by John Darer CLU ChFC MSSC CeFT RSP CLTC
In two prior blogs this past week I've introduced readers to the SEC's lawsuit against Orlando based Synergy Settlement Services, Inc., its CEO, its President and a Pooled Special Needs Trust, Foundation for Those with Special Needs, as well as Synergy's response. In this new blog, I'm going to do a bit deeper dive into some background information about True Link that may be helpful to readers and other interested parties.
What is a Pooled Special Needs Trust (PSNT)?
Medicaid and SSI law permit "(d)(4)(C)" or "pooled trusts" for beneficiaries with special needs. Such trusts pool the resources of many beneficiaries, and those resources are managed by a non-profit association. Unlike individual disability trusts, which may be created only for those under age 65, pooled trusts may be for beneficiaries of any age and may be created by the beneficiary herself. Source: Academy of Special Needs Planners website
Who is True Link Financial?
As set forth in the SEC complaint against Synergy it had previously settled with True Link Financial Advisors LLC. I am going to go more deeply into the settlement later on in this post.
True Link Financial Advisors, LLC had $1B assets under management as of January 4, 2022, according to its website, however the True Life Financial Advisors LLC Form ADV last updated March 30, 2022, states it has less than $1B. The True Link website also says its serves as investment adviser to 20 organizations that have pooled trusts as of January 3, 2022. Pooled Trusts represented $46 million of the assets under management according to the SEC Order Instituting Case and Desist Proceeding dated May 2, 2022.
True Link Financial is familiar to lawyers in the Special Needs Community and many settlements planners who are referral sources for trust companies and special needs lawyers for its True Link prepaid VISA cards.
According to a website associated with the Bristol Rhode Island based Academy of Special Needs Planners (ASNP), "trustees of special needs trusts are increasingly relying on “administrator-managed prepaid debit cards,” such as True Link cards, when disbursing funds to beneficiaries. These cards offer trust beneficiaries greater independence and the ability to get what they need more quickly. But such cards existed in a regulatory gray area as far as the Social Security Administration (SSA) was concerned. That is no longer the case.
Special needs trusts must abide by strict rules, overseen by the SSA, concerning what trust assets can be used for. For example, special needs trust funds can almost never be used for food and shelter expenses, medical expenses that would otherwise be covered by Medicaid, and items that can be traded for cash.
To ensure that trust distributions comply with these rules, trustees are increasingly relying on administrator-managed prepaid debit cards, the most commonly used being a reloadable Visa card known as the True Link card. These cards allow trustees to maintain oversight of card transactions while providing people with disabilities -- the cardholders -- the ability to make purchases quickly and independently". Source: Academy of Special Needs Planners ''Special Needs Answers" website
For example, according to its website True Link Spending Monitor helps protect daily spending and helps prevent fraud by customizing where the Visa card works, and where it doesn’t
- Block trouble spots like liquor stores and casinos
- Allow or block access to cash and ATMs
- Set spending limits for certain stores and categories of spending
- Scamwatch™ blocks merchants and businesses identified as potentially predatory Source: Truelinkfinancial.com
On to the SEC Order Instituting a Cease-and -Desist Against True Link Financial Advisor LLC.
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 11059 / May 2, 2022
INVESTMENT ADVISERS ACT OF 1940
Release No. 6012 / May 2, 2022
File No. 3-20838
In the Matter of
TRUE LINK FINANCIAL
ADVISORS, LLC and KAI H.
ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO
SECTION 8A OF THE SECURITIES ACT
OF 1933 AND SECTION 203(k) OF THE
INVESTMENT ADVISERS ACT OF 1940,
MAKING FINDINGS, AND IMPOSING A
1. From 2017 to the present, True Link, a registered investment adviser, has acted as
the investment adviser to two pooled investment trusts (the “Pooled Trusts”) managed in Orlando,
Florida. These trusts currently hold approximately $46 million in assets under management for
over 380 beneficiaries, most of whom are disabled recipients of Medicaid or Social Security
Supplemental Security Income (“SSI”) benefits. Section 1917 of the Social Security Act, 42
U.S.C. § 1396p (“Section 1396p”), allows such recipients to remain eligible for benefits despite
receiving substantial assets, such as from personal injury lawsuits, as long as those assets are
irrevocably placed in a trust established and managed by a non-profit association.
2. From 2015 to the present, a for-profit corporation with its principal place of
business in Orlando, Florida, (“FPC”) and its principals, have profited from managing pooled
investment trusts under the guise of their sham non-profit corporation located in Orlando, Florida
(“NPC”). FPC promised beneficiaries they would remain eligible for Medicaid and SSI benefits
by joining a valid Section 1396p trust managed by NPC as trustee. To the contrary, those benefits
of the pooled trust investors have been put at risk because, in reality, FPC operated and managed
the trusts for its own profit.
3. True Link, which is not affiliated with FPC or NPC, has acted as investment and
asset manager for the Pooled Trusts amid warning signs of the improper management of the trusts
by FPC for its profit. For example, Stinchcombe, True Link’s Chief Executive Officer, signed a
purported Marketing Agreement between True Link and FPC by which True Link has routed all
trustee fees directly to FPC. True Link subsequently has received all fee disbursement instructions
from – and sent all trustee fees directly to – FPC. True Link also has handled the investments at
the direction of FPC (or even sometimes beneficiaries) with no involvement of NPC.
As a result of the conduct above, True Link and Stinchcombe caused violations of Section 17(a)(3) of the Securities Act and Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder
True Link Financial Advisors settlement for $200,000 and Stinchcombe settled for $20,000 [ Source: SEC Complaint v Synergy Settelment Services, Inc. and, additionally as to Kai Stinchcombe, Stinchcombe's Form ADV, which listed the matter as a disclosure event on May 2, 2022.
NPC-Foundation for Those with Special Needs, Inc.
FPC-Synergy Settlement Services, Inc.
Section 206(4) generally prohibits any investment adviser from engaging in any act, practice or course of business that the Commission, by rule, defines as fraudulent, deceptive or manipulative. Rule 206(4)-8 prohibits advisers to pooled investment vehicles from (i) making false or misleading statements to investors or prospective investors in those pools or (ii) otherwise
defrauding those investors or prospective investors.
SEC Rule 206(4)-8 The Securities and Exchange Commission adopted SEC Rule 206(4)-8 effective September 10, 2007. The rule prohibits advisers to pooled investment vehicles from making false or misleading statements to, or otherwise defrauding, investors or prospective investors in those pooled vehicles. This rule is designed to clarify, in light of a recent court opinion, the Commission’s ability to bring enforcement actions under the Investment Advisers Act of 1940 against investment advisers who
defraud investors or prospective investors in a hedge fund or other pooled investment vehicle. The SEC enforces the rule through civil and administrative enforcement actions against advisers who violate it.
Section 206(4) generally prohibits any investment adviser from engaging in any act, practice or course of business that the Commission, by rule, defines as fraudulent, deceptive or manipulative.
Section 17(a)(3) of the Securities Act, which prohibits any person in the offer or sale of securities from engaging in any transaction, practice or course of business which operates or would operate as a fraud or deceit upon the
purchaser. Proof of scienter is not required to establish a violation of Section 17(a)(3) of the
Securities Act. Aaron v. SEC, 446 U.S. 680, 697 (1980)
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