United States Court of Appeals For the First Circuit

Nos. 20-1581, 21-1857, 22-1733, 23-1509

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, Appellee,

v.

NAVELLIER & ASSOCIATES, INC.; LOUIS NAVELLIER,

Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Denise J. Casper, U.S. District Judge]

Before

Kayatta, Lipez, and Gelpí, Circuit Judges.

Samuel Kornhauser for appellants.

Paul G. Álvarez, Senior Appellate Counsel, with whom Megan Barbero, General Counsel, and Daniel Staroselsky, Assistant General Counsel, Securities and Exchange Commission, Washington, D.C., were on brief, for appellee.

July 16, 2024 GELPÍ, Circuit Judge. In 2017, the Securities and

Exchange Commission ("SEC") brought suit against investment

advisers Louis Navellier ("Navellier") and Navellier & Associates,

Inc. ("NAI") (collectively, "Appellants"), alleging violations of

sections 206(1) and 206(2) of the Investment Advisers Act

("Advisers Act"), 15 U.S.C. § 80b-6(1)-(2). After the United

States District Court for the District of Massachusetts granted

summary judgment in favor of the SEC and, inter alia, ordered

disgorgement in an amount exceeding $22 million, Appellants

appealed. They then moved the district court to stay pending

appeal and to alter or amend its judgment, both of which the

district court denied. Appellants appealed from this denial.

Finally, Appellants appealed from the district court's denial of

their motion to reduce the supersedeas bond. We consolidated the

appeals and now affirm.

I. BACKGROUND

A. Statutory Background

The Advisers Act1 "was the last in a series of Acts

designed to eliminate certain abuses in the securities industry."

SEC v. Cap. Gains Rsch. Bureau, Inc.,

(1963).

In drafting the Advisers Act, Congress recognized that "the

national public interest and the interest of investors are

1Pub. L. No. 76-768,

(1940) (codified as amended at 15 U.S.C. §§ 80b-1 to 80b-21).

- 2 - adversely affected . . . when the business of investment advisers

is so conducted as to defraud or mislead investors, or to enable

such advisers to relieve themselves of their fiduciary obligations

to their clients." Investment Trusts and Investment Companies:

Hearings Before a Subcomm. of the Comm. on Banking & Currency on

S. 3580, 76th Cong. 30 (1940). The Advisers Act thus

"substitute[s] a philosophy of full disclosure for the philosophy

of caveat emptor" and prescribes federal fiduciary standards for

investment advisers. Cap. Gains,

; Santa Fe Indus.,

Inc. v. Green,

, 471 n.11 (1977).

At issue here are sections 206(1) and 206(2) of the

Advisers Act. Section 206(1) makes it unlawful for an investment

adviser "to employ any device, scheme, or artifice to defraud any

client or prospective client." 15 U.S.C. § 80b-6(1). Section

206(2), in turn, prohibits an investment adviser from "engag[ing]

in any transaction, practice, or course of business which operates

as a fraud or deceit upon any client or prospective client." 15

U.S.C. § 80b-6(2).

B. Factual Background

We draw the following facts from the summary judgment

record and present them in the light most favorable to Appellants.

See González-Piña v. Rodríguez,

(1st Cir. 2005).

During the relevant time period, Navellier was the

majority owner, Chief Investment Officer ("CIO"), and Chief

- 3 - Executive Officer ("CEO") of NAI, an SEC-registered investment

advisory firm. As CIO and CEO, Navellier had authority, along

with NAI's Board of Directors, to decide which investment

strategies NAI offered its clients and to sell NAI's business

lines. Navellier was also "responsible for [the] supervision of

individuals providing investment advice to [NAI's] clients." At

all relevant times, Navellier and NAI acted as "investment

advisers" within the meaning of the Advisers Act.2

1. SEC Communications with NAI

From 1999 to 2007, the SEC's Office of Compliance

Inspections and Examinations ("OCIE") sent NAI three letters

detailing compliance deficiencies in NAI's marketing materials.

In 1999, OCIE's first letter informed NAI of its failure to

adequately disclose that some of its marketed performance figures

"d[id] not represent actual trading using client assets, but were

achieved through a form of back-testing." As relevant to this

action, "back-testing" is the process by which an investment

strategy is retroactively applied to historical market data (the

The Advisers Act defines "investment adviser" as "any person 2

who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities." 15 U.S.C. § 80b-2(a)(11). The Advisers Act defines "person" as "a natural person or a company." 15 U.S.C. § 80b-2(a)(16).

- 4 - prices of underlying securities during a past time period) as if

the strategy had actually been used to trade assets during that

time period. Back-tested investment strategies thus generate

hypothetical performance figures and benefit from hindsight. By

contrast, "live" or "active" investment strategies are in fact

used to trade assets, thus generating actual performance figures,

and reflect "investment decisions [made] at the time of execution."

In 2003, OCIE's second letter again warned NAI of its

failure to prominently disclose that some of its marketed,

back-tested performance figures were "purely hypothetical and

constructed based on the benefit of hindsight." Finally, in 2007,

OCIE's third letter detailed similar compliance deficiencies. In

this third letter, OCIE noted its "concern[] that NAI may not have

taken [the previous letters] seriously," and stated that the SEC

"views repeat violations as a serious matter and considers

recidivist behavior when making a determination on whether to refer

matters to the enforcement staff for possible further actions."

2. AlphaSector Strategy

In or around 2001, Jay Morton ("Morton"), at the time

the principal owner of a wealth management firm, developed a

"defensive, sector rotation investment strategy" meant to invest

in exchange-traded funds ("ETFs").3 The investment strategy was

3 An ETF "is a pooled investment security that can be bought and sold like an individual stock. ETFs can be structured to track

- 5 - thereafter licensed by investment advisory firm Newfound Research

LLC ("Newfound"). In 2008, investment advisory firm F-Squared

Investments, Inc. ("F-Squared") licensed the strategy from

Newfound and rebranded it as the "AlphaSector" strategy.

In October 2009, Peter Knapp ("Knapp"), NAI's General

Counsel and Chief Compliance Officer, met with Howard Present

("Present"), President and CEO of F-Squared, to conduct due

diligence on the AlphaSector strategy in connection with NAI

potentially licensing and offering the strategy to their clients.

Present claimed that the AlphaSector strategy was a live investment

strategy. Specifically, Present told Knapp that, from 2001 to

2008, a wealth management firm had used the AlphaSector strategy

to manage real client accounts and trade actual assets, and that

the strategy's performance figures were based on those trades.

However, when Knapp asked Present for the trade confirmations that

would support Present's claim, Present responded that a

confidentiality agreement prevented him from disclosing that

information.

While Present did not provide Knapp with the trade

confirmations, Present did provide other information regarding the

anything from the price of a commodity to a large and diverse collection of securities." James Chen, Exchange-Traded Fund (ETF): What It Is and How To Invest, Investopedia, https://www.investopedia.com/terms/e/etf.asp [https://perma.cc/9PAS-U99V] (last updated May 23, 2024).

- 6 - origin, methodology, and performance of the AlphaSector strategy.

