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«In the Matter of ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS DIEGO F. HERNANDEZ, THE AND A CEASE-AND-DESIST ORDER WEALTH MANAGEMENT ...»

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UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 9581 / May 1, 2014

SECURITIES EXCHANGE ACT OF 1934

Release No. 72073 / May 1, 2014

INVESTMENT ADVISERS ACT OF 1940

Release No. 3828 / May 1, 2014

INVESTMENT COMPANY ACT OF 1940

Release No. 31037 / May 1, 2014

ADMINISTRATIVE PROCEEDING

File No. 3-15518 In the Matter of ORDER MAKING FINDINGS AND

IMPOSING REMEDIAL SANCTIONS

DIEGO F. HERNANDEZ, THE

AND A CEASE-AND-DESIST ORDER

WEALTH MANAGEMENT

PURSUANT TO SECTION 8A OF THE

PARTNERS, LLC, WEALTH

SECURITIES ACT OF 1933, SECTIONS

FINANCIAL, LIMITED LIABILITY

15(b) AND 21C OF THE SECURITIES

COMPANY, DFHR

EXCHANGE ACT OF 1934, SECTION INVESTMENTS, INC., and HD 203(f) OF THE INVESTMENT MILE HIGH MARKETING, INC., ADVISERS ACT OF 1940, AND SECTION 9(b) OF THE INVESTMENT COMPANY ACT OF 1940 AS TO DIEGO Respondents.

F. HERNANDEZ AND HD MILE HIGH

MARKETING, INC.

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest to enter this Order Making Findings, and Imposing Remedial Sanctions and a Cease- and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”), Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”), Section 203(f) of the Investment Advisers Act of 1940 (“Advisers Act”), and Section 9(b) of the Investment Company Act of 1940 (“Investment Company Act”) against Diego F. Hernandez (“Hernandez”) and pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act against HD Mile High Marketing (“Mile High” or together with Hernandez “Respondents”).

II.

Following the institution of administrative proceedings against Respondents on September 24, 2013, Respondents submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Respondents consent, without admitting or denying the Commission’s findings herein, except as to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are admitted, to the entry of this Order Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934, Section 203(f) of the Investment Advisers Act of 1940 and Section 9(b) of the Investment Company Act of 1940 (“Order”), as set forth below.

–  –  –

1. Between July 2011 and approximately April 2013, Hernandez, through Wealth Management, Wealth Financial, DFHR, and HD Mile High, willfully violated the antifraud provisions of the Securities Act and the Exchange Act by raising and misappropriating approximately $921,000 from 13 Colorado investors through a fraudulent offering of securities.

Hernandez carried out his fraudulent offering by meeting with each investor and telling them that he, through his entities, would invest their money in corporate bonds or other “safe” investments that would pay a guaranteed, above-market annual interest rate. In reality, Hernandez, through Wealth Management, Wealth Financial, DFHR, and HD Mile High, willfully misappropriated investor funds for (1) personal expenses, (2) business expenses, and (3) to repay other investors.

HD Mile High is the only Hernandez entity still in existence; the other entities are now defunct.

2. Between July 2011 and January 2013, in connection with his fraudulent offering and through Wealth Management, Wealth Financial, and DFHR, Hernandez and his entities also willfully operated as unregistered brokers.

1 The findings herein are made pursuant to Respondents’ Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.

–  –  –

3. Diego Hernandez, age 39, is a Colombian national who has been a lawful permanent resident of the United States since he was a child. He resides in Lone Tree, Colorado. Hernandez held a Series 6 license from 1998 until January 2013. From 1998 to January 2013, Hernandez was a registered representative associated with three broker dealers registered with the Commission.

4. The Wealth Management Partners, LLC was a Colorado limited liability company with its principal place of business in Lakewood, Colorado. Hernandez owned and controlled Wealth Management. Wealth Management was not registered with the Commission in any capacity, but Wealth Management acted as an unregistered broker-dealer in connection with the offer and sale of securities to investors between April 2012 and January 2013. Wealth Management never conducted a registered offering or registered a class of securities with the Commission.





Hernandez used Wealth Management to receive customer funds. Wealth Management is now a defunct entity.

5. Wealth Financial, Limited Liability Company was a Colorado limited liability company with its principal place of business in Lakewood, Colorado. Hernandez owned and controlled Wealth Financial. Wealth Financial was not registered with the Commission in any capacity, but Wealth Financial acted as an unregistered broker-dealer in connection with the offer and sale of securities to investors between April 2012 and January 2013. Wealth Financial never conducted a registered offering or registered a class of securities with the Commission. Hernandez used Wealth Financial to receive customer funds. Wealth Financial is now a defunct entity.

6. DFHR Investments, Inc. was a Colorado corporation that was in delinquent status with the Colorado Secretary of State since May 1, 2011. Hernandez owned and controlled DFHR.

DFHR was not registered with the Commission in any capacity, but DFHR acted as an unregistered broker-dealer in connection with the offer and sale of securities to investors between July 2011 and January 2012. DFHR never conducted a registered offering or registered a class of securities with the Commission. Hernandez used DFHR to receive customer funds. DFHR is a defunct entity.

7. HD Mile High Marketing, Inc. is a Colorado corporation with its principal place of business in Lakewood, Colorado. Hernandez owns and controls HD Mile High. HD Mile High has never conducted a registered offering or registered a class of securities with the Commission. HD Mile High is a marketing agency that focuses on advertising boards placed in elevators, lobbies, and restrooms. Hernandez used HD Mile High to receive customer funds.

