In re PINNACLE INVESTMENTS

 
 
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UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
SECURITIES EXCHANGE ACT OF 1934 
Release No.  97448 / May 5, 2023 
INVESTMENT ADVISERS ACT OF 1940 
Release No.  6302 / May 5, 2023 
ADMINISTRATIVE 
PROCEEDING File No. 3-21405 
 
In the Matter of 
PINNACLE INVESTMENTS, LLC 
Respondent. 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-
AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTION 15(b) OF 
THE SECURITIES EXCHANGE ACT 
OF 1934 AND SECTIONS 203(e) AND 
203(k) OF THE INVESTMENT 
ADVISERS ACT OF 1940, MAKING 
FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A 
CEASE-AND-DESIST ORDER 
 
I. 
The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) 
and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”), against 
Pinnacle Investments, LLC (“Pinnacle” or “Respondent”). 
 
II. 
In anticipation of the institution of these proceedings, Pinnacle has 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, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Pinnacle consents to the entry of this Order Instituting Administrative and Cease-and-
Desist Proceedings, Pursuant to Section 15(b) of the Securities Exchange Act of 1934, and 
Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and 
Imposing Remedial Sanctions and a Cease-And-Desist Order (“Order”), as set forth below. 

 
 
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III. 
On the basis of this Order and Pinnacle’s Offer of Settlement, the Commission 
finds
1
 that: 
Summary  
1. From January 2015 to October 2022, Pinnacle, which is dually registered with the 
Commission as an investment adviser and a broker-dealer, violated antifraud, compliance, and 
reporting provisions of the Advisers Act. Pinnacle made false and misleading statements in its 
Forms ADV Part 2A (the “brochure”) regarding reviews of advisory client accounts; failed to 
adequately disclose its conflicts of interests in connection with the outside business activities and 
related compensation arrangements of an Investment Adviser Representative (“IAR A”) with an 
affiliated fund; failed to adopt and implement policies and procedures reasonably designed to 
prevent violations of the Advisers Act and the rules thereunder concerning reviews of client 
accounts and conflicts of interest; and failed to deliver to clients information about advisory 
personnel as required in Form ADV Part 2B (the “brochure supplement”). As a result of this 
conduct, Pinnacle willfully violated Sections 204(a), 206(2) and 206(4) of the Advisers Act and 
Rules 204-3 and 206(4)-7 thereunder. 
Respondent  
2. Pinnacle Investments, LLC, is a New York limited liability company with its 
principal place of business in East Syracuse, New York, and has been dually registered with the 
Commission as a broker-dealer and an investment adviser since June 2007. Pinnacle is a wholly-
owned subsidiary of Pinnacle Holding Company, LLC (“PHC”), a Delaware limited liability 
company. Pinnacle had approximately $814 million in assets under management as of December 
2022. 
Other Relevant Entity 
3. Pinnacle Capital Management, LLC (“PCM”), a Delaware limited liability 
company, is an investment adviser registered with the Commission since 2006. PCM provides 
portfolio management advisory services to a registered investment company and its series 
portfolios. PCM is a wholly-owned subsidiary of PHC. 
Facts  
4. Pinnacle offers investment advisory, financial planning, and brokerage services to 
retail advisory clients and brokerage customers, primarily in the central New York area, through 
its IARs, most of whom are also registered representatives. 
5. As a registered investment adviser, Pinnacle was required to file and deliver to 
clients, on an annual basis, its brochure. Form ADV requires an investment adviser to prepare 
narrative discussions covering, among other things, the adviser’s business practices, fees, and 
 
1
 The findings herein are made pursuant to Pinnacle’s Offer of Settlement and are not binding on any other person or 
entity in this or any other proceeding. 

 
 
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conflicts of interest. One of the required brochure items is a description of “Review of 
Accounts.” A registered investment adviser must “indicate whether [it] periodically review[s] 
client accounts or financial plans,” and if so, “the frequency and nature of the review, and the 
titles of the supervised persons who conduct the review.” 
6. As an investment adviser, Pinnacle is a fiduciary that is obligated to act in the best 
interests of its clients and not subordinate its clients’ interests to its own. As part of its fiduciary 
duty, Pinnacle “must eliminate or make full and fair disclosure of all conflicts of interest which 
might incline an investment adviser—consciously or unconsciously—to render advice which was 
not disinterested. . . .” Commission Interpretation Regarding Standard of Conduct for Investment 
Advisers, Investment Advisers Act Release No. 5248 (June 5, 2019) [84 FR 33669 (July 12, 
2019)]. Pinnacle was also obligated to disclose all material facts relating to how those conflicts 
could affect the advice it or its IARs provided to clients. To meet this fiduciary obligation, 
Pinnacle was required to provide its advisory clients with full and fair disclosure that was 
sufficiently specific so that clients could understand the conflicts of interest concerning 
Pinnacle’s investment advice and have an informed basis on which they could consent to or 
reject the conflicts. 
7. Rule 204-3 under the Advisers Act requires registered investment advisers to 
deliver to clients and prospective clients a brochure and one or more brochure supplements that 
contain all information required by Part 2 of Form ADV. The Part 2B brochure supplement 
provides information about the advisory personnel on whom the clients rely for investment 
advice, including educational background, experience, disciplinary history (if any), other 
investment-related business activities, any associated compensation arrangements, and any 
material conflicts of interest that might arise therefrom. 
Pinnacle Misrepresented Its Account Review Practices 
8. In 2013, staff from the Commission’s Division of Examinations (“EXAMS”) 
examined Pinnacle and found that Pinnacle did not conduct sufficient periodic reviews of client 
advisory accounts to determine whether client accounts were being managed in accordance with 
their investment mandates. In addition, EXAMS determined that Pinnacle did not have a chief 
compliance officer at that time who was sufficiently knowledgeable about the Advisers Act and 
was empowered to enforce Pinnacle’s compliance program. Pinnacle told EXAMS that it would 
implement periodic reviews of advisory accounts to ensure that client portfolios were managed in 
accordance with clients’ investment objectives and that it would maintain documentation of these 
account reviews. Pinnacle did not conduct those account reviews. 
9. From January 2015 to March 2018, Pinnacle filed brochures with substantially 
similar disclosures regarding advisory account reviews: 
At Pinnacle Investments, LLC a representative sample of accounts are reviewed at least 
quarterly. The securities held in Portfolio Management accounts are reviewed 
continuously, and Portfolio Management accounts may be reviewed more frequently in 
the event of material market, economic or political events or changes in the client’s 
individual circumstances. All reviews are made by Pinnacle Investments, LLC’s 
[specific members of Pinnacle’s management]. 
 