First, Present provided Knapp with "a spreadsheet that showed all

of the 'trades' conducted" based on the AlphaSector strategy from

2001 to 2008. Second, Present emailed Knapp a letter from index

performance calculation firm NASDAQ OMX Group, Inc. ("NASDAQ").

The letter explained that, in September 2008, NASDAQ "began the

process of converting [the AlphaSector] live investment strategy

to a daily valued, public index"4 named the "AlphaSector Rotation

Index." On October 13, 2008, NASDAQ "began publishing and

disseminating the [AlphaSector Rotation] Index value[s] on a daily

basis." The letter noted that NASDAQ had calculated those values

based on data provided by F-Squared, which F-Squared had "indicated

to represent live[] . . . investment decisions." NASDAQ, however,

did not disseminate any AlphaSector Rotation "Index values prior

to October 13, 2008."

Notwithstanding the spreadsheet and NASDAQ letter, Knapp

later testified that Present "could[] [not] produce anything to"

verify his claim that the AlphaSector strategy had been used to

manage real client accounts and trade actual assets from 2001 to

2008. Furthermore, Knapp and Arjen Kuyper ("Kuyper"), NAI's

President, testified that because NASDAQ did not disseminate any

AlphaSector Rotation Index values prior to 2008, NASDAQ could not

4 As relevant to this action, an index reflects the performance track record of an investment strategy.

- 7 - verify the AlphaSector strategy's performance figures prior to

2008.

On October 5, 2009, Knapp prepared an executive summary

of his due diligence on the AlphaSector strategy. There, Knapp

stated that "[t]he AlphaSector trading system was originally

developed and used by a large wealth management group" and that

"[t]here is a confidentiality agreement that prevents [F-Squared]

from divulging who they are." Knapp further stated that F-Squared

"flat out [would not] show the math to" him, "which would knock

[F-Squared] out of contention but for" the fact that "[F-Squared]

began reporting the holdings/trades to NASDAQ, which . . . used

the data to calculate and publish [the AlphaSector Rotation

Index's] performance[] since October 2008." This, according to

Knapp, "add[ed] to the legitimacy of the analytical system."

Shortly thereafter, Knapp met with Navellier and

discussed his executive summary with him. Knapp later testified

that, during this meeting, "[i]t would have come up that [Knapp]

couldn't verify" the AlphaSector strategy's performance figures

from 2001 to 2008. Knapp recommended to Navellier that NAI license

the AlphaSector strategy from F-Squared. Navellier agreed.

On or around October 19, 2009, NAI and F-Squared entered

into a Model Manager Agreement whereby NAI licensed the AlphaSector

strategy from F-Squared. Pursuant to the agreement, F-Squared

would periodically send NAI trading signals indicating which ETFs

- 8 - to purchase and which to sell based on the AlphaSector strategy.

NAI rebranded the strategy and offered it to its clients under

NAI's new, separate "Vireo AlphaSector" brand.

3. Internal Communications

On April 6, 2011, Navellier emailed NAI employees,

expressing concern over the lack of support for the AlphaSector

strategy's performance track record. Navellier wrote:

What is so frustrating about [F-Squared] and Vireo is the ongoing lies. . . . I was told the numbers were GIPS5 verified. Lie . . . . I was told that we had all the trade confirm[ations]. Lie . . . . I am now told that we just have a spreadsheet. Any idiot can make up numbers on a spreadsheet! . . . Obviously, I have to distance myself from [F-Squared] when it blows up and am still trying to figure out how to reduce [NAI's] liability, since when the lies become evident, we are out of business . . . .

Knapp responded, emailing Navellier "the [e]xecutive [s]ummary

[that Knapp] prepared that ha[d] the representations made to

[Navellier] regarding F-Squared." Later that day, Navellier

emailed Knapp, writing:

I went to get the [trade] confirm[ations] yesterday to see the [wealth management] firm that built the record and I was told that there were no [trade] confirm[ations], just a spreadsheet. I was shocked. Any idiot can send in a bogus spreadsheet! That is not due diligence, that is stupidity. . . . We have always been transparent to consulting groups, but now we suddenly smell like rotting fish! . . . [Present] is not

5 "GIPS" are the Global Investment Performance Standards.

- 9 - transparent . . . . I have no idea how to avoid liability on this fiasco. At least no one has lost money yet, but come the next market downturn, we could be out of business.

Navellier then emailed Kuyper, stating that "[t]he SEC [was] going

to love this." The next week, on April 12, 2011, Navellier emailed

NAI employee Jane Hunt ("Hunt") and instructed her to "take

'Navellier' off of as many [Vireo AlphaSector] documents [as she

could], such as Advisory Agreements, the Web Site, etc."

The following month, Navellier again emailed NAI

employees, stating that "[u]nless somebody show[ed] [him] the

[trade] confirm[ations], [F-Squared] [was] merely a model and

[Navellier would] protect[ NAI] from potential fraud, so [NAI

employees] must not talk about [F-Squared] as being base[d] on

real [money] since 2001." Navellier, however, stated that he would

not stop Vireo AlphaSector sales and would direct "tough questions"

to Knapp.

On August 11, 2011, in another email to NAI employees,

Navellier stated that the "[F-Squared system] . . . continue[d] to

smell like pure FRAUD" and that he could not explain "why [Present

was] clueless about basic statistics." Navellier further stated

that while "Vireo was a good idea," NAI "sold the wrong product

that continues to smell like FRAUD." Navellier suggested that, in

light of the situation, NAI could "try to sell" the Vireo

- 10 - AlphaSector business. On August 25, 2011, Navellier emailed John

Ranft ("Ranft"), NAI's Director of Marketing, stating:

After Vireo is sold, you can run wild and do whatever you want, but I am not going to be convicted for fraud, so we need some serious disclosure[s] . . . . Having indices that cannot be found or daily pricing smells to high heaven. So until [F-Squared] can be transparent and . . . allow the validation of their claims, I will continue to believe that the original Alpha Sector Premium Model . . . is just made up and pure FRAUD.

4. Marketing Materials

Meanwhile, NAI distributed NAI-created Vireo AlphaSector

marketing materials to current and prospective clients. From

August 2011 to November 2011, NAI distributed Vireo AlphaSector

presentations that stated that the AlphaSector strategy had an

inception date of April 1, 2001 (defined as the date in which

"[l]ive assets began tracking" the strategy), described the

AlphaSector strategy as an "active" one, and noted that the

strategy's returns, going back to 2001, were "not back-tested."

In 2012, NAI continued to distribute Vireo AlphaSector

marketing materials containing these statements. For example, in

March 2012, NAI sent a Vireo AlphaSector presentation to a Wells

Fargo Advisors ("WFA") representative. At the time, WFA advertised

the Vireo AlphaSector strategy to its clients. The presentation

still stated that "[l]ive assets began tracking" the AlphaSector

strategy on April 1, 2001. In June 2012, NAI sent Vireo

- 11 - AlphaSector "commentary" to another WFA representative. The

commentary again described the AlphaSector strategy as an "active"

one with an inception date of April 1, 2001, and stated that the

strategy's returns, going back to 2001, were not back-tested. WFA

provided its clients with these marketing materials.

5. Sale of the Vireo AlphaSector Business to F-Squared

On March 15, 2013, NAI and F-Squared executed a letter

of intent setting forth the terms of F-Squared's proposed offer to

purchase NAI's "Vireo strategies and associated client accounts."

