The US District Court for the District of Nevada entered a final judgment against Loral Langemeier and her company, Live Out Loud, Inc (LOL), for selling securities in unregistered offerings, acting as unregistered brokers for, and breaching their fiduciary duties as, investment advisers by failing to disclose financial conflicts of interest to clients.   

The court ordered Langemeier to pay disgorgement of $404,807, prejudgment interest of $121,302.28, and a civil penalty of $50,000, for a total monetary judgment of $576,109.28.

Fast Cash Coaching

The facts of the case portray a company founder and chief executive who called herself The Millionaire Maker and whose business supposedly offered “Fast Cash Coaching,” plus lifetime “Big Table” services for clients who would pay a large fee upfront. But not only were the profitable outcomes for clients – largely small business owners and retirees – not forthcoming, LOL was not registered with the Commission as a broker-dealer at any time during the relevant period, the SEC said.

And Langemeier was not registered with the SEC as an associated person of a broker-dealer at any time during that timeframe, the SEC noted in its complaint.

The complaint alleges that Langemeier and LOL actively marketed oil and gas securities to their network of clients, both individually and at investment seminars, getting commissions from these sales.

She knew that traditional retirement accounts such as employer-sponsored 401(k) plans and IRAs, in which her clients typically held their available funds, did not permit withdrawals to fund the purchase of alternative investments, the SEC said. So she advised clients to transfer funds to self-directed IRAs so that they could act on her recommendations to purchase oil and gas securities, the agency alleged.

And the SEC said Langemeier used aggressive sales tactics, texting clients about what they were missing out on and telling them to wire hundreds of thousands of dollars for particular investments.

The complaint also states that Langemeier’s and LOL’s contribution to the distribution of the oil and gas securities was not de minimis and that they generated at least $7.4m of sales due to their customers’ investments.

And from those sales were benefits that directly accrued to Langemeier, the SEC said, as she held undisclosed ownership interests in two of the issuers of the oil and gas securities, and had an undisclosed partnership arrangement with the principal parties behind the oil and gas securities offerings.

Questionable disclaimers, fiduciary duty

LOL and Langemeier had clients attending the monthly Big Table seminars sign an agreement, which outlined services provided and contained disclaimers, including that services should not be construed as investment advice. The disclaimer was part of the registration process for clients who were already physically present at the seminar, some of whom had traveled thousands of miles and all of whom had committed significant monies to attend. (So a bit late in coming.)

Regardless, the SEC alleged, LOL and Langemeier negated the disclaimer through their actions once the seminars started and after they concluded because they actually provided investment advice at the seminars and the disclaimer language was “a transparent attempt to dodge their fiduciary responsibilities as investment advisers.”

That meant the business and Langemeier were fiduciaries who had a legal and ethical obligation to act in their clients’ best interest, to provide investment advice that was in their clients’ best interest, and to exercise utmost good faith in dealing with their clients. This included the duty to clients to disclose all material conflicts of interest.

Rule violations

The SEC said and court found that Langemeier and LOL violated the registration requirements of Section 15(a) of the Securities Exchange Act of 1934 and the registration rules for securities offerings and communications made before and after filing a registration statement that comprise Sections 5(a) and 5(c) of the Securities Act of 1933.

And the parties violated Section 206(2) of the Investment Advisers Act of 1940, which prohibits investment advisers from engaging in any transaction, practice, or course of business that would be considered fraudulent or deceptive to a client or prospective client.

The court ordered Langemeier to stop participating in the issuance, purchase, offer, or sale of any security going forward.