Fargo financial adviser under scrutiny by securities regulators wants receiver to oversee accounts
Jeremy L. Carlson said enforcement orders by North Dakota securities officals make it impossible for him to operate investment businesses he manages. He wants a receiver to oversee accounts.
FARGO — Jeremy L. Carlson, a financial adviser under investigation by North Dakota securities officials, is asking a judge to appoint a receiver to manage accounts to allow investment companies he established to keep operating.
Carlson and his firm, Jamieson Capital Financial, are under orders from the North Dakota securities commissioner to stop selling securities and to “cease exercising control” over investment companies’ bank accounts.
Those restraints make it impossible for Carlson to manage the investment companies, placing the firms at risk of bankruptcy and threatening investors’ money, Carlson pleads in a lawsuit filed Monday, Jan. 9, in Cass County District Court.
In its most recent regulatory action, the North Dakota Securities Department fined Carlson and Jamieson Capital Financial $3.25 million and accused both of continuing to control investor funds despite orders barring him from doing so.
“The Securities Department continues its investigation of Carlson, Jamieson, and numerous associated individuals and businesses, and alleges Carlson continues to take custody of and exercise control over investor funds,” the department said in a statement on Friday, Dec. 23.
Carlson and his companies deny the alleged violations and have asked for a hearing.
In the lawsuit, Carlson named as defendants seven companies he established and manages that serve as investment vehicles: Jamieson CAPEX Real Estate Fund, Jamieson Legacy Fund, Jamieson Medical, Jamieson Natural Resources Fund, Mainstreet Investment Partners, Nova DC and the Secure Income Fund.
Carlson’s request follows a request in December from Western State Bank, which holds some of the accounts for the investment funds Carlson manages, to have the District Court take possession of the money while the investigations are pending.
In September, Carlson’s Jamieson Natural Resources Fund tried to pay an operating expense of $246,775 to Iron Oil Operating from an account held at Western State Bank, based in Devils Lake with branches in Fargo and West Fargo.
Despite repeated demands, Western State Bank refused to release the funds, citing the orders by state securities officials.
Carlson and Jamieson Natural Resources “dispute Western State Bank’s position and the appropriateness of its refusal to release the funds,” Carlson said in his lawsuit.
A receiver is needed to continue operating the investment firms, according to the lawsuit. Most of the companies receive operating revenues and must pay for operating expenses to remain viable.
Western State Bank won’t permit the companies to access operating revenues to pay operating expenses, according to the lawsuit.
“Other banks have expressed concern about the situation and indicated they may reconsider their position as events develop,” the suit said.
The Securities Department’s most recent order, issued in December, compels Carlson to “cease exercising control over the Companies’ bank accounts, threatening penalties and criminal sanctions for inappropriate use of funds, and identifies the payment of operating expenses, such as basic utilities, as inappropriate,” according to Carlson’s lawsuit.
If the companies can’t pay operating costs, they will be forced to cease operation and liquidate assets, the lawsuit said.
“The Companies will also face the risk of losing assets through bank foreclosures,” the lawsuit said.
Restrictions from the Securities Department orders place Carlson in a “conflicted position in which he must choose between potentially violating the Department Orders and fulfilling his duties to other members,” the lawsuit said.
If appointed, a receiver would be in a position to review the companies’ finances and help in reaching a “global solution,” Carlson’s lawsuit said.
Bank records subpoenaed by securities investigators show Carlson took custody of at least $17.78 million in client funds through the sale of private fund membership interests, according to documents from the Securities Department.
Custody of investor securities and funds by a North Dakota registered investment adviser is illegal under state law, according to securities officials.