According to the letter, the purchase price would be $14 million,

"payable in cash at closing, assuming [that there were] at least

$1.1 billion in revenue generating client assets transfers at [the]

time of closing."

On April 20, 2013, Navellier emailed NAI employees and

notified them of the impending sale of the Vireo AlphaSector

business to F-Squared. In the email, Navellier stated that "[t]he

catalyst for the [sale] . . . [was] that F-Squared refuse[d] to

stop circulating its fake 10+ year [AlphaSector] indices before

the ETFs actually commenced on May 10, 2007." Navellier further

stated that NAI was "tipped off to F-Squared's fraud by an ex-SEC

enforcement officer, so [NAI] ha[d] no other choice other than to

clean up th[e] mess" in light of the "obvious fraud." Navellier

described the situation as "a massive due diligence failure" and

noted that NAI was at risk of a $225,000 fine "for creating indices

- 12 - before the actual securities existed, due to F-Squared flooding

the broker/advisor market with its fake 10+ year performance

record" that "[could not] be documented."

On August 7, 2013, NAI and F-Squared entered into an

Assignment and Asset Purchase Agreement whereby NAI agreed to sell

the Vireo AlphaSector business to F-Squared for $14 million. The

next day, NAI sent a letter to its clients announcing that NAI and

F-Squared had entered into an agreement whereby F-Squared

"plan[ned] to purchase from [NAI] the client accounts and

associated investment advisory agreements invested within the

Vireo[] AlphaSector[] suite of strategies." The letter stated

that, upon completion of the sale, "there should be no material

change in investment decision-making or investment objectives of

client accounts." The letter went further, stating that "the only

material change for clients [would be] that the strategy names

[would] change from the Vireo AlphaSector strategies to the

F-Squared AlphaSector strategies." The letter did not indicate

any reason for the sale.

In September 2013, NAI sold the Vireo AlphaSector

business to F-Squared for $14 million. Almost all Vireo

AlphaSector clients consented to the sale and continued investing

in the AlphaSector strategy with F-Squared. Appellants do not

dispute that at no time before or after the sale did they inform

their clients of the reason for the sale or of Appellants' lack of

- 13 - support for the statements in their Vireo AlphaSector marketing

materials.

6. SEC Investigation

In or around October 2013, the SEC began investigating

F-Squared. As part of that investigation, the SEC served

investigative subpoenas on NAI and other investment advisory firms

that had licensed or marketed AlphaSector products. In December

2014, the SEC brought an enforcement action against F-Squared,

which later settled. The SEC also brought a civil action against

Present, which did not settle. The SEC litigated its case against

Present, won a jury verdict, and obtained an injunction against

Present.

The SEC brought enforcement actions against twenty other

investment advisers, including NAI and Navellier, in connection

with the dissemination of marketing materials relating to the

AlphaSector strategy. Of those investment advisers, only NAI and

Navellier did not settle with the SEC.

C. Procedural Background

On August 31, 2017, the SEC brought suit against

Appellants in the United States District Court for the District of

Massachusetts. Count I alleged that Appellants had violated

section 206(1) of the Advisers Act by making "materially false and

misleading statements and omissions to their investment advisory

clients" and engaging "in a scheme to defraud those clients by

- 14 - concealing material information regarding the performance track

record of the investment strategies they offered." Count II

alleged that Appellants had similarly violated section 206(2) of

the Advisers Act. Count III alleged that, in the alternative,

Navellier had aided and abetted NAI's violations of sections 206(1)

and 206(2) of the Advisers Act. Finally, Count IV alleged that

NAI violated section 206(4)6 of the Advisers Act. The SEC sought

permanent injunctions, disgorgement, and civil monetary penalties

against Appellants. Appellants answered the SEC's complaint,

denying the allegations therein and asserting affirmative

defenses, including a selective enforcement defense.

On August 12, 2019, the SEC moved for partial summary

judgment on Count I, Count II, and Appellants' selective

enforcement defense. Appellants cross-moved for summary judgment

on all counts and on their selective enforcement defense.

On February 13, 2020, after holding a hearing on the

motions, the district court denied Appellants' motion for summary

judgment and granted the SEC's partial motion for summary judgment

as to Count I, Count II, and Appellants' selective enforcement

defense. As to Counts I and II, the district court concluded that

Appellants had violated sections 206(1) and 206(2) of the Advisers

6 Section 206(4) of the Advisers Act makes it unlawful for an investment adviser "to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative." 15 U.S.C. § 80b-6(4).

- 15 - Act. As to Appellants' selective enforcement defense, the district

court first determined that Appellants alleged two types of equal

protection claims: a claim of selective enforcement and a class of

one claim. The district court then concluded that both claims

failed.7

On March 12, 2020, Appellants moved the district court

to reconsider its grant of partial summary judgment in favor of

the SEC. The district court denied Appellants' motion for

reconsideration.

On June 2, 2020, the district court entered its final

judgment. Therein, the district court (1) permanently enjoined

Appellants from violating sections 206(1) and 206(2) of the

Advisers Act; (2) held Appellants jointly and severally liable for

disgorgement in the amount of $28,964,571 plus prejudgment

interest of $6,513,619; and (3) ordered NAI and Navellier to

respectively pay civil penalties of $2 million and $500,000. On

June 12, 2020, the SEC instituted administrative proceedings

against Appellants. Appellants timely appealed from the district

court's grant of partial summary judgment in favor of the SEC,

denial of reconsideration, and final judgment.

7 On March 25, 2020, the SEC moved to dismiss, with Appellants' consent, Counts III and IV. The district court granted the motion. Counts III and IV are not at issue here.

- 16 - On June 22, 2020, the Supreme Court decided Liu v. SEC,

(2020). There, the Court held that "a disgorgement

award that does not exceed a wrongdoer's net profits and is awarded

for victims is equitable relief permissible under" the Securities

Exchange Act of 1934 ("Exchange Act").8

. The Court also

instructed district courts to "deduct legitimate expenses before

ordering disgorgement."

.

On August 20, 2020, we granted the SEC's motion for a

limited remand to allow the district court to make additional

factual findings and conclusions of law regarding the disgorgement

award in light of Liu. On September 21, 2021, the district court

entered its amended final judgment, lowering the disgorgement

amount to $22,734,487 with prejudgment interest of $6,635,403,

along with amended disgorgement findings of fact and conclusions

of law. Appellants timely appealed from the district court's

amended final judgment.

On October 13, 2021, Appellants moved to stay

enforcement of the amended final judgment pending their appeals

(and to thus stay the SEC's administrative proceedings) and to

reduce the supersedeas bond. On October 19, 2021, Appellants moved

the district court to alter or amend its amended final judgment.

On September 13, 2022, the district court denied both motions.

8

Stat. 881 (codified as amended at 15 U.S.C. §§ 78a-78rr).

- 17 - Appellants timely appealed from the district court's denial of

both motions.

On October 7, 2022, Appellants renewed their motion to

reduce the supersedeas bond, which the district court again denied.

Appellants timely appealed from the district court's denial of

their renewed motion to reduce the supersedeas bond.

