The Securities and Exchange Commission has taken enforcement action against New York-based investment advisory firm Hudson Valley Wealth Management Inc. and its founder, Christopher Conover, for breaching their fiduciary duties to clients.

Between 2017 and 2021, Hudson Valley and Conover advised their private investment fund and individual clients to invest money in films produced by a particular production company. However, they failed to disclose that Conover's affiliated company was receiving payments of around $530,000 from that same production company, essentially compensation tied to steering the investments its way. Initially, Hudson Valley and Conover did not disclose these payments at all to clients, and later misrepresented that the money Conover received was for his work as an executive producer on the films.

In a separate breach, in May 2021 the firm and Conover improperly gave preferential treatment to one fund investor by satisfying that investor's redemption request, while not satisfying several other redemption requests submitted at the same time by other clients of the fund. This violated their fiduciary duty to treat all clients fairly.

To settle the charges of failing to disclose conflicts of interest and making misleading statements, Hudson Valley agreed to pay a $200,000 civil penalty. Conover agreed to pay over $600,000 in disgorgement of ill-gotten gains plus interest, and a $150,000 penalty. They also consented to cease-and-desist orders and censures.

The SEC emphasized that fully and fairly disclosing conflicts is core to an investment adviser's fiduciary obligations, and that investors must be able to trust advisers are acting in their best interests when managing their money. The enforcement action signals the SEC's focus on pursuing advisers who breach those duties.

See press release