The Securities and Exchange Commission launched an investigation into Wealth Masters International for possible securities violations in August 2011. This inquiry began weeks after the company announced plans for an Initial Public Offering. The SEC's probe, identified under case number MFW-03629, immediately followed WMI's statement about pursuing "major corporate initiatives" to go public.
Congress established the SEC in 1934 to regulate the stock market. The agency enforces laws against corporate abuses in securities offerings and financial reporting. It can bring civil cases against individuals and companies accused of accounting fraud, providing false information, insider trading, or other securities law violations. The SEC also works with criminal authorities for prosecutions.
The SEC ordered WMI management to preserve all documents in their possession. The agency then issued a detailed request for specific materials. These demands included originals or copies of any complaints or disagreements from WMI members or employees. Regulators also sought documents distributed at WMI wealth conferences, member meetings, or phone calls.
The agency demanded investment letters, including the Vertical Research Advisory, and notes from WMI meetings or calls. Regulators sought documents about any security or investment WMI recommended to members. They also requested materials related to "Falcon Oil & Gas" and records detailing WMI's formation, ownership structure, and ownership percentages. Communications with senior management, including Kip Herriage and Karl Bessey, were specifically named. The request concluded with a general demand for any other documents related to WMI.
The SEC set an October 19, 2011 deadline for WMI to turn over these materials. The request amounted to a demand for nearly all company records. An anonymous WMI employee or member received the letter, presumably complying with the order.
The SEC has not publicly disclosed the specific nature of its investigation or what violations it suspects.