C. Facts Regarding the Respondents

8. From August 2005 to April 2012, Hernandez was a registered representative associated with broker-dealer registered with the Commission. From April 12, 2012 to January 31, 2013, Hernandez was a registered representative associated with a dually-registered broker-dealer and investment adviser registered with the Commission. During his fraudulent offering, Hernandez was selling away from both firms, while also targeting their retail customers.

–  –  –

10. In December 2011, Hernandez incorporated HD Mile High. During the relevant time, Hernandez controlled HD Mile High, including its bank accounts. In 2012, in connection with his fraudulent offering, Hernandez instructed three investors to provide investment funds to HD Mile High.

11. In March 2012, Hernandez organized Wealth Management. During the relevant time, Hernandez controlled Wealth Management, including its bank account. Between April 2012 and January 2013, Hernandez instructed 10 investors to provide investment funds to Wealth Management.

12. From approximately May 2012 to January 2013, Hernandez used “Wealth Financial, LLC” as his d/b/a for his brokerage business. In February 2013, Hernandez organized Wealth Financial. During the relevant time, Hernandez controlled Wealth Financial, including its bank account. Between approximately May 2012 and April 2013, Hernandez used Wealth Financial in connection with his fraudulent securities transactions. In January 2013, one investor provided investment funds to Wealth Financial.

13. Hernandez failed to disclose adequately to the two broker-dealers with which he was associated his outside business activities at DFHR, HD Mile High, and Wealth Management.

Hernandez also failed adequately to disclose to one broker-dealer with which he was associated from April 2012 to January 2013, his outside business activities at Wealth Financial.

–  –  –

14. Hernandez generally carried out his fraudulent offering by meeting with the investors face-to-face and convincing them to invest their money with him based on numerous material false statements and omissions.

15. To generate funds for the fraudulent offering, Respondents targeted Hernandez’s customers who were retail investors, almost all of whom were individuals.

16. Hernandez advised several investors to surrender out of their existing annuities, and he assisted his customers with completing the paperwork necessary to complete the surrenders.

Hernandez also advised various customers to provide him with their cash savings and funds they removed from their 401(k) plans.

17. Hernandez told at least two investors that he would provide them with a six to eight percent monetary “bonus” for agreeing to transfer their funds as he advised.

–  –  –

19. Hernandez told investors that he would invest their funds and he instructed them to direct payment to one or more of his entities. The Respondents then pooled investor funds in the Respondents’ bank accounts, which were controlled by Hernandez.

20. The investors had an expectation of profits to be derived solely from the efforts of the Respondents; after investing, the investors were passive and had no control over the use of their funds.

The Respondents Made Material False Statements, Misrepresentations, and Omissions

21. Between July 2011 and January 2013, Hernandez, through his entities, made material misrepresentations, false statements, and omissions, both orally and in writing, when offering and selling securities to approximately 13 investors.

22. Hernandez falsely told investors that he, through his entities, would be investing their funds in corporate bonds. The account statements for Wealth Management and Wealth Financial, which were drafted by Hernandez and provided to some investors, also described the investment as a “corporate bond.” The account statements also falsely stated that there was a “market” for the “corporate bonds,” and that Wealth Management was a “fund.”

23. Hernandez also told investors that he, through DFHR or Wealth Management, would be placing their money in another “safe” investment, such as mutual funds or annuities.

24. Hernandez failed to disclose to investors that the Respondents would be the sole recipients of their funds, that their funds would be treated as a “loan” to the Respondents, that their funds would be used to pay the business and personal expenses of the Respondents, and that their funds would be used to repay other investors.

25. Hernandez also falsely touted the safety of the investments, and he both misrepresented and failed to disclose the risks. He told numerous investors that the securities he offered and sold were “safe.” Hernandez also assured investors that the securities he offered provided both flexibility and liquidity. For example, he told one investor that if she liquidated her 401(k) and provided the funds to him, he and his entities could liquidate her “corporate bond” account on demand so that she could use the funds for a down payment on a home. Similarly, he told another investor that at least $10,000 of her $50,000 would be available to her on demand and penalty free so that she could cover her school and living expenses.

26. Hernandez told investors that the securities he offered and sold would pay a guaranteed, above-market, annual interest rate. Numerous investors were assured by Hernandez that the investments he was putting them into would result in a higher rate of return than the investment products they currently held.

5

27. Hernandez knew that these statements were false because the Respondents did not have any means of generating interest on the investor funds, much less a “guaranteed” abovemarket interest rate.

28. Hernandez failed to inform investors that their funds would not be maintained in a separate “account,” as was stated on their account statements. Instead, investor funds remained in bank accounts controlled by the Respondents, where they were comingled with the funds of other investors, as well as other funds deposited by the proposed Respondents.

29. All of these misrepresentations, false statements, and omissions were material to investors.

30. Hernandez knew that his statements regarding the use of investor proceeds were false because he controlled Wealth Management, Wealth Financial, DFHR, and HD Mile High, and he knew that neither he nor any of those entities were purchasing or issuing corporate bonds or using investor funds to purchase any other security or investment product for which there was a “market.” Hernandez also knew that Wealth Management, which he owned and controlled, was not a “fund.” Hernandez also knew that all of these statements were false because he and his entities were misappropriating investors’ funds.



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