On November 22, 2022, Appellants moved this court to

stay the SEC's administrative proceedings pending their appeals.

We denied the motion on December 23, 2022. On August 7, 2023, we

consolidated the four appeals.

II. DISCUSSION

A. Sections 206(1) and 206(2) of the Advisers Act

We begin with Appellants' challenge to the district

court's grant of summary judgment in favor of the SEC as to Counts

I and II. To the extent Appellants also appeal the district

court's denial of their cross-motion for summary judgment on the

same claims, we address those arguments as well.

We review the district court's grant of summary judgment

de novo. Ferrari v. Vitamin Shoppe Indus. LLC,

(1st Cir. 2023). In conducting this review, we construe the record

in the light most favorable to the non−moving party and draw all

reasonable inferences in their favor.

We need not, however,

"credit 'conclusory allegations, improbable inferences, and

unsupported speculation.'" Dixon-Tribou v. McDonough, 86 F.4th

- 18 - 453, 458 (1st Cir. 2023) (quoting Lahens v. AT&T Mobility P.R.,

Inc.,

(1st Cir. 2022)).

Summary judgment is proper "if the movant shows that

there is no genuine dispute as to any material fact and the movant

is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

This standard "remains the same when the district court is faced

with cross-motions for summary judgment." Dixon-Tribou, 86 F.4th

at 458. We "may affirm a district court decision on any ground

supported by the record." P.R. Ports Auth. v. Umpierre-Solares,

(1st Cir. 2006).

Section 206(1) of the Advisers Act makes it unlawful for

an investment adviser "to employ any device, scheme, or artifice

to defraud any client or prospective client." 15 U.S.C.

§ 80b-6(1). Section 206(2) prohibits an investment adviser from

"engag[ing] in any transaction, practice, or course of business

which operates as a fraud or deceit upon any client or prospective

client." 15 U.S.C. § 80b-6(2). To establish a violation, "each

of these sections requires the SEC to show the investment adviser

made a material misrepresentation with a culpable mental state."

ZPR Inv. Mgmt. Inc. v. SEC,

(11th Cir. 2017).

We address each element in turn.

1. Misrepresentations

Appellants do not dispute that their Vireo AlphaSector

marketing materials stated that the AlphaSector strategy had an

- 19 - inception date of April 1, 2001, that the strategy was an "active"

one, and that the strategy's returns were not back-tested.9

Appellants, however, contend that the SEC did not prove that these

statements were false.

The Supreme Court has emphasized that "[t]o impose upon

the [SEC] the burden of showing deliberate dishonesty as a

condition precedent to protecting investors through the

prophylaxis of disclosure would effectively nullify the protective

purposes of the statute." Cap. Gains,

. Consistent

with this, we have made clear that section 206 "includes an

obligation to provide 'full and fair disclosure of all material

facts' to investors" and "to employ reasonable care to avoid

misleading" current and prospective clients. SEC v. Tambone,

(1st Cir. 2008) (quoting Cap. Gains,

). It follows that section 206 "prohibits failures to disclose

material information, not just affirmative frauds." SEC v. Wash.

Inv. Network,

(D.C. Cir. 2007).

After Appellants conceded having made these statements in 9

their opening brief, Appellants argued, for the first time in their reply brief, that what "NAI actually said and did was to provide a two-page performance chart and disclosure stating correctly that its Vireo AlphaSector Premium live-traded strategy began in '2010' and provided its live-traded performance track record of a 13.18% increase through December 31, 2010." The record, however, confirms that Appellants made the relevant statements, and Appellants have waived any argument to the contrary. See United States v. Evans-Garcia,

(1st Cir. 2003) ("Arguments raised for the first time in reply briefs are generally deemed waived.").

- 20 - Here, the undisputed facts establish that the relevant

statements were false and therefore misrepresentations within the

scope of section 206. As early as October 2009, Knapp knew that

Present would not disclose the trade confirmations that would

verify his claims about the AlphaSector strategy's performance

figures from 2001 to 2008. Navellier was similarly on notice that

F-Squared "flat out [would not] show the math to" Knapp. Indeed,

F-Squared later admitted in an administrative proceeding that it

"did not create AlphaSector until late 2008" and that the claim

that the AlphaSector strategy "had been used to manage client

assets from April 2001 to September 2008" was "materially false."

And, in 2017, a jury found that Present's misrepresentations as to

the history of the AlphaSector strategy violated the Advisers Act.

See SEC v. Present, No. 14-cv-14692,

, at *1 (D.

Mass. Mar. 20, 2018).

From April 2011 to August 2011, in a series of internal

emails with NAI employees,10 Navellier expressed concern over

10 Appellants contend that the district court "impermissibly did not consider" the context of Navellier's internal emails with NAI employees. According to Appellants, these "internal email accusations were unsupported fabrications, made by [Navellier] in an effort to coerce and scare NAI's marketers to stop marketing Vireo, and focus instead on marketing [Navellier's] personally created investment strategies." Appellants thus argue that the emails were a product of Navellier's "jealous[y] of Howard Present and his success." The record, however, which evidences Appellants' lack of support for the relevant statements, belies Appellants' post hoc rationalization of these emails. Appellants' characterization of the emails is thus insufficient to create a

- 21 - having "no [trade] confirm[ations], just a spreadsheet," to

support Present's claims about the AlphaSector strategy and its

performance. More than once, Navellier acknowledged the liability

that could stem from NAI's lack of support for these claims.

Navellier emphasized that the Vireo AlphaSector business

"smell[ed] like FRAUD, especially since no one [could] find" trade

confirmations for the AlphaSector strategy's performance.

Navellier even warned NAI employees "not [to] talk about [the

AlphaSector strategy] as being base[d] on real [money] since 2001."

Nevertheless, from 2011 to 2012, NAI created and

distributed Vireo AlphaSector marketing materials that restated

Present's false claims. Specifically, the marketing materials

claimed that the AlphaSector strategy had an inception date of

April 1, 2001, that the strategy was an "active" one, and that the

strategy's performance figures, all the way back to 2001, were

"not back-tested." NAI, however, remained unable to corroborate

these statements. Indeed, in their answer to the SEC's complaint,

Appellants admitted that they "lack[ed] knowledge or information

sufficient to admit or deny . . . that [the] statements" in their

Vireo AlphaSector marketing materials were false.

genuine issue of material fact. See Triangle Trading Co. v. Robroy Indus.,

(1st Cir. 1999) ("Conclusory allegations, improbable inferences, and unsupported speculation, are insufficient to establish a genuine dispute of fact.") (internal quotation marks and alteration omitted).

- 22 - Instead of modifying or stopping the distribution of the

relevant statements, Navellier ordered Hunt to "take 'Navellier'

off of as many [Vireo AlphaSector] documents [as she could], such

as Advisory Agreements, the Web Site, etc." Instead of halting

Vireo AlphaSector sales, Navellier declared that he would "not

stop[] Vireo sales" and would direct "tough questions to [Knapp]."

Instead of informing clients of the lack of support for the

statements, Navellier sold the Vireo AlphaSector business to

F-Squared and told clients that "there should be no material change

in investment decision-making or investment objectives of client

accounts."

