Prestige. By the end of 2011, The Money Navigator newsletter had more than 60,000 subscribers. The SEC stated that Grimaldi used the Navigator Newsletters to promote NMM’s investment adviser business, to bring clients to NMM, and to solicit people to invest in the Mutual Fund.

The SEC found that NMM and Grimaldi made materially misleading statements concerning past performance recommendations by NMM in the Navigator Newsletters and on the website that did not comply with Rule 206(4)-1(a)(2) under the Advisers Act. The statements were misleading in the SEC’s view because they failed to include:

  • a list of all recommendations by NMM within the past year with the name of the security and market prices, and
  • a legend stating: “it should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.”

The SEC further found that from February 2009 through 2013, websites controlled by NMM, form email correspondence with potential investors in the Mutual Fund and the Navigator Newsletters all advertised NMM’s services and the Mutual Fund while proclaiming that NMM was a “five-star (Morningstar) money manager.” This was materially misleading in the SEC’s view because (i) Morningstar rates mutual funds, not investment advisers; and (ii) since February 2009, NMM has not been the investment manager of any mutual fund rated five stars by Morningstar.

Lastly, the SEC found that NMM’s written policies and procedures were not reasonably designed or implemented to ensure that the Navigator Newsletters and other advertisements provided to prospective and existing investors did not contain any false or misleading information.

Click here for the administrative action.


Investment Advisers, Investment Companies