1018 Kanawha Blvd.,
Suite 301
Charleston, WV 25301
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Mutual Fund Brand(s)
AAM Equity
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Background:
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AAM Equity fell victim to misdeeds of its one-person investment advisor who took funds from other of his clients (but not the fund).
Knox Fuqua founded Appalachian Asset Management (AAM) in 1992 as a registered investment advisor. The investment advisor was jointly owned by KI&T Holdings, Inc. and Argent Financial Group, Inc. until March of 2004 when KI&T purchased Argent's 50 percent stake in AAM.
Fuqua claimed to have been an analyst at First American Bank in Nashville and later a manager of trust portfolios at Key Centurion Bank in Charleston, West Virginia1.
He launched AAM Equity (formerly AAMI) in 1998 as the firm's sole mutual fund. While Fuqua claimed to practice a "Growth-at-a-reasonable-price" (GAARP) strategy, media profiles highlighted his focus on low overhead and simple operations.1
"It amazes me what people say it takes to run a fund," Fuqua told Forbes magazine in 2004. "It's not something where you need a huge research staff, five computers and six secretaries."
He reportedly paid just $330 in monthly rent for a third-floor office with a view of the Kanawha River and operated as a solo shop with a dial-up Internet line and a single phone line. Those economies helped keep the $20 million in AUM fund's expenses to just $90,000, said Fuqua.
The fund was a series of the Ameriprime Funds run by Unified Fund Services and was available on the TD Ameritrade and Fidelity platforms (though not the NTF platforms).
SEC Fraud Allegations
The SEC alleged in a civil suit in August 20062 that Fuqua had defrauded clients of $1.5 million of funds. The suit claimed that Fuqua siphoned client cash (though not assets held in AAM Equity) pay for jewelry, groceries and other business expenses along with a resort home in Kiawah, South Carolina.3
The victims of the SEC-alleged scheme that involved fraudulent loans between the Fixed Income Fund (a Fuqua-controlled entity) and AAM Investments were Monica Hatfield ($300,000); Retina Consultants owned by Mark Hatfield (Monica's husband) and Community Health Systems of Beckley, West Virginia.
SEC Resolution
In August, 2009, Fuqua agreed to an SEC adminisrative order indefinitely barring him from serving as an investment advisor. He neither admitted nor denied any wrong-doing as a part of the settlement.
4http://www.sec.gov/litigation/admin/2009/ia-2920.pdf
Guilty Plea
On June 30, 2010, Fuqua pled guilty to criminal charges that he misapproriated funds totaling $600,000 from a 401(k) plan sponsored by Community Health Systems.
Sources
1Forbes, Sept. 20, 2004
2
SEC v. Knox H. Fuqua and KHF Advisors LLC, Civil Action 2:06-0666 (Southern District of West Virginia)
3
The West Virginia Record
4
SEC Administrative Proceeding [pdf]
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