 
 
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After March 2015, Pinnacle changed only the name of the persons then serving in specified 
management roles and, in March 2017, added the phrase “or their delegates” following the 
named members of Pinnacle’s management. 
10. In February 2019, Pinnacle revised the brochure disclosure, changing the 
statement that the securities in accounts were “reviewed continuously” to “reviewed frequently.” 
In September 2021, Pinnacle further revised the brochure to state that the reviews were 
conducted “by applicable financial advisers, supervisors and/or their delegates.” This language 
remained the same until October 2022. 
11. From at least January 2015 until October 2022, Pinnacle failed to conduct the 
account reviews described in the brochures because it did not review a “sample of accounts” that 
was “representative” of its advisory accounts, “at least quarterly,” and because it did not conduct 
a review of the securities in advisory accounts “continuously.” 
12. While Pinnacle did perform event-driven trade reviews of the securities in 
advisory accounts, Pinnacle failed to conduct the disclosed account reviews even after Pinnacle 
revised the disclosure in March 2017 to include “delegates” of the named officers (e.g., 
Pinnacle’s IARs). Pinnacle did not confirm that any delegate actually performed account reviews 
as contemplated in the brochure, and provided no training, written procedures, or any oversight 
to any delegate for the purpose of conducting the account reviews. 
13. As a result of Pinnacle’s failure to perform the account reviews as represented in 
its brochures, Pinnacle did not discover that from 2015 through 2018, 111 Pinnacle advisory 
accounts had at least one year of no trades with no documented evidence that the IARs contacted 
the clients concerning the accounts or provided advisory services to the clients. Eleven of those 
accounts had no activity or documented evidence of contact for three years; twenty-two accounts 
had no activity or contact for two years. Yet, Pinnacle continued to charge those accounts 
advisory fees, totaling $201,843, of which Pinnacle retained $83,462 and paid out the remainder 
to its IARs. 
14. In 2018, EXAMS conducted another examination of Pinnacle, identified a number 
of inactive advisory accounts, and stated that Pinnacle should implement procedures for the 
review of inactive accounts. EXAMS also requested that Pinnacle conduct a review of all 
inactive accounts during the examination period. In approximately February 2019, Pinnacle 
rebated advisory fees of $30,925.40 to nine inactive client accounts. 
15. Beginning in January 2019, Pinnacle manually reviewed certain advisory accounts 
with low trade activity.  Until October 2022, Pinnacle, however, continued to fail to review a 
“representative sample of accounts” quarterly, or all securities within accounts “continuously.” 
Moreover, Pinnacle did not document criteria used in the low trade activity reviews or the results 
of the reviews. 
  

 
 
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Pinnacle Failed to Disclose Conflicts of Interest 
16. Pinnacle breached its fiduciary duty and failed to disclose conflicts of interest in 
connection with the outside business activities of one of its IARs (IAR A) from November 2016 
through March 2020. 
17. During the 2013 examination, EXAMS staff found that Pinnacle failed to disclose 
a conflict of interest related to Pinnacle’s financial interest in notes in which an advisory client 
invested.  Pinnacle told EXAMS that, going forward, it would disclose any potential conflict of 
interest to advisory clients “when offering investments in affiliated entities.”  
18. In approximately November 2016, IAR A, while simultaneously providing 
advisory services to Pinnacle clients as an IAR, became managing director and head of 
institutional sales of PCM, in addition to serving in several officer positions of Pinnacle Capital 
Management Funds Trust (the “Trust”), a registered investment company.  PCM provides 
advisory services to the Trust for its sole series (the “Fund”).  
19. Beginning in approximately 2018 and continuing through the end of 2019, Pinnacle 
compensated IAR A for his PCM-related work by increasing his advisory fee ratio (i.e., the payout 
by Pinnacle of his share of the advisory fees) on advisory accounts that he managed. For example, 
IAR A’s advisory fee ratio paid by Pinnacle fluctuated between 50% and 75%; he received the 
higher percentage when he did more work for PCM and the Fund.  
20. Between December 2017 and March 2020, approximately 54 of IAR A’s advisory 
clients invested in the Fund. Neither Pinnacle nor IAR A disclosed to those clients that IAR A 
had dual roles at Pinnacle and PCM; that IAR A was responsible for promoting and increasing 
institutional investments in the Fund; or that Pinnacle was compensating him for doing so. 
Pinnacle failed to provide its advisory clients with information about IAR A’s role with the Fund 
and his compensation arrangements that was sufficiently specific to enable the clients to 
understand the conflicts of interest and make an informed evaluation of Pinnacle’s and IAR A’s 
ability to provide disinterested investment advice. 
Pinnacle’s Deficient Compliance Program 
21. From at least December 2015 through September 2022, Pinnacle failed to adopt 
and properly implement policies and procedures reasonably designed to prevent violations of the 
Advisers Act and the rules thereunder. 
22. Before January 2019, despite the statements in its brochure that it would review a 
representative sample of advisory accounts at least quarterly, Pinnacle had no written policies 
and procedures regarding account reviews. In January 2019, Pinnacle revised its advisory 
compliance manual to include a statement that advisory accounts are reviewed at least annually 
for inactivity and that the reviews would be documented, but provided no procedures for the 
annual account reviews or any quarterly reviews of a representative sample of accounts. While 
Pinnacle began to review accounts with low activity in January 2019, the review was initially 
manual, not documented, and, until the fourth quarter of 2020, involved no process to seek 
feedback from IARs to evaluate low or no activity. 

 
 
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23. In October 2021, Pinnacle again revised its policies and procedures concerning 
advisory account reviews, but the revised policies and procedures mirrored the then-current 
brochure disclosures, stating that a representative sample of accounts are reviewed at least 
quarterly by applicable financial advisers, supervisors, or their delegates. The revised policies 
and procedures failed to provide written guidance or criteria for conducting account reviews or 
identifying a representative sample of accounts for review. Pinnacle also did not provide written 
guidance to officers, delegates, or IARs about account review criteria. 
24. Before January 2019, Pinnacle had no written policies and procedures regarding 
the identification and disclosure to clients of conflicts of interest in its investment advisory 
business. In January 2019, Pinnacle adopted a conflicts of interest policy for its investment 
advisory business that was copied wholesale from the supervisory policies and procedures 
manual for its broker-dealer business, without making modifications to take into account the 
nature of Pinnacle’s investment advisory business. This policy was not reasonably designed 
because it failed to address the conflicts and potential conflicts that could arise from its IARs’ 
outside business activities, including, in particular, the conflict that arose from IAR A’s 
compensation arrangements with Pinnacle related to his work for the Fund. Moreover, Pinnacle 
failed to properly implement the conflicts of interest policy with regard to the conflict arising 
from IAR A’s role as head of institutional sales for the Fund. Pinnacle revised the conflicts of 
interest policies and procedures in October 2021, for the first time tailoring these policies and 
procedures to its investment advisory business. 
25. In October 2022, Pinnacle revised its policies and procedures, including the 
sections concerning conflicts of interest and advisory account reviews.  The revised policies and 
procedures addressed the deficiencies noted above. 
Pinnacle Failed to Timely Deliver Form ADV Disclosures to Clients 
26. From at least 2015 to the present, Pinnacle failed to deliver to clients and 
prospective clients with the required Form ADV Part 2B brochure supplements. EXAMS notified 
Pinnacle in the 2018 exam that it was not in compliance with this requirement. In March 2020, 
Pinnacle provided advisory clients with a brochure supplement, but it did not provide 
information on all individuals required to be covered by instructions to the form. 
Violations  
27. As a result of the conduct described above, Pinnacle willfully
2
 violated Section 
206(2) of the Advisers Act, which prohibits any investment adviser from engaging in any 
transaction, practice, or course of business which operates as a fraud or deceit upon any client or 
prospective client. A violation of Section 206(2) may rest on a finding of simple negligence. 
 
