SEC Charges Investment Adviser and its CEO for Undisclosed Conflicts 

ADMINISTRATIVE PROCEEDING
File No. 3-21771

September 29, 2023 – The Securities and Exchange Commission today announced settled charges against New York City-based investment advisory firm Florence Capital Advisors, LLC (“FCA”) and its principal owner and Chief Executive Officer, Gregory A. Hersch, for their failure to adequately disclose conflicts of interest in connection with client investments in a third-party private fund (the “Fund”) from which FCA was also receiving substantial advisory fees. 

According to the SEC’s order, FCA received approximately $850,000 in fees from the Fund between May 2017 and April 2019, which was significantly more than the amount that FCA would have received from the Fund under a prior agreement and constituted more than 25 percent of FCA’s total fee revenue from all clients during that period. The SEC’s order finds that FCA and Hersch failed to provide clients invested in the Fund with full and fair disclosure of their conflicts of interest, including by failing to adequately inform clients that FCA received a substantial amount of fees from the Fund during this period, that such fees exceeded FCA’s typical advisory fees on assets, and that these fees constituted a substantial percentage of FCA’s revenues. The SEC’s order further finds that FCA’s disclosure in its Form ADV Part 2A Brochures made available to clients during this period contained inaccurate information about the arrangement FCA had with the Fund. 

The SEC’s order finds that FCA and Hersch violated Section 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the findings, FCA and Hersch consented to cease-and-desist orders, censures, and payment of a $200,000 civil penalty on a joint and several basis. 

The SEC’s investigation was conducted by Brian A. Kudon and Wendy Tepperman and was supervised by Sheldon Pollock, all of the New York Regional Office. The examination that led to the investigation was conducted by Anthony Pennella, John Bulla, Rachel Lavery, and George DeAngelis, of the SEC’s Division of Examinations.