Secretary of State William Galvin demanded yesterday that Cantella & Co. Inc. return an estimated $3.5 million to investors whom Galvin said the firm failed to protect against agents sellingunregistered hedge funds.
Galvin, in his ongoing crackdown on financial firms, charged Cantella with failure to supervise two agents who began selling the hedge-fund products to “unsophisticated investors” in 1999.
Galvin’s charge stems from an investigation that led to complaints being filed last August against top managers of three funds he said were preying on investors.
“Securities dealers have a fiduciary responsibility to their investors,” Galvin said in a statement. “Allowing, even encouraging, agents to offer unregistered and high-risk hedge funds to unsophisticated investors will not be tolerated.”
A Cantella worker who identified himself as a spokesman but declined to give his name refused comment yesterday, saying lawyers advised the Boston company not to make public statements.
Galvin’s complaint states that the two agents were registered representatives of Cantella when they began peddling the Hercules Hedgehog Fund and the Agrippa Fund, neither of which are registered securities. Cantella knew of their activities but did not supervise them, Galvin’s office charged.
The Hercules Hedgehog fund was one of the products Galvin highlighted in his complaint against managers last August.
