The SEC charged The Nutmeg Group LLC, owner and managing member Randall Goulding, and chief compliance officer David Goulding for misappropriating client assets, making misrepresentations to their clients, failing to comply with Nutmeg's custodial obligations, and failing to keep required books and records. The Honorable Judge William J. Hibbler of the U.S. District Court for the Northern District of Illinois temporarily enjoined the defendants from violating antifraud, custodial, and recordkeeping provisions of the federal securities laws and imposed a freeze of Nutmeg's assets.
According to the SEC's complaint, Northbrook, Ill.-based Nutmeg serves as the general partner or investment adviser to 15 unregistered investment pools and claims to have assets under management of more than $32 million. Nutmeg and the Gouldings misappropriated more than $4 million in client assets by transferring them to third parties, and did not fully document the funds' investments. The SEC alleges that they improperly commingled fund assets and cannot value the funds' holdings, and as a result, net asset and other investment values have been incorrectly reported to investors. Nutmeg also has failed to keep required books and records or keep assets with qualified custodians, which has further put client funds at risk.
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