2
 “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and Section 203(e) of the 
Advisers Act, “‘means no more than that the person charged with the duty knows what he is doing.’” Wonsover v. 
SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no 
requirement that the actor “also be aware that he is violating one of the Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 
(2d Cir. 1965). The decision in The Robare Group, Ltd. v. SEC, which construed the term “willfully” for purposes of 
a differently structured statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) 
(setting forth the showing required to establish that a person has “willfully omit[ted]” material information from a 
required disclosure in violation of Section 207 of the Advisers Act). 

 
 
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SEC v. Steadman, 967 F.2d 636, 643 n.5 (D.C. Cir. 1992) (citing SEC v. Capital Gains Research 
Bureau, Inc., 375 U.S. 180, 195 (1963)). Proof of scienter is not required to establish a violation 
of Section 206(2) of the Advisers Act. Id. 
28. As a result of the conduct described above, Pinnacle willfully violated Section 
206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require a registered investment 
adviser to adopt and implement written compliance policies and procedures reasonably designed 
to prevent violations of the Advisers Act and the rules thereunder. 
29. As a result of the conduct described above, Pinnacle willfully violated Section 
204(a) and Rule 204-3 of the Advisers Act, which requires a registered investment adviser to 
“deliver to its clients or prospective clients, a brochure and one or more brochure supplements to 
each client or prospective client that contains all information required by Part 2 of Form ADV,” 
including, but not limited to, information in the Part 2B brochure supplement about any other 
investment-related business activities of certain supervised persons who provide advisory 
services to the client and any material conflicts of interest arising therefrom. 
Disgorgement and Prejudgment Interest 
30. The disgorgement and prejudgment interest ordered in Section IV.C are consistent 
with equitable principles, do not exceed Respondent’s net profits from its violations, and will be 
distributed to harmed advisory clients to the extent feasible. The Commission will hold funds 
paid pursuant to Section IV.C in an account at the United States Treasury pending distribution. 
Upon approval of the distribution final accounting by the Commission, any amounts remaining 
that are infeasible to return to investors, and any amounts returned to the Commission in the 
future that are infeasible to return to investors, may be transferred to the general fund of the U.S. 
Treasury subject to Section 21F(g)(3) of the Exchange Act. 
Remedial Efforts 
31. In January 2022, Pinnacle retained a third-party compliance consultant 
(“Compliance Consultant”) to conduct a review of its compliance program and make 
recommendations to improve its policies and procedures. As discussed above, in October 2022 
Pinnacle revised its written policies and procedures, including the sections concerning conflicts 
of interest and advisory account reviews. In determining to accept the Offer, the Commission 
considered remedial acts undertaken by Pinnacle in response to the Compliance Consultant’s 
recommendations. 
Undertakings  
32. Notice to Advisory Clients. Within thirty (30) days of the entry of this Order, 
Pinnacle undertakes to notify those former and current Pinnacle advisory clients whose accounts 
are referenced in Paragraph 13, above, that between 2015 and 2018 had at least one year of no 
trades, with no evidence that the IARs contacted the clients concerning the accounts or provided 
advisory services to the clients (the “affected clients”), of the settlement terms of this Order by 
sending a copy of this Order to each affected client via mail, email or such other method not 
unacceptable to the Commission staff, together with a cover letter in a form not unacceptable to 
the Commission staff.   

 
 
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33. Compliance Consultant. 
A. Effective upon entry of this Order, Pinnacle undertakes to continue to retain the 
services of the Compliance Consultant, exclusively bearing all costs, including compensation 
and expenses, associated with the retention of the Compliance Consultant. 
B. Pinnacle shall require the Compliance Consultant to conduct, at the end of the 
second and fourth quarters after the date of the entry of this Order, comprehensive reviews of 
the effectiveness and implementation of Pinnacle’s compliance policies and procedures (each, 
an “Interim Review”), relating to: (1) reviews of advisory accounts; (2) assessing advisory 
conflicts of interest and disclosure thereof; (3) the review, filing and dissemination of the Form 
ADV and other disclosures obligations; and (4) IAR training (the “Policies and Procedures”). 
Pinnacle shall require the Compliance Consultant to provide Pinnacle with any 
recommendations for changes or improvements to the effectiveness and implementation of the 
Policies and Procedures as the Compliance Consultant deems appropriate during any Interim 
Review and prior to the issuance of reports required in paragraphs 33.C, 33.D, and 33.G, below. 
C. Pinnacle shall require, within thirty (30) days from the completion of the first 
Interim Review, the Compliance Consultant to submit a written and detailed report to Pinnacle 
and the Commission staff (the “Semi-Annual Report”). The Semi-Annual Report will describe 
the first Interim Review, the names of the individuals who performed the Interim Review, the 
conclusions reached, any recommendations by the Compliance Consultant for changes in or 
improvements to the Policies and Procedures and/or Pinnacle’s implementation thereof, and the 
status of Pinnacle’s adoption of such recommendations by the Compliance Consultant or failure 
to cooperate with reasonable requests to access its files, books, records, or personnel.  
D. Pinnacle shall require, within thirty (30) days from the completion of the 
second Interim Review, the Compliance Consultant to submit a written and detailed report to 
Pinnacle and the Commission staff (the “Anniversary Report”). The Anniversary Report will 
describe the second Interim Review, the names of the individuals who performed the Interim 
Review, the conclusions reached, any recommendations by the Compliance Consultant for 
changes in or improvements to the Policies and Procedures and/or Pinnacle’s implementation 
thereof, and the status of Pinnacle’s adoption of such recommendations by the Compliance 
Consultant or failure to cooperate with reasonable requests to access its files, books, records, 
or personnel.  
E. Pinnacle shall adopt all recommendations contained in the Semi-Annual Report 
and the Anniversary Report within forty-five (45) days of the date of each Report; provided, 
however, that within thirty (30) days after the date of each Report, Pinnacle shall in writing 
advise the Compliance Consultant and the Commission staff of any recommendations that 
Pinnacle considers to be unduly burdensome, impractical, or inappropriate. With respect to any 
recommendation that Pinnacle considers to be unduly burdensome, impractical, or inappropriate, 
Pinnacle need not adopt that recommendation at that time but shall propose in writing an 
alternative policy, procedure, or system designed to achieve the same objective or purpose. 
F. As to any recommendation on which Pinnacle and the Compliance Consultant 
do not agree, Pinnacle shall attempt in good faith to reach an agreement with the Compliance 
Consultant on an alternative proposal within sixty (60) days after the date of the Semi-Annual 

 
 
