SEC charges Sacramento-area financial adviser and radio host Keith Springer with fraud

Local financial adviser Keith Springer, whose radio show “Smart Money” airs weekends on KFBK, was charged Thursday by the Securities and Exchange Commission with defrauding hundreds of clients.

The SEC alleged that Springer, 55, owner of Sacramento-based Springer Financial Advisors, received millions of dollars worth of undisclosed compensation for recommending investments without disclosing a conflict of interest.

Since early 2014, Springer and his company “have engaged in a pattern of deceptive conduct specifically targeted at retirees and near-retirees, including making false and misleading representations to clients and prospective clients and breaching the fiduciary duty they owed to their clients,” the complaint alleged.

Many of the fraud victims were drawn to Springer through his KFBK radio show, which the SEC accused Springer of lying on.

Springer claimed on-air to have spent tens or even hundreds of thousands of dollars per year on research and portfolio monitoring, the SEC alleged, though the real number was closer to $3,000, according to the complaint.

Springer apparently told prospective clients that he had been chosen for the radio show due to his industry knowledge, but he actually paid to get on the air, according to the SEC.

“Our complaint alleges that Springer actively targeted vulnerable retirees by misleading them about his prominence in the industry and promising to act in their best interests,” SEC San Francisco regional director Erin E. Schneider said in a prepared statement. “Investment advisers must be truthful about their background and fully disclose all conflicts of interest.”

Advertisements for his company allegedly misinformed potential clients by falsely claiming that Springer wasn’t paid to promote particular investment opportunities, according to the SEC.

“We never receive any incentives to use an investment in our client portfolios,” Springer’s website says. “This puts us on the same team with you, eliminating the pressure to buy and sell, and freeing us of the conflict of interest that often exists with traditional brokerage relationships.”

The complaint also alleged that Springer attempted to hide previous SEC charges and his disciplinary record from the New York Stock Exchange, going so far as to hire internet search suppression consultants and telling employees to keep quiet with prospective clients.

In 2005, the SEC alleged that Springer had misrepresented the performance of a hedge fund managed by Springer Financial Advisors by overvaluing a website the company had invested in — at the time the largest investment in the fund.

Since 1985, Springer has worked as a registered investment representative for a number of broker-dealer firms, but in 1999, the New York Stock Exchange barred him from membership and disallowed him to work for any member organization for four years, according to the SEC.

Stock exchange records show that Springer was accused of improperly allocating trades to appear more favorably.

Donna Karnofsky, a former client of Springer’s, said that before hiring him to manage her investments for about five years, she was personal friends with him, having met him at a health club.

“I’m really disappointed, thinking that when I decided to use him as an investment broker that he would take really good care of me,” Karnofsky said.

His services, she said, were lackluster, as he focused more on his image and branding than actually handling her accounts.

“He was putting all his energy toward his social media, his airtime show,” Karnofsky said. “He once told me about an article he had just published in ‘the journal’ — it was the Natomas journal.”

Karnofsky said he once held on to a big check of hers — somewhere around $50,000 to $75,000 — for about six months, losing her significant investment potential.

When she expressed her displeasure, he told her “he’ll take care of me in some way, but don’t tell anybody about it,” Karnofsky said.

Then, Karnofsky said, due to another error on his part, she had to spend years ironing out a backup withholding issue.

“He was mishandling these accounts,” she said. “That’s why I fired him.”

Calls to KFBK on Saturday were directed to the business office Monday. Springer’s weekend radio shows were broadcast on AM 1530 and FM 93.1 as scheduled. The station is owned by San Antonio-based radio giant iHeartMedia.

A representative of Springer Financial Advisors said Springer was not available Sunday afternoon and his lawyers did not immediately respond to requests for comment.

Springer told MarketWatch on Saturday that the charges against him were “horribly unfair.”

This story was changed Dec. 23 to correct the nature of the charges. The SEC’s actions are civil, not criminal.

This story was originally published December 22, 2019 at 2:40 PM.