The Securities and Exchange Commission (SEC) today announced settled charges against Texas-based investment adviser Fair Invest, LLC and its sole officer and managing member, Khalid Parekh, for making false statements and engaging in other wrongdoing in a securities offering aimed at members of the Muslim community raising approximately $18.5 million.
The SEC issued an order finding that Fair Invest and Parekh offered investors an investment product called a Wealth Building Account (WBA), which purported to conform to Islamic prohibitions against earning or charging interest. From August 2021 to August 2022, the firm sold WBAs to 373 investors in 40 states, promising dividends of up to 4% on an annualized basis.
Fair Invest represented to the investors, each of whom was a firm client, that it would generate dividends by making long-term investments in equities, exchange-traded funds, mutual funds, and tangible commodities.
It claimed that the WBA accounts were insured by SIPC and that the investments would be tailored to the financial needs and objectives of individual clients. But Fair Invest made no such investments and provided clients no individualized investment advice.
Instead, it limited investments to short-term crypto-asset lending on two crypto-trading platforms, never holding any WBA assets in a SIPC-insured account. Fair Invest also failed to disclose conflicts of interest that arose because a firm affiliate retained a share of the earnings generated from the crypto-asset transactions and because Parekh held an equity interest in one of the crypto-trading platforms.
During the SEC’s investigation, Fair Invest returned the investors’ principal, plus dividends, and withdrew its registration with the SEC as an investment adviser.
The order finds that Fair Invest and Parekh violated, or caused violations of, the securities-registration and anti-fraud provisions of Sections 5(a), 5(c), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 and the anti-fraud provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2 thereunder.
Without admitting or denying the SEC’s findings, Fair Invest and Parekh consented to the entry of an order imposing a cease-and-desist order and a censure against each of them and ordering them to pay, jointly and severally, a civil money penalty of $100,000.