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Report or Anniversary Report, as applicable. Within fifteen (15) days after the conclusion of 
the discussion and evaluation by Pinnacle and the Compliance Consultant, Pinnacle shall 
require that the Compliance Consultant inform Pinnacle and the Commission staff in writing of 
the Compliance Consultant’s final determination concerning any recommendation objected to 
by Pinnacle. Pinnacle shall abide by the determinations of the Compliance Consultant and, 
within thirty (30) days after final agreement between Pinnacle and the Compliance Consultant 
or final determination of the Compliance Consultant, whichever occurs first, Pinnacle shall 
adopt and implement all of the recommendations that the Compliance Consultant deems 
appropriate. 
G. Within thirty (30) days of Pinnacle’s adoption of all of the recommendations in 
the Anniversary Report that the Compliance Consultant deems appropriate, Pinnacle shall require 
the Compliance Consultant to submit a written final report to Pinnacle and the Commission staff 
(the “Final Report”). The Final Report will (1) describe how Pinnacle has adopted and 
implemented the Compliance Consultant’s recommendations, if any, from the Semi-Annual 
Report and Anniversary Report; (2) certify that the Compliance Consultant agrees with 
Pinnacle’s adoption and implementation of its recommendations, if any; and (3) include an 
opinion of the Compliance Consultant on whether the Policies and Procedures, and Pinnacle’s 
implementation thereof, are reasonably designed to prevent violations of the federal securities 
laws by Pinnacle and its employees. 
H. Pinnacle shall cooperate fully with the Compliance Consultant and shall provide 
the Compliance Consultant with access to its files, books, records, and personnel as reasonably 
requested by the Compliance Consultant.  For the period of the engagement, Pinnacle: (1) shall 
not have the authority to terminate the Compliance Consultant or substitute another 
compliance consultant for the Compliance Consultant without the prior written approval of the 
Commission staff; and (2) shall compensate the Compliance Consultant and persons engaged 
to assist the Compliance Consultant for services rendered pursuant to this Order at their 
reasonable and customary rates. 
I. Pinnacle shall require the Compliance Consultant to enter into an agreement that 
provides that for the period of engagement and for a period of two years from completion of the 
engagement, the Compliance Consultant shall not enter into any employment, consultant, 
attorney-client, auditing or other professional relationship with Pinnacle, or any of its present or 
former affiliates, directors, officers, employees, or agents acting in their capacity. The 
agreement will also provide that the Compliance Consultant will require that any firm with 
which she is affiliated or of which she is a member, and any person engaged to assist the 
Compliance Consultant in performance of her duties under this Order shall not, without prior 
written consent of the Commission staff, enter into any employment, consultant, attorney-client, 
auditing or other professional relationship with Pinnacle, or any of its present or former 
affiliates, directors, officers, employees, or agents acting in their capacity as such for the period 
of the engagement and for a period of two (2) years after the engagement. 
  For the period of engagement and for a period of two years from completion of 
the engagement, Pinnacle undertakes not to (i) retain the Compliance Consultant for any other 
professional services outside of the services described in this Order; (ii) enter into any other 
professional relationship with the Compliance Consultant, including any employment, 

 
 
10 
consultant, attorney-client, auditing or other professional relationship; or (iii) enter, without prior 
written consent of the Commission staff, into any such professional relationship with any of the 
Compliance Consultant’s present or former affiliates, employers, directors, officers, employees, 
or agents acting in their capacity as such. 
J. A Report will likely include confidential financial, proprietary, competitive 
business or commercial information. Public disclosure of a Report could discourage 
cooperation, impede pending or potential government investigations or undermine the objectives 
of the reporting requirement. For these reasons, among others, Reports and the contents thereof 
are intended to remain and shall remain non-public, except (1) pursuant to court order, (2) as 
agreed to by the parties in writing, (3) to the extent that the Commission determines in its sole 
discretion that disclosure would be in furtherance of the Commission’s discharge of its duties 
and responsibilities, or (4) as otherwise required by law. 
34. Certification. Pinnacle undertakes to certify, in writing, compliance with the 
undertakings set forth above. The certification shall identify the undertakings, provide written 
evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to 
demonstrate compliance. The Commission staff may make reasonable requests for further 
evidence of compliance, and Respondent agrees to provide such evidence. The certification and 
supporting material shall be submitted to Hane L. Kim, Assistant Director, Division of 
Enforcement, Securities and Exchange Commission, 100 Pearl St., Suite 20-100, New York, NY 
10004-2616, with a copy to the Office of Chief Counsel of the Enforcement Division, no later 
than sixty (60) days from the date of the completion of the undertakings. 
35. Recordkeeping. Pinnacle shall preserve for a period of not less than six (6) years 
from the end of the fiscal year last used, the first two years in an easily accessible place, any 
record of its compliance with the undertakings set forth herein. 
36. Deadlines. For good cause shown, the Commission staff may extend any of the 
procedural dates relating to the undertakings. Deadlines for procedural dates shall be counted in 
calendar days, except that if the last day falls on a weekend or federal holiday, the next business 
day shall be considered to be the last day. 
IV. 
In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent’s Offer. 
Accordingly, pursuant to Section 15(b) of the Exchange Act and Sections 203(e) and 
203(k) of the Advisers Act, it is hereby ORDERED that: 
A. Respondent shall cease and desist from committing or causing any violations and 
any future violations of Sections 204(a), 206(2), and 206(4) of the Advisers Act and Rules 204-3 
and 206(4)-7 promulgated thereunder. 
B. Respondent is censured. 

 
 
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C. Respondent shall pay disgorgement of $83,462, prejudgment interest of 
$11,874 and civil penalties of $393,381 to the Securities and Exchange Commission. If 
timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 
600.  Payment shall be made in the following installments: 
1. Due within 14 days of the entry of this Order: $122,179.25; 
2. Due within 90 days of the entry of this Order: $122,179.25; 
3. Due within 180 days of the entry of this Order: $122,179.25; and 
4. The remainder within 365 days after the entry of this Order. 
Payments shall be applied first to post-order interest, which accrues pursuant to SEC Rule 
of Practice 600 and pursuant to 31 U.S.C. 3717.  Prior to making the final payment set 
forth herein, Respondent shall contact the staff of the Commission for the amount due.  If 
Respondent fails to make any payment by the date agreed and/or in the amount agreed 
according to the schedule set forth above, all outstanding payments under this Order, 
including post-order interest, minus any payments made, shall become due and payable 
immediately at the discretion of the staff of the Commission without further application to 
the Commission.  
 Payment must be made in one of the following ways: 
(1) Respondent may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon 
request; 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to: 
Enterprise Services Center  
Accounts Receivable Branch                                                                                  
HQ Bldg., Room 181, AMZ-341  
6500 South MacArthur Boulevard  
Oklahoma City, OK 73169 
Payments by check or money order must be accompanied by a cover letter identifying 
Pinnacle Investments, LLC, as a Respondent in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Hane L. Kim, 
Assistant Regional Director, U.S. Securities and Exchange Commission, Division of 
Enforcement, 100 Pearl St, Suite 20-100, New York, NY 10004-2616. 

 
 
12 
D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 
created for the disgorgement, prejudgment interest, and penalties referenced in Section IV.C 
above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes. To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such 
a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order 
granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount 
of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be 
deemed an additional civil penalty and shall not be deemed to change the amount of the civil 
penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” 
means a private damages action brought against Respondent by or on behalf of one or more 
investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
E. Respondent shall comply with the undertakings enumerated in paragraphs 32 
through 36 above. 
By the Commission. 
 