Appellants' argument that they presented "evidence that

the statement[s] [were] true" fails to raise a genuine dispute of

material fact as to the statements' veracity.11 First, Appellants

point to Morton's assurances to Present that he began applying the

sector rotation strategy to actual assets in April 2001. But while

the assurances Appellants received about the AlphaSector strategy

may be relevant to what Appellants knew about the strategy's

performance, they do not actually prove the strategy had been live

11 The Supreme Court rejected a similar argument in Capital Gains, which interpreted the reach of section 206.

. There, the respondents argued that "their advice was 'honest' in the sense that they believed it was sound."

The Court characterized this argument as "another way of putting the rejected argument that the elements of technical common-law fraud -- particularly intent -- must be established before an injunction requiring disclosure may be ordered."

- 23 - traded since 2001. Second, Appellants contend that the NASDAQ

letter "reasonably confirmed" that the AlphaSector strategy had

been used to manage real assets since 2001. The letter, however,

states only that NASDAQ "calculated historical values of the Index

back to the inception date as defined by F-Squared," and that NASDAQ

relied upon data provided by F-Squared, which F-Squared "indicated

to represent live[] . . . investment decisions." NASDAQ itself

never independently verified the claim that the AlphaSector

strategy had been live traded since 2001. Indeed, Knapp and Kuyper

testified that, even with the NASDAQ letter, NAI remained unable

to verify the strategy's performance figures prior to 2008.

Appellants' inability to point to any direct evidence supporting

their claims as to the AlphaSector strategy -- evidence they have

every incentive to produce in this litigation -- is telling.

For the foregoing reasons, we conclude that there

remains no genuine dispute of material fact as to whether the

relevant statements were misrepresentations within the scope of

sections 206(1) and 206(2) of the Advisers Act.

2. Materiality

Next, Appellants argue that either the relevant

statements were not material or that materiality is a question for

the jury that cannot be resolved on a motion for summary judgment.

Appellants rely on (1) an SEC witness's testimony that "for

purposes of coming to [a] settlement[,]" "the older [a] track

- 24 - record gets, the less important it is"; (2) an investment adviser's

testimony that, when advising clients to invest in Vireo

AlphaSector strategies, he "[f]ocused on how [the strategies]

would behave going forward" and "[did not] care about

[back-testing]"; and (3) Ranft's testimony that "[i]t was [his]

understanding . . . that the reason [investors] remained NAI Vireo

clients was the actual performance they received."

Appellants misconstrue the materiality requirement.

Omissions are material "if there is a substantial likelihood that

a reasonable investor would consider [them] important in" making

an investment decision. SEC v. Fife,

(1st Cir. 2002)

(emphasis added) (citing Basic v. Levinson,

(1988)). The standard for materiality is thus not actual reliance

and "the SEC [is] not required to prove that any investor actually

relied on [Appellants'] misrepresentations." SEC v. World Tree

Fin., L.L.C.,

(5th Cir. 2022); Wash. Inv.

Network,

("To obtain an injunction under section

206 against fraudulent conduct, the SEC does not need to prove

reliance on the investment adviser's misleading statements, nor

does the SEC need to prove injury." (citing Cap. Gains,

)). If the "established omissions are 'so obviously

important to an investor, that reasonable minds cannot differ on

the question of materiality[,]' . . . the ultimate issue of

materiality [is] appropriately resolved 'as a matter of law' by

- 25 - summary judgment." TSC Indus., Inc. v. Northway, Inc.,

(1976) (quoting Johns Hopkins Univ. v. Hutton,

(4th Cir. 1970)). Such is the case here.

The established omissions here are obviously important

to an investor because whether the AlphaSector strategy's

performance figures are back-tested or based on actual trades

speaks to the potential risk that an investor will take if they

decide to invest in the strategy. As opposed to active strategies

and performance figures generated by actual trades, back-testing

generates only hypothetical performance figures, benefits from

hindsight, and involves "the corresponding ability to manipulate

[data] to obtain attractive returns." A reasonable investor, in

deciding whether to invest in the Vireo AlphaSector strategy, would

thus consider Appellants' omissions, that they were unable to

corroborate that the strategy was an "active" one and its

performance returns not back-tested, obviously important. The

disclosure of these omissions "would obviously change the

perceived" risk of investing in the strategy "to a reasonable

investor." See SEC v. Bauer,

(7th Cir. 2013).

In other words, the "omissions were material because a reasonable

investor would want to know the risks involved" in their

investment. Fife,

.

Neither does any of Appellants' proffered evidence raise

a genuine question of fact as to the materiality of the

- 26 - misstatements. The SEC witness's testimony speaks only to how the

SEC itself weighs misstatements about an investment strategy's

track record when formulating a proposed settlement offer, and not

how investors would use the same information when making an

investment decision. Similarly, Ranft's testimony goes only to

whether the misstatements motivated investors to remain NAI Vireo

AlphaSector clients, not whether it encouraged them to sign up for

Vireo in the first place. And the investment adviser's testimony

describes how he presented the information about Vireo AlphaSector

to potential clients, not how those potential clients themselves

considered the statements at issue when choosing to put their money

in Vireo.

The record provides further support for the conclusion

that Appellants' omissions were material as a matter of law.

First, on three different occasions prior to NAI's distribution of

the relevant statements, OCIE flagged NAI's failure to adequately

disclose performance figures as back-tested, explaining and

alerting NAI to the importance of this disclosure. Second,

Navellier himself acknowledged the importance of this disclosure

not only by repeatedly referencing the liability that could stem

from NAI's unsupported claims but also by directing NAI employees

"not [to] talk about [F-Squared] as being base[d] on real [money]

since 2001." See SEC v. Mayhew,

(2d Cir. 1997)

- 27 - ("[A] major factor in determining whether information was material

is the importance attached to it by those who knew about it.").

Because Appellants' omissions "are 'so obviously

important to an investor[] that reasonable minds cannot differ on

the question of materiality' . . . the ultimate issue of

materiality [is] appropriately resolved [here] 'as a matter of

law' by summary judgment." TSC Indus., Inc.,

(quoting Johns Hopkins Univ.,

).

3. Culpable Mental State

While the misrepresentation and materiality elements are

the same for sections 206(1) and 206(2) of the Advisers Act, the

requisite mental state differs. See ZPR Inv. Mgmt. Inc.,

. Section 206(1) "requires the SEC to show the adviser

acted with scienter."

Section 206(2), on the other hand,

"require[s] no showing of scienter, and a showing of negligence is

sufficient."

a. Scienter

As to scienter, Appellants argue that summary judgment

was improper because a reasonable jury could find that they did

- 28 - not intend to defraud current or prospective clients.12 This

argument fails.

Proving scienter requires "a showing of either conscious

intent to defraud or 'a high degree of recklessness.'" ACA Fin.

Guar. Corp. v. Advest, Inc.,

, 58 (1st Cir. 2008)

(quoting Aldridge v. A.T. Cross Corp.,

(1st Cir.

