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Sunday, February 15, 2015

SEC ANNOUNCES CHARGES, ASSET FREEZE AGAINST UTAH RESIDENT AND INVESTMENT ADVISORY FIRM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23188 / February 5, 2015
Securities and Exchange Commission v. Total Wealth Management, Inc., et al., Civil Action No. 15-CV-0226-BAS-DHB
SEC Obtains Emergency Relief Against San Diego Investement Advisor Charged with Wrongfully Taking Client Funds

The Securities and Exchange Commission today announced charges and an emergency temporary restraining order and asset freeze against a Utah resident and his San Diego, Calif. investment advisory firm.

The SEC alleges that Jacob Keith Cooper and Total Wealth Management Inc. wrongfully took at least $150,000 from clients in order to partially fund the potential settlement of an administrative proceeding previously instituted against them in 2014 by the SEC's Division of According to the SEC's complaint, filed yesterday in the U.S. District Court for the Southern District of California, the Division of Enforcement had reached a tentative settlement with Cooper and Total Wealth in the previously-instituted administrative proceeding that required Cooper to escrow $150,000. However, after learning that Cooper intended to pay this amount using funds misappropriated from clients, the Division terminated this settlement and the agency brought this emergency action in federal district court. Cooper's use of investor funds for his settlement with the SEC was never disclosed to or authorized by clients, and was a breach of Total Wealth's and Cooper's fiduciary duty to their clients. According to the complaint, Cooper admitted to taking $150,000 in investor monies to fund his escrow settlement, although he claims that it was a "loan."

According to the complaint, Cooper has also admitted that he and Total Wealth have used investor monies to pay unspecified legal expenses related to the Division of Enforcement's previously-instituted administrative proceeding as well as a private class action lawsuit filed in California state court. The complaint alleges that Total Wealth has been charging investors unexplained, inflated "administrative fees" to pay those expenses and that Total Wealth and Cooper have failed to provide any accounting or meaningful explanation for the fees to investors, despite investors' repeated requests.

The Honorable Cynthia Bashant for the U.S. District Court for the Southern District of California issued an order temporarily enjoining Cooper and Total Wealth from future violations of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940, and rule 206(4)-8 thereunder, as well as orders (1) freezing Cooper's and Total Wealth's assets; (2) appointing a temporary receiver; (3) prohibiting the destruction of documents, (4) expediting discovery; and (5) requiring accountings. Cooper and Total Wealth stipulated to the entry of the court orders without admitting or denying the SEC's allegations. The SEC also seeks preliminary and permanent injunctions, return of ill-gotten gains with prejudgment interest, and financial penalties against Cooper and Total Wealth.

A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for February 13, 2015.

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