      Vanessa A. Countryman 
       Secretary 

1 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES EXCHANGE ACT OF 1934 
Release No.  97448 / May 5, 2023 

INVESTMENT ADVISERS ACT OF 1940 

Release No.  6302 / May 5, 2023 

ADMINISTRATIVE 
PROCEEDING File No. 3-21405 

 

In the Matter of 

PINNACLE INVESTMENTS, LLC 

Respondent. 

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-

AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTION 15(b) OF 

THE SECURITIES EXCHANGE ACT 

OF 1934 AND SECTIONS 203(e) AND 

203(k) OF THE INVESTMENT 

ADVISERS ACT OF 1940, MAKING 

FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A 

CEASE-AND-DESIST ORDER 
 

I. 

The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) 

and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”), against 

Pinnacle Investments, LLC (“Pinnacle” or “Respondent”). 

 

II. 

In anticipation of the institution of these proceedings, Pinnacle has 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, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Pinnacle consents to the entry of this Order Instituting Administrative and Cease-and-

Desist Proceedings, Pursuant to Section 15(b) of the Securities Exchange Act of 1934, and 

Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and 

Imposing Remedial Sanctions and a Cease-And-Desist Order (“Order”), as set forth below. 



 

 

2 

III.  

On the basis of this Order and Pinnacle’s Offer of Settlement, the Commission 
finds1 that: 

Summary  

1. From January 2015 to October 2022, Pinnacle, which is dually registered with the 

Commission as an investment adviser and a broker-dealer, violated antifraud, compliance, and 

reporting provisions of the Advisers Act. Pinnacle made false and misleading statements in its 

Forms ADV Part 2A (the “brochure”) regarding reviews of advisory client accounts; failed to 

adequately disclose its conflicts of interests in connection with the outside business activities and 

related compensation arrangements of an Investment Adviser Representative (“IAR A”) with an 

affiliated fund; failed to adopt and implement policies and procedures reasonably designed to 

prevent violations of the Advisers Act and the rules thereunder concerning reviews of client 

accounts and conflicts of interest; and failed to deliver to clients information about advisory 

personnel as required in Form ADV Part 2B (the “brochure supplement”). As a result of this 

conduct, Pinnacle willfully violated Sections 204(a), 206(2) and 206(4) of the Advisers Act and 

Rules 204-3 and 206(4)-7 thereunder. 

Respondent  

2. Pinnacle Investments, LLC, is a New York limited liability company with its 

principal place of business in East Syracuse, New York, and has been dually registered with the 

Commission as a broker-dealer and an investment adviser since June 2007. Pinnacle is a wholly-

owned subsidiary of Pinnacle Holding Company, LLC (“PHC”), a Delaware limited liability 

company. Pinnacle had approximately $814 million in assets under management as of December 

2022. 

Other Relevant Entity 

3. Pinnacle Capital Management, LLC (“PCM”), a Delaware limited liability 

company, is an investment adviser registered with the Commission since 2006. PCM provides 

portfolio management advisory services to a registered investment company and its series 

portfolios. PCM is a wholly-owned subsidiary of PHC. 

Facts  

4. Pinnacle offers investment advisory, financial planning, and brokerage services to 

retail advisory clients and brokerage customers, primarily in the central New York area, through 

its IARs, most of whom are also registered representatives. 

5. As a registered investment adviser, Pinnacle was required to file and deliver to 

clients, on an annual basis, its brochure. Form ADV requires an investment adviser to prepare 

narrative discussions covering, among other things, the adviser’s business practices, fees, and 
 

1 The findings herein are made pursuant to Pinnacle’s Offer of Settlement and are not binding on any other person or 

entity in this or any other proceeding. 



 

 

3 

conflicts of interest. One of the required brochure items is a description of “Review of 

Accounts.” A registered investment adviser must “indicate whether [it] periodically review[s] 

client accounts or financial plans,” and if so, “the frequency and nature of the review, and the 

titles of the supervised persons who conduct the review.” 

6. As an investment adviser, Pinnacle is a fiduciary that is obligated to act in the best 

interests of its clients and not subordinate its clients’ interests to its own. As part of its fiduciary 

duty, Pinnacle “must eliminate or make full and fair disclosure of all conflicts of interest which 

might incline an investment adviser—consciously or unconsciously—to render advice which was 

not disinterested. . . .” Commission Interpretation Regarding Standard of Conduct for Investment 

Advisers, Investment Advisers Act Release No. 5248 (June 5, 2019) [84 FR 33669 (July 12, 

2019)]. Pinnacle was also obligated to disclose all material facts relating to how those conflicts 

could affect the advice it or its IARs provided to clients. To meet this fiduciary obligation, 

Pinnacle was required to provide its advisory clients with full and fair disclosure that was 

sufficiently specific so that clients could understand the conflicts of interest concerning 

Pinnacle’s investment advice and have an informed basis on which they could consent to or 

reject the conflicts. 

7. Rule 204-3 under the Advisers Act requires registered investment advisers to 

deliver to clients and prospective clients a brochure and one or more brochure supplements that 

contain all information required by Part 2 of Form ADV. The Part 2B brochure supplement 

provides information about the advisory personnel on whom the clients rely for investment 

advice, including educational background, experience, disciplinary history (if any), other 

investment-related business activities, any associated compensation arrangements, and any 

material conflicts of interest that might arise therefrom. 

Pinnacle Misrepresented Its Account Review Practices 

8. In 2013, staff from the Commission’s Division of Examinations (“EXAMS”) 

examined Pinnacle and found that Pinnacle did not conduct sufficient periodic reviews of client 

advisory accounts to determine whether client accounts were being managed in accordance with 

their investment mandates. In addition, EXAMS determined that Pinnacle did not have a chief 

compliance officer at that time who was sufficiently knowledgeable about the Advisers Act and 

was empowered to enforce Pinnacle’s compliance program. Pinnacle told EXAMS that it would 

implement periodic reviews of advisory accounts to ensure that client portfolios were managed in 

accordance with clients’ investment objectives and that it would maintain documentation of these 

account reviews. Pinnacle did not conduct those account reviews. 

9. From January 2015 to March 2018, Pinnacle filed brochures with substantially 

similar disclosures regarding advisory account reviews: 

At Pinnacle Investments, LLC a representative sample of accounts are reviewed at least 

quarterly. The securities held in Portfolio Management accounts are reviewed 

continuously, and Portfolio Management accounts may be reviewed more frequently in 

the event of material market, economic or political events or changes in the client’s 

individual circumstances. All reviews are made by Pinnacle Investments, LLC’s 

[specific members of Pinnacle’s management]. 

 



 

 

4 

After March 2015, Pinnacle changed only the name of the persons then serving in specified 

management roles and, in March 2017, added the phrase “or their delegates” following the 

named members of Pinnacle’s management. 

10. In February 2019, Pinnacle revised the brochure disclosure, changing the 

statement that the securities in accounts were “reviewed continuously” to “reviewed frequently.” 

In September 2021, Pinnacle further revised the brochure to state that the reviews were 

conducted “by applicable financial advisers, supervisors and/or their delegates.” This language 

remained the same until October 2022. 