2002)). "Recklessness is 'a highly unreasonable omission,

involving not merely simple, or even inexcusable [] negligence,

but an extreme departure from the standards of ordinary care, and

which presents a danger of misleading buyers or sellers that is

either known to the defendant or is so obvious the actor must have

been aware of it.'" Fife, 311 F.3d at 9–10 (alteration in

original) (quoting Greebel v. FTP Software, Inc.,

(1st Cir. 1999)). "As this court has observed, a defendant's

publication of statements when that defendant 'knew facts

suggesting the statements were inaccurate or misleadingly

incomplete is classic evidence of scienter.'" SEC v. Johnston,

12Appellants further argue that the district court improperly considered "NAI's work product/attorney-client privileged communications" with ACA Compliance Group ("ACA"), a consulting firm "hired at the behest of NAI's attorney to assist him in providing legal advice to [Appellants] in anticipation of possible litigation with the SEC." Even assuming arguendo that the district court improperly considered the communications, any such error is harmless as our de novo review does not rely on the communications. See Dusel v. Factory Mut. Ins. Co.,

(1st Cir. 2022).

- 29 -

(1st Cir. 2021) (quoting Aldridge,

).

As per our analysis of the misrepresentation and

materiality requirements, Appellants' omissions were not only

material but an extreme departure from the standards of ordinary

care. Furthermore, as evidenced by OCIE's communications with NAI

as well as Navellier's internal emails with NAI employees, the

misrepresentations presented a danger of misleading current and

prospective clients that was known to Appellants when they

distributed the relevant statements. The record thus establishes

that Appellants acted with a high degree of recklessness, thus

acting with scienter.

b. Negligence

"[T]he negligence required by [section] 206(2) is a less

demanding standard than scienter . . . ." SEC v. Cutter Fin. Grp.,

LLC, No. 23-cv-10589,

, at *6 (D. Mass. Dec. 14,

2023). Here, the SEC has proved that Appellants were negligent

"by failing to 'employ reasonable care to avoid misleading [their]

clients.'" SEC v. Duncan, No. 3:19-cv-11735,

, at

*15 (D. Mass. Sept. 15, 2021) (quoting Cap. Gains,

).

For the foregoing reasons, we conclude that there

remains no genuine dispute of material fact as to any element of

the alleged violations of sections 206(1) and 206(2) of the

- 30 - Advisers Act. We thus affirm the district court's grant of summary

judgment in favor of the SEC as to Counts I and II.

B. Affirmative Defense

We turn to Appellants' challenge to the district court's

grant of summary judgment in favor of the SEC as to Appellants'

selective enforcement defense. The district court determined, and

neither party disputes, that Appellants alleged (1) a claim of

selective enforcement and (2) a class of one claim. We take each

claim in turn.

1. Selective Enforcement

To establish a claim of selective enforcement under the

Equal Protection Clause, Appellants must establish that

"(1) [they], compared with others similarly situated, [were]

selectively treated; and (2) that such selective treatment was

based on impermissible considerations such as race, religion,

intent to inhibit or punish the exercise of constitutional rights,

or malicious or bad faith intent to injure a person." Rubinovitz

v. Rogato,

(1st Cir. 1995) (quoting Yerardi's

Moody St. Rest. & Lounge, Inc. v. Bd. of Selectmen,

,

21 (1st Cir. 1989)).

a. "Similarly Situated" Element

Appellants argue that they were similarly situated to

investment advisory firms WFA and Beaumont Financial Partners

("Beaumont") because both WFA and Beaumont disseminated the

- 31 - relevant statements to their clients, yet the SEC took no

enforcement action against them. We are unpersuaded.

"[T]he standard 'is whether a prudent person, looking

objectively at the incidents, would think them roughly equivalent

and the protagonists similarly situated.'" Mulero-Carrillo v.

Román-Hernández,

(1st Cir. 2015) (quoting

Barrington Cove Ltd. P'ship v. R.I. Hous. & Mortg. Fin. Corp.,

(1st Cir. 2001)). "[T]he 'relevant aspects' are those

factual elements which determine whether reasoned analogy

supports, or demands, a like result." Dartmouth Rev. v. Dartmouth

Coll.,

(1st Cir. 1989), overruled on other grounds

by Educadores Puertorriqueños en Acción v. Hernández,

(1st Cir. 2004). While "[e]xact correlation is neither likely nor

necessary, . . . the cases must be fair congeners." Dartmouth,

.

Here, a prudent person, looking objectively at the

incidents, would not think them roughly equivalent or the

protagonists similarly situated. In arguing only that WFA and

Beaumont disseminated the relevant statements, Appellants ignore

the ways in which Appellants' case is unique and differs from WFA

and Beaumont's. For example, Appellants point to only one instance

in which WFA and Beaumont each distributed the relevant statements,

whereas Appellants repeatedly disseminated the statements from

2011 to 2012 while knowing that they lacked support for them.

- 32 - Furthermore, Appellants did so even after OCIE had warned them of

having made similar misleading statements in the past and informed

them that the SEC "views repeat violations as a serious matter and

considers recidivist behavior when making a determination on

whether to refer matters to the enforcement staff for possible

further actions." Appellants, however, have produced absolutely

no evidence that this was also the case for WFA and Beaumont, or

that, at the very least, these firms had received similar warnings.

The cases are not "fair congeners." See

Because Appellants fail to establish that they were

similarly situated to the comparators they identify, Appellants'

selective enforcement claim fails as a matter of law. We need not

consider whether the alleged selective treatment was based on

impermissible considerations or bad faith. See PDK Lab'ys Inc. v.

DEA,

(D.C. Cir. 2004) (Roberts, J., concurring)

("[I]f it is not necessary to decide more, it is necessary not to

decide more.").

2. Class of One

To establish a class of one claim, Appellants "must show

that they were 'intentionally treated differently from others

similarly situated and that there is no rational basis for the

difference in treatment.'" Freeman v. Town of Hudson,

(1st Cir. 2013) (quoting Vill. of Willowbrook v. Olech,

(2000)). The "similarly situated" element here

- 33 - requires "an extremely high degree of similarity between

[Appellants] and the [entities] to whom they compare themselves."

(quoting Cordi–Allen v. Conlon,

(1st Cir.

2007)). In light of our previous conclusion, see supra, Appellants

have failed to establish a high degree of similarity between WFA,

Beaumont, and Appellants. Their class of one claim thus fails as

a matter of law.

For the foregoing reasons, we affirm the district

court's grant of summary judgment in favor of the SEC as to

Appellants' selective enforcement defense.13

C. Disgorgement

We now consider Appellants' challenges to the district

court's disgorgement order.

1. Availability

Appellants first argue that disgorgement was not an

available equitable remedy because NAI's Vireo AlphaSector clients

suffered no pecuniary harm. "The availability of an equitable

remedy presents a question of law engendering de novo review." In

13 Appellants argue that the district court's denial of reconsideration of its summary judgment ruling "was an abuse of discretion since[] . . . [the district court] failed to follow the law and the fact that there was no evidence the statement[s] [were] false." In light of our reasoning and conclusion above, this argument fails. See Laureano-Quiñones v. Nadal-Carrión,

(1st Cir. 2020) (dismissing challenge to the district court's denial of motion for reconsideration when the motion was directed to the underlying substantive issue of summary judgment).

- 34 - re PHC, Inc. S'holder Litig.,

(1st Cir. 2018);

see also SEC v. Sanchez-Diaz,

, 87 n.2 (1st Cir. 2023).