11. From at least January 2015 until October 2022, Pinnacle failed to conduct the 

account reviews described in the brochures because it did not review a “sample of accounts” that 

was “representative” of its advisory accounts, “at least quarterly,” and because it did not conduct 

a review of the securities in advisory accounts “continuously.” 

12. While Pinnacle did perform event-driven trade reviews of the securities in 

advisory accounts, Pinnacle failed to conduct the disclosed account reviews even after Pinnacle 

revised the disclosure in March 2017 to include “delegates” of the named officers (e.g., 

Pinnacle’s IARs). Pinnacle did not confirm that any delegate actually performed account reviews 

as contemplated in the brochure, and provided no training, written procedures, or any oversight 

to any delegate for the purpose of conducting the account reviews. 

13. As a result of Pinnacle’s failure to perform the account reviews as represented in 

its brochures, Pinnacle did not discover that from 2015 through 2018, 111 Pinnacle advisory 

accounts had at least one year of no trades with no documented evidence that the IARs contacted 

the clients concerning the accounts or provided advisory services to the clients. Eleven of those 

accounts had no activity or documented evidence of contact for three years; twenty-two accounts 

had no activity or contact for two years. Yet, Pinnacle continued to charge those accounts 

advisory fees, totaling $201,843, of which Pinnacle retained $83,462 and paid out the remainder 

to its IARs. 

14. In 2018, EXAMS conducted another examination of Pinnacle, identified a number 

of inactive advisory accounts, and stated that Pinnacle should implement procedures for the 

review of inactive accounts. EXAMS also requested that Pinnacle conduct a review of all 

inactive accounts during the examination period. In approximately February 2019, Pinnacle 

rebated advisory fees of $30,925.40 to nine inactive client accounts. 

15. Beginning in January 2019, Pinnacle manually reviewed certain advisory accounts 

with low trade activity.  Until October 2022, Pinnacle, however, continued to fail to review a 

“representative sample of accounts” quarterly, or all securities within accounts “continuously.” 

Moreover, Pinnacle did not document criteria used in the low trade activity reviews or the results 

of the reviews. 

  



 

 

5 

Pinnacle Failed to Disclose Conflicts of Interest 

16. Pinnacle breached its fiduciary duty and failed to disclose conflicts of interest in 

connection with the outside business activities of one of its IARs (IAR A) from November 2016 

through March 2020. 

17. During the 2013 examination, EXAMS staff found that Pinnacle failed to disclose 

a conflict of interest related to Pinnacle’s financial interest in notes in which an advisory client 

invested.  Pinnacle told EXAMS that, going forward, it would disclose any potential conflict of 

interest to advisory clients “when offering investments in affiliated entities.”  

18. In approximately November 2016, IAR A, while simultaneously providing 

advisory services to Pinnacle clients as an IAR, became managing director and head of 

institutional sales of PCM, in addition to serving in several officer positions of Pinnacle Capital 

Management Funds Trust (the “Trust”), a registered investment company.  PCM provides 

advisory services to the Trust for its sole series (the “Fund”).  

19. Beginning in approximately 2018 and continuing through the end of 2019, Pinnacle 

compensated IAR A for his PCM-related work by increasing his advisory fee ratio (i.e., the payout 

by Pinnacle of his share of the advisory fees) on advisory accounts that he managed. For example, 

IAR A’s advisory fee ratio paid by Pinnacle fluctuated between 50% and 75%; he received the 

higher percentage when he did more work for PCM and the Fund.  

20. Between December 2017 and March 2020, approximately 54 of IAR A’s advisory 

clients invested in the Fund. Neither Pinnacle nor IAR A disclosed to those clients that IAR A 

had dual roles at Pinnacle and PCM; that IAR A was responsible for promoting and increasing 

institutional investments in the Fund; or that Pinnacle was compensating him for doing so. 

Pinnacle failed to provide its advisory clients with information about IAR A’s role with the Fund 

and his compensation arrangements that was sufficiently specific to enable the clients to 

understand the conflicts of interest and make an informed evaluation of Pinnacle’s and IAR A’s 

ability to provide disinterested investment advice. 

Pinnacle’s Deficient Compliance Program 

21. From at least December 2015 through September 2022, Pinnacle failed to adopt 

and properly implement policies and procedures reasonably designed to prevent violations of the 

Advisers Act and the rules thereunder. 

22. Before January 2019, despite the statements in its brochure that it would review a 

representative sample of advisory accounts at least quarterly, Pinnacle had no written policies 

and procedures regarding account reviews. In January 2019, Pinnacle revised its advisory 

compliance manual to include a statement that advisory accounts are reviewed at least annually 

for inactivity and that the reviews would be documented, but provided no procedures for the 

annual account reviews or any quarterly reviews of a representative sample of accounts. While 

Pinnacle began to review accounts with low activity in January 2019, the review was initially 

manual, not documented, and, until the fourth quarter of 2020, involved no process to seek 

feedback from IARs to evaluate low or no activity. 



 

 

6 

23. In October 2021, Pinnacle again revised its policies and procedures concerning 

advisory account reviews, but the revised policies and procedures mirrored the then-current 

brochure disclosures, stating that a representative sample of accounts are reviewed at least 

quarterly by applicable financial advisers, supervisors, or their delegates. The revised policies 

and procedures failed to provide written guidance or criteria for conducting account reviews or 

identifying a representative sample of accounts for review. Pinnacle also did not provide written 

guidance to officers, delegates, or IARs about account review criteria. 

24. Before January 2019, Pinnacle had no written policies and procedures regarding 

the identification and disclosure to clients of conflicts of interest in its investment advisory 

business. In January 2019, Pinnacle adopted a conflicts of interest policy for its investment 

advisory business that was copied wholesale from the supervisory policies and procedures 

manual for its broker-dealer business, without making modifications to take into account the 

nature of Pinnacle’s investment advisory business. This policy was not reasonably designed 

because it failed to address the conflicts and potential conflicts that could arise from its IARs’ 

outside business activities, including, in particular, the conflict that arose from IAR A’s 

compensation arrangements with Pinnacle related to his work for the Fund. Moreover, Pinnacle 

failed to properly implement the conflicts of interest policy with regard to the conflict arising 

from IAR A’s role as head of institutional sales for the Fund. Pinnacle revised the conflicts of 

interest policies and procedures in October 2021, for the first time tailoring these policies and 

procedures to its investment advisory business. 

25. In October 2022, Pinnacle revised its policies and procedures, including the 

sections concerning conflicts of interest and advisory account reviews.  The revised policies and 

procedures addressed the deficiencies noted above. 

Pinnacle Failed to Timely Deliver Form ADV Disclosures to Clients 

26. From at least 2015 to the present, Pinnacle failed to deliver to clients and 

prospective clients with the required Form ADV Part 2B brochure supplements. EXAMS notified 

Pinnacle in the 2018 exam that it was not in compliance with this requirement. In March 2020, 

Pinnacle provided advisory clients with a brochure supplement, but it did not provide 

information on all individuals required to be covered by instructions to the form. 

Violations  

27. As a result of the conduct described above, Pinnacle willfully2 violated Section 

206(2) of the Advisers Act, which prohibits any investment adviser from engaging in any 

transaction, practice, or course of business which operates as a fraud or deceit upon any client or 

prospective client. A violation of Section 206(2) may rest on a finding of simple negligence. 

 
2 “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and Section 203(e) of the 

Advisers Act, “‘means no more than that the person charged with the duty knows what he is doing.’” Wonsover v. 

SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no 

requirement that the actor “also be aware that he is violating one of the Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 

(2d Cir. 1965). The decision in The Robare Group, Ltd. v. SEC, which construed the term “willfully” for purposes of 

a differently structured statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) 

(setting forth the showing required to establish that a person has “willfully omit[ted]” material information from a 

required disclosure in violation of Section 207 of the Advisers Act). 



 

 

7 

SEC v. Steadman, 967 F.2d 636, 643 n.5 (D.C. Cir. 1992) (citing SEC v. Capital Gains Research 

Bureau, Inc., 375 U.S. 180, 195 (1963)). Proof of scienter is not required to establish a violation 

of Section 206(2) of the Advisers Act. Id. 

28. As a result of the conduct described above, Pinnacle willfully violated Section 

206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require a registered investment 

adviser to adopt and implement written compliance policies and procedures reasonably designed 

to prevent violations of the Advisers Act and the rules thereunder. 

29. As a result of the conduct described above, Pinnacle willfully violated Section 

204(a) and Rule 204-3 of the Advisers Act, which requires a registered investment adviser to 

“deliver to its clients or prospective clients, a brochure and one or more brochure supplements to 

each client or prospective client that contains all information required by Part 2 of Form ADV,” 

including, but not limited to, information in the Part 2B brochure supplement about any other 

investment-related business activities of certain supervised persons who provide advisory 

services to the client and any material conflicts of interest arising therefrom. 

Disgorgement and Prejudgment Interest 

30. The disgorgement and prejudgment interest ordered in Section IV.C are consistent 

with equitable principles, do not exceed Respondent’s net profits from its violations, and will be 

distributed to harmed advisory clients to the extent feasible. The Commission will hold funds 

paid pursuant to Section IV.C in an account at the United States Treasury pending distribution. 

Upon approval of the distribution final accounting by the Commission, any amounts remaining 

that are infeasible to return to investors, and any amounts returned to the Commission in the 

future that are infeasible to return to investors, may be transferred to the general fund of the U.S. 

Treasury subject to Section 21F(g)(3) of the Exchange Act. 

Remedial Efforts 

31. In January 2022, Pinnacle retained a third-party compliance consultant 

(“Compliance Consultant”) to conduct a review of its compliance program and make 

recommendations to improve its policies and procedures. As discussed above, in October 2022 

Pinnacle revised its written policies and procedures, including the sections concerning conflicts 

of interest and advisory account reviews. In determining to accept the Offer, the Commission 

considered remedial acts undertaken by Pinnacle in response to the Compliance Consultant’s 

recommendations. 

Undertakings  

32. Notice to Advisory Clients. Within thirty (30) days of the entry of this Order, 

Pinnacle undertakes to notify those former and current Pinnacle advisory clients whose accounts 

are referenced in Paragraph 13, above, that between 2015 and 2018 had at least one year of no 

trades, with no evidence that the IARs contacted the clients concerning the accounts or provided 

advisory services to the clients (the “affected clients”), of the settlement terms of this Order by 

sending a copy of this Order to each affected client via mail, email or such other method not 

unacceptable to the Commission staff, together with a cover letter in a form not unacceptable to 

the Commission staff.   



 

 

8 

33. Compliance Consultant. 

A. Effective upon entry of this Order, Pinnacle undertakes to continue to retain the 

services of the Compliance Consultant, exclusively bearing all costs, including compensation 

and expenses, associated with the retention of the Compliance Consultant. 

B. Pinnacle shall require the Compliance Consultant to conduct, at the end of the 

second and fourth quarters after the date of the entry of this Order, comprehensive reviews of 

the effectiveness and implementation of Pinnacle’s compliance policies and procedures (each, 

an “Interim Review”), relating to: (1) reviews of advisory accounts; (2) assessing advisory 

conflicts of interest and disclosure thereof; (3) the review, filing and dissemination of the Form 

ADV and other disclosures obligations; and (4) IAR training (the “Policies and Procedures”). 

Pinnacle shall require the Compliance Consultant to provide Pinnacle with any 

recommendations for changes or improvements to the effectiveness and implementation of the 

Policies and Procedures as the Compliance Consultant deems appropriate during any Interim 

Review and prior to the issuance of reports required in paragraphs 33.C, 33.D, and 33.G, below. 

C. Pinnacle shall require, within thirty (30) days from the completion of the first 

Interim Review, the Compliance Consultant to submit a written and detailed report to Pinnacle 

and the Commission staff (the “Semi-Annual Report”). The Semi-Annual Report will describe 

the first Interim Review, the names of the individuals who performed the Interim Review, the 

conclusions reached, any recommendations by the Compliance Consultant for changes in or 

improvements to the Policies and Procedures and/or Pinnacle’s implementation thereof, and the 

status of Pinnacle’s adoption of such recommendations by the Compliance Consultant or failure 

to cooperate with reasonable requests to access its files, books, records, or personnel.  

D. Pinnacle shall require, within thirty (30) days from the completion of the 

second Interim Review, the Compliance Consultant to submit a written and detailed report to 

Pinnacle and the Commission staff (the “Anniversary Report”). The Anniversary Report will 

describe the second Interim Review, the names of the individuals who performed the Interim 

Review, the conclusions reached, any recommendations by the Compliance Consultant for 

changes in or improvements to the Policies and Procedures and/or Pinnacle’s implementation 

thereof, and the status of Pinnacle’s adoption of such recommendations by the Compliance 

Consultant or failure to cooperate with reasonable requests to access its files, books, records, 

or personnel.  

E. Pinnacle shall adopt all recommendations contained in the Semi-Annual Report 

and the Anniversary Report within forty-five (45) days of the date of each Report; provided, 

however, that within thirty (30) days after the date of each Report, Pinnacle shall in writing 

advise the Compliance Consultant and the Commission staff of any recommendations that 

Pinnacle considers to be unduly burdensome, impractical, or inappropriate. With respect to any 

recommendation that Pinnacle considers to be unduly burdensome, impractical, or inappropriate, 

Pinnacle need not adopt that recommendation at that time but shall propose in writing an 

alternative policy, procedure, or system designed to achieve the same objective or purpose. 

F. As to any recommendation on which Pinnacle and the Compliance Consultant 

do not agree, Pinnacle shall attempt in good faith to reach an agreement with the Compliance 

Consultant on an alternative proposal within sixty (60) days after the date of the Semi-Annual 



 

 

9 

Report or Anniversary Report, as applicable. Within fifteen (15) days after the conclusion of 

the discussion and evaluation by Pinnacle and the Compliance Consultant, Pinnacle shall 

require that the Compliance Consultant inform Pinnacle and the Commission staff in writing of 

the Compliance Consultant’s final determination concerning any recommendation objected to 

by Pinnacle. Pinnacle shall abide by the determinations of the Compliance Consultant and, 

within thirty (30) days after final agreement between Pinnacle and the Compliance Consultant 

or final determination of the Compliance Consultant, whichever occurs first, Pinnacle shall 

adopt and implement all of the recommendations that the Compliance Consultant deems 

appropriate. 