To punish securities fraud, Congress authorized federal

courts to grant "any equitable relief that may be appropriate or

necessary for the benefit of investors." 15 U.S.C. § 78u(d)(5);

see also Liu,

. Congress explicitly provided for

disgorgement as equitable relief, stating that "[i]n any action or

proceeding brought by the [SEC] under any provision of the

securities laws, the [SEC] may seek, and any [f]ederal court may

order, disgorgement." 15 U.S.C. § 78u(d)(7). Under this

provision, federal courts have jurisdiction to require

disgorgement "of any unjust enrichment by the person who received

such unjust enrichment as a result of" a securities law violation.

15 U.S.C. § 78u(d)(3)(A)(ii).

Appellants' argument that disgorgement was not an

available equitable remedy here because NAI's Vireo AlphaSector

clients did not suffer pecuniary harm mischaracterizes the nature

and purpose of disgorgement.14 Disgorgement is a "profit-based

14Appellants cite SEC v. Govil,

(2d Cir. 2023), for the proposition that, before awarding disgorgement, the district court was required to find that NAI's clients suffered pecuniary harm. Govil states that "[a]n investor who suffered no pecuniary harm as a result of the fraud is not a victim," and thus disgorgement in such a case would not be "awarded for victims," as Liu requires. See

; Liu,

. Neither Liu nor our case law, however, require investors to suffer pecuniary harm as a precondition to a disgorgement award. In Liu, the Court held that a disgorgement award must be awarded for victims, and

- 35 - measure of unjust enrichment" which reflects the foundational

principle that "it would be inequitable that [a wrongdoer] should

make a profit out of [their] own wrong." Liu,

(alteration omitted) (first alteration in original). Disgorgement

is thus "tethered to a wrongdoer's net unlawful profits."

(emphasis added). Consistent with this understanding, we have

recognized the distinction between disgorgement, which is limited

to "the amount with interest by which the defendant profited from

his wrongdoing," and other forms of equitable relief which may

"include[] total losses suffered by the victims." CFTC v. JBW

Cap.,

(1st Cir. 2016) (quoting SEC v. MacDonald,

(1st Cir. 1983) (en banc)). We have similarly

emphasized that "[t]he case law holds with conspicuous clarity

that when a fiduciary has secured an undue advantage by virtue of

his position, equitable relief is available even in the absence of

direct economic loss to the complaining party." In re PHC, Inc.,

.

explained that "the SEC's equitable, profits-based remedy must do more than simply benefit the public at large by virtue of depriving a wrongdoer of ill−gotten gains." Liu,

. Here, notwithstanding the fact that Vireo AlphaSector clients profited from their investments, they were induced into paying advisory fees to NAI by Appellants' misrepresentations. And the SEC "intends to distribute to the Vireo AlphaSector clients any disgorgement awarded." Disgorgement here will thus do more than simply benefit the public at large -- it will remedy a direct harm to Vireo AlphaSector clients.

- 36 - We thus conclude that, "in the circumstances of this

case, the equitable remedy of disgorgement was available in

principle." Id. at 437.

2. Appropriateness

Next, we consider Appellants' challenges to the

appropriateness of the district court's disgorgement order.

"[T]he decision either to award or to refrain from awarding an

available equitable remedy is reviewed for abuse of discretion."

Id. at 435. Similarly, we evaluate under an abuse of discretion

standard "whether the district court . . . properly tailored the

scope of the disgorgement order to address the wrongdoer's

conduct." Sanchez-Diaz,

n.2; see also SEC v. Happ,

(1st Cir. 2004). "Once a right and a violation

have been shown, the scope of a district court's equitable powers

to remedy past wrongs is broad, for breadth and flexibility are

inherent in equitable remedies." Swann v. Charlotte-Mecklenburg

Bd. of Educ.,

(1971). We will thus conclude that

a district court "abuse[d] its discretion only if we are left with

a firm conviction that it has committed 'a meaningful error in

judgment.'" Rosario-Torres v. Hernandez-Colon,

(1st Cir. 1989) (quoting Anderson v. Cryovac, Inc.,

(1st Cir. 1988)).

A "disgorgement award that does not exceed a wrongdoer's

net profits and is awarded for victims is equitable relief

- 37 - permissible" under the Exchange Act. Liu,

. "The

equitable nature of the profits remedy generally requires the SEC

to return a defendant's gains to wronged investors for their

benefit."

. "The amount of disgorgement 'need only be

a reasonable approximation of profits causally connected to the

violation.'" Happ,

(quoting SEC v. First City Fin.

Corp.,

(D.C. Cir. 1989)). "Once the SEC shows

that the disgorgement is a reasonable approximation, the burden

shifts to the defendant to demonstrate that the amount of

disgorgement is not a reasonable approximation."

District

courts must "deduct legitimate expenses before ordering

disgorgement" so that the disgorgement award does not "exceed the

gains 'made upon any business or investment, when both the receipts

and payments are taken into the account.'" Liu,

-92

(quoting Providence Rubber Co. v. Goodyear,

(1869)). "The risk of uncertainty in calculating disgorgement

should fall on the wrongdoer whose illegal conduct created that

uncertainty." Happ,

.

In its amended final judgment, the district court

ordered Appellants jointly and severally liable for disgorgement

in the amount of $22,734,487 plus prejudgment interest of

$6,635,403. The district court first determined that disgorgement

will be for the benefit of investors because the SEC "intends to

distribute to the Vireo AlphaSector clients any disgorgement

- 38 - awarded here." The district court then noted that there were two

types of profit causally connected to Appellants' violations:

(1) the advisory fees NAI clients paid for Vireo AlphaSector

strategies from 2011 to 2013, when Appellants sold the Vireo

AlphaSector business, and (2) the proceeds from such sale. Based

on NAI's income statements, the district court determined that the

advisory fees totaled $22,775,867. The proceeds from the sale of

the Vireo AlphaSector business were $14 million. The district

court thus concluded that the total profits causally connected to

Appellants' violations equaled $36,775,867. Consistent with Liu,

the district court then deducted $14,041,380 in legitimate

expenses from these profits. This deduction represented research

expenses, other non-marketing expenses, and non-marketing

salaries. The district court thus determined the total

disgorgement amount to be $22,734,487.

Appellants launch multiple challenges to the district

court's disgorgement order. First, they contend that the district

court abused its discretion in ordering Navellier jointly and

severally liable with NAI even though Navellier himself did not

disseminate the relevant statements and did not directly provide

investment advice to NAI's Vireo AlphaSector clients.

This argument is unavailing. The "imposition of joint

and several liability for a disgorgement award is permissible so

long as it is 'consistent with equitable principles.'" SEC v.

- 39 - Janus Spectrum LLC,

, 433-34 (9th Cir. 2020)

(quoting Liu,

). The district court concluded that

joint and several liability was consistent with equitable

principles here because Appellants engaged in concerted

wrongdoing. See Liu,

. In so concluding, the

district court considered (1) Navellier's authoritative role in

NAI; (2) Navellier's fiduciary duty, as investment adviser, to all

of NAI's clients; (3) Navellier's violation of sections 206(1) and

206(2) of the Advisers Act; and (4) that Navellier, as majority

owner of NAI, shared in profits received by NAI. In light of the

district court's considerations, the district court did not abuse

its discretion in ordering Appellants jointly and severally liable

for disgorgement.