G. Within thirty (30) days of Pinnacle’s adoption of all of the recommendations in 

the Anniversary Report that the Compliance Consultant deems appropriate, Pinnacle shall require 

the Compliance Consultant to submit a written final report to Pinnacle and the Commission staff 

(the “Final Report”). The Final Report will (1) describe how Pinnacle has adopted and 

implemented the Compliance Consultant’s recommendations, if any, from the Semi-Annual 

Report and Anniversary Report; (2) certify that the Compliance Consultant agrees with 

Pinnacle’s adoption and implementation of its recommendations, if any; and (3) include an 

opinion of the Compliance Consultant on whether the Policies and Procedures, and Pinnacle’s 

implementation thereof, are reasonably designed to prevent violations of the federal securities 

laws by Pinnacle and its employees. 

H. Pinnacle shall cooperate fully with the Compliance Consultant and shall provide 

the Compliance Consultant with access to its files, books, records, and personnel as reasonably 

requested by the Compliance Consultant.  For the period of the engagement, Pinnacle: (1) shall 

not have the authority to terminate the Compliance Consultant or substitute another 

compliance consultant for the Compliance Consultant without the prior written approval of the 

Commission staff; and (2) shall compensate the Compliance Consultant and persons engaged 

to assist the Compliance Consultant for services rendered pursuant to this Order at their 

reasonable and customary rates. 

I. Pinnacle shall require the Compliance Consultant to enter into an agreement that 

provides that for the period of engagement and for a period of two years from completion of the 

engagement, the Compliance Consultant shall not enter into any employment, consultant, 

attorney-client, auditing or other professional relationship with Pinnacle, or any of its present or 

former affiliates, directors, officers, employees, or agents acting in their capacity. The 

agreement will also provide that the Compliance Consultant will require that any firm with 

which she is affiliated or of which she is a member, and any person engaged to assist the 

Compliance Consultant in performance of her duties under this Order shall not, without prior 

written consent of the Commission staff, enter into any employment, consultant, attorney-client, 

auditing or other professional relationship with Pinnacle, or any of its present or former 

affiliates, directors, officers, employees, or agents acting in their capacity as such for the period 

of the engagement and for a period of two (2) years after the engagement. 

  For the period of engagement and for a period of two years from completion of 

the engagement, Pinnacle undertakes not to (i) retain the Compliance Consultant for any other 

professional services outside of the services described in this Order; (ii) enter into any other 

professional relationship with the Compliance Consultant, including any employment, 



 

 

10 

consultant, attorney-client, auditing or other professional relationship; or (iii) enter, without prior 

written consent of the Commission staff, into any such professional relationship with any of the 

Compliance Consultant’s present or former affiliates, employers, directors, officers, employees, 

or agents acting in their capacity as such. 

J. A Report will likely include confidential financial, proprietary, competitive 

business or commercial information. Public disclosure of a Report could discourage 

cooperation, impede pending or potential government investigations or undermine the objectives 

of the reporting requirement. For these reasons, among others, Reports and the contents thereof 

are intended to remain and shall remain non-public, except (1) pursuant to court order, (2) as 

agreed to by the parties in writing, (3) to the extent that the Commission determines in its sole 

discretion that disclosure would be in furtherance of the Commission’s discharge of its duties 

and responsibilities, or (4) as otherwise required by law. 

34. Certification. Pinnacle undertakes to certify, in writing, compliance with the 

undertakings set forth above. The certification shall identify the undertakings, provide written 

evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to 

demonstrate compliance. The Commission staff may make reasonable requests for further 

evidence of compliance, and Respondent agrees to provide such evidence. The certification and 

supporting material shall be submitted to Hane L. Kim, Assistant Director, Division of 

Enforcement, Securities and Exchange Commission, 100 Pearl St., Suite 20-100, New York, NY 

10004-2616, with a copy to the Office of Chief Counsel of the Enforcement Division, no later 

than sixty (60) days from the date of the completion of the undertakings. 

35. Recordkeeping. Pinnacle shall preserve for a period of not less than six (6) years 

from the end of the fiscal year last used, the first two years in an easily accessible place, any 

record of its compliance with the undertakings set forth herein. 

36. Deadlines. For good cause shown, the Commission staff may extend any of the 

procedural dates relating to the undertakings. Deadlines for procedural dates shall be counted in 

calendar days, except that if the last day falls on a weekend or federal holiday, the next business 

day shall be considered to be the last day. 

IV. 

In view of the foregoing, the Commission deems it appropriate and in the public interest 

to impose the sanctions agreed to in Respondent’s Offer. 

Accordingly, pursuant to Section 15(b) of the Exchange Act and Sections 203(e) and 

203(k) of the Advisers Act, it is hereby ORDERED that: 

A. Respondent shall cease and desist from committing or causing any violations and 

any future violations of Sections 204(a), 206(2), and 206(4) of the Advisers Act and Rules 204-3 

and 206(4)-7 promulgated thereunder. 

B. Respondent is censured. 



 

 

11 

C. Respondent shall pay disgorgement of $83,462, prejudgment interest of 

$11,874 and civil penalties of $393,381 to the Securities and Exchange Commission. If 

timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 

600.  Payment shall be made in the following installments: 

1. Due within 14 days of the entry of this Order: $122,179.25; 

2. Due within 90 days of the entry of this Order: $122,179.25; 

3. Due within 180 days of the entry of this Order: $122,179.25; and 

4. The remainder within 365 days after the entry of this Order. 

Payments shall be applied first to post-order interest, which accrues pursuant to SEC Rule 

of Practice 600 and pursuant to 31 U.S.C. 3717.  Prior to making the final payment set 

forth herein, Respondent shall contact the staff of the Commission for the amount due.  If 

Respondent fails to make any payment by the date agreed and/or in the amount agreed 

according to the schedule set forth above, all outstanding payments under this Order, 

including post-order interest, minus any payments made, shall become due and payable 

immediately at the discretion of the staff of the Commission without further application to 

the Commission.  

 Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request; 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center  

Accounts Receivable Branch                                                                                  

HQ Bldg., Room 181, AMZ-341  

6500 South MacArthur Boulevard  

Oklahoma City, OK 73169 

Payments by check or money order must be accompanied by a cover letter identifying 

Pinnacle Investments, LLC, as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Hane L. Kim, 

Assistant Regional Director, U.S. Securities and Exchange Commission, Division of 

Enforcement, 100 Pearl St, Suite 20-100, New York, NY 10004-2616. 

http://pay.gov/
http://www.sec.gov/about/offices/ofm.htm;


 

 

12 

D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 

created for the disgorgement, prejudgment interest, and penalties referenced in Section IV.C 

above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such 

a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order 

granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount 

of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be 

deemed an additional civil penalty and shall not be deemed to change the amount of the civil 

penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” 

means a private damages action brought against Respondent by or on behalf of one or more 

investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding. 

E. Respondent shall comply with the undertakings enumerated in paragraphs 32 

through 36 above. 

By the Commission. 

 

      Vanessa A. Countryman 

       Secretary