Second, Appellants argue that there is no causal

connection between the advisory fees paid by NAI's clients for

Vireo AlphaSector strategies and Appellants' violations of the

Advisers Act. Specifically, Appellants contend that the SEC did

not prove that investors became and remained Vireo AlphaSector

clients because of NAI's dissemination of the relevant statements.

This argument likewise fails. The SEC need only

establish that the amount of disgorgement sought is a reasonable

approximation of profits causally connected to the violation. See

Happ,

. And the causal connection requirement does

not demand the type of tracing suggested by Appellants. Indeed,

- 40 - this requirement "does not imply that a court may order a

malefactor to disgorge only the actual property obtained by means

of [their] wrongful act." SEC v. Banner Fund Int'l,

(D.C. Cir. 2000) ("[D]isgorgement is an equitable obligation

to return a sum equal to the amount wrongfully obtained, rather

than a requirement to replevy a specific asset."). Instead, "the

causal connection required is between the amount by which the

defendant was unjustly enriched and the amount [they] can be

required to disgorge."

With this in mind, we find no abuse of discretion in the

district court's determination that there is a causal connection

between the paid advisory fees and Appellants' violations. The

SEC presented evidence that Appellants distributed the relevant,

material statements to current and prospective clients, and that

those who became Vireo AlphaSector clients paid advisory fees to

NAI. From 2011 to 2013, those clients continued to pay advisory

fees to NAI while Appellants continued to conceal their lack of

support for the relevant statements. Once the burden shifted to

Appellants, Appellants failed to demonstrate that any of the

advisory fees paid to them were unconnected to the Vireo

AlphaSector strategies.

Appellants' related argument that there is no causal

connection between the proceeds from the sale of the Vireo

AlphaSector business and Appellants' violations fails for similar

- 41 - reasons. According to the letter of intent between NAI and

F-Squared, the sale price would be $14 million "assuming [that

there were] at least $1.1 billion in revenue generating client

assets transfers at [the] time of closing." The sale price was

therefore dependent on the number of Vireo AlphaSector clients who

transferred their assets to F-Squared. The district court

concluded, and Appellants do not dispute, that Appellants thus

"had a substantial incentive not to disclose their

misrepresentations and the reason they were selling the business."

And, indeed, Appellants did not disclose them. At the time of the

sale, almost all Vireo AlphaSector clients transferred their

assets to F-Squared, and the sale price was, in fact, $14 million.

In light of this, the district court did not abuse its discretion

in concluding that Appellants' profits from the sale of the Vireo

AlphaSector Business are causally connected to their violations.

Third, Appellants argue that disgorgement must be

limited to only two of the Vireo AlphaSector strategies they sold

because some Vireo AlphaSector marketing materials for the other

strategies did not contain the relevant statements. Not so.

Contrary to Appellants' assertion, the record shows that the

distributed relevant statements applied to all of their Vireo

AlphaSector strategies. For example, Appellants' marketing

materials claimed that "[l]ive assets began tracking the

[AlphaSector] strategies" on April 1, 2001, and that "the Indexes

- 42 - are based on active strategies." That Appellants distributed

marketing materials that did not contain these statements does not

change the fact that these statements, which apply to all Vireo

AlphaSector strategies, may have induced investors to buy any of

the offered strategies.15

For the foregoing reasons, we find no abuse of discretion

in the district court's disgorgement order,16 and affirm the

district court's amended final judgment.17

15 Appellants also argue that they were entitled to a deduction

of legitimate expenses in the amount of $8,303,849, and a deduction of the profits they provided to their clients as part of the Vireo AlphaSector business. Appellants, however, fail to explain how their $8,303,849 figure and the investment profits returned to their clients, which their clients were entitled to, represent legitimate expenses that had "value independent of fueling a fraudulent scheme." Liu,

; see also United States v. Zannino,

(1st Cir. 1990) ("[W]e see no reason to abandon the settled appellate rule that issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived."). Similarly, Appellants assert, in both their opening and reply briefs, that they repaid their Vireo AlphaSector clients all advisory fees in addition to returning the Vireo AlphaSector profits. At no point, however, do Appellants provide support for this assertion. See Zannino,

. 16Appellants conclusorily assert that the ten-year statute of limitations Congress enacted in 2021 governing claims under section 206(1) is unconstitutionally retroactive. See William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021,

,

, 4625-26 (codified at 15 U.S.C. § 78u(d)(8)). This argument is waived. See Zannino,

. 17Our conclusion disposes of Appellants' claims that the district court abused its discretion in ordering Appellants to pay prejudgment interest and civil penalties, and in declining to alter

- 43 - D. Supersedeas Bond18

Appellants argue that the amount of the supersedeas bond

should be reduced to no more than $1.5 million. "The nature and

the amount of [a supersedeas] bond is entrusted to the discretion

of the trial court." Acevedo-García v. Vera-Monroig,

(1st Cir. 2002).

Under Local Rule 62.2, "[a] bond or other security

staying execution of a money judgment shall be in the amount of

the judgment plus 10% of the amount." LR, D. Mass. 62.2. Here,

that is approximately $33 million. In deciding whether to reduce

this amount, district courts may consider "whether the defendant

is in such a precarious financial situation that the requirement

to post a bond would place other creditors of the defendant in an

insecure position." Cognitive Edge Pte Ltd. v. Code Genesys, LLC,

No. 1:19-cv-12123,

, at *5 (D. Mass. Sept. 30, 2021)

(quoting In re Nassau Cnty. Strip Search Cases,

(2d Cir. 2015)).

Appellants argue that the supersedeas bond should be

reduced to no more than $1.5 million because "neither NAI [n]or

or amend its amended final judgment, both of which are based on Appellants' challenges to the disgorgement order. 18 Appellants again ask us to stay the SEC's administrative proceedings. We have already considered Appellants' arguments and deny the request for the reasons stated in our December 23, 2022, order.

- 44 - [Navellier] have the assets or financial capability to obtain" a

higher supersedeas bond. Appellants also argue that Navellier and

his wife hold real estate, personal property, and financial

accounts as tenants by the entirety, and that Navellier's wife "is

not a judgment debtor in this case and does not consent to hav[ing]

their . . . assets available to satisfy" Appellants' debts.

The district court rejected these arguments. In doing

so, the district court considered Appellants' financial report and

concluded that the report did not "warrant the [district court's]

exercise of discretion" to reduce the supersedeas bond,

"particularly where [the] amount [of $1.5 million] represents less

than 5% of the $33 million bond that would otherwise be required."

As to Navellier's assets, the district court noted that "[w]hether

all such assets would be reachable by judgment in this case is

different [from] whether [those assets] could be collateral for a

bond that exceeds the [$1.5] million" Appellants seek. In light

of the district court's considerations, we find no abuse of

discretion in its decision not to reduce the amount of the

supersedeas bond.

III. CONCLUSION

The district court's judgments in these consolidated

appeals are affirmed.

- 45 -