Carmel Capital Management L.L.C. (“CCM” or the “Firm”) is an investment adviser registered with
the Securities and Exchange Commission. CCM has been in business since 1999. Its Principal and
sole owner is West D. Whittaker. As of December 31, 2019, CCM had $146.3 million in assets under
management. All assets are managed on a discretionary basis.
CCM is an independent investment advisory firm that provides wealth and portfolio management for
trusts, retirement accounts, individuals, family offices, corporations, pensions and profit-sharing plans,
endowments and foundations through separately managed accounts. The Firm typically tailors its
services to the individual needs of each client. CCM generally manages all client accounts on a
discretionary basis. CCM’s initial minimum account size is $3.5 million for new clients. CCM will
consider waivers to the minimum account size; however, accounts below the usual minimum may be
charged higher investment advisory fees in CCM’s sole discretion.
CCM advisory services are tailored to its clients’ needs as determined by the information provided by
each client, such as investment objectives and experience, financial condition, family circumstances,
retirement goals, and other relevant information.
CCM does not participate in wrap fee programs.
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CCM generally charges an annual advisory fee equal to 1% of the assets under management in a client
account. In some cases, when CCM accepts an initial investment that is below CCM’s usual account
minimum, CCM may charge a higher advisory fee (up to 1.5%). CCM may also charge consulting
fees for investment consulting services; fees depend on the specific services provided.
Advisory fees are payable in quarterly installments, in advance. Valuation of client accounts is
determined in accordance with market prices and industry procedures. Clients may consent to having
their fees deducted from their accounts or having their fees billed to them, as provided in the
investment advisory agreement between CCM and the client.
Clients pay the typical fees associated with an investment account, such as custodial fees, commissions
and mark ups charged by broker-dealers. Should client assets be invested in mutual funds, exchange
traded funds, or private funds, clients also pay their share of advisory fees and other expenses charged
by the funds. Clients should refer to Brokerage Practices, below, for more information on CCM’s
brokerage practices.
Neither CCM nor its Principal accepts compensation for the purchase or sale of securities or other
investment products. No other compensation is charged by CCM with respect to its client accounts.
Generally, CCM or a client may terminate an individually managed account upon a 5-day written
notice to the other party. Clients will receive a pro-rata refund of any pre-paid unearned fees. CCM
uses its account valuation procedures to determine the value of the client’s account at termination.
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CCM does not charge performance-based investment advisory fees. In addition, CCM does not engage
in side-by-side management where an investment adviser advises different types of client accounts
separately from its investment management accounts.
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CCM provides investment advisory services to trusts, retirement accounts, individuals, family offices,
corporations, pensions and profit-sharing plans, endowments and foundations. CCM may also have
accommodation accounts for minor children of high net worth clients.
METHOD OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS
A focus on fundamental analysis and value investing are the cornerstones of Carmel Capital
Management’s investment philosophy. The firm seeks to build wealth through the purchase of high-
quality underpriced securities in a diversified portfolio. CCM utilizes “bottom-up” research to identify
and purchase investments in companies that are undervalued compared to their earnings prospects and
intrinsic value.
CCM may invest in equity securities, fixed income securities, Exchange Traded Funds (ETFs),
Exchange Traded Notes (ETNs), mutual funds, Rule 144A securities, and other securities. CCM also
recommends private fund investments to clients. The mix of securities held in client portfolios will
vary depending upon CCM’s portfolio management decisions and client investment objectives.
No specific level of gain can be guaranteed, as there is always a risk of loss, including loss of principal
investments, when investing the in markets due to market volatility and company specific issues.
Some investments have limited liquidity, including ones in pooled investments, which may impede the
ability to conduct purchases or sales of those investments in a timely fashion or at expected valuations.
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1. There are no adverse events affecting CCM that would be material to a client’s decision to use
CCM’s investment advisory services.
2. There have been no criminal or civil actions in a domestic, foreign or military court of
competent jurisdiction involving either CCM or any member of its management team.
3. There have been no administrative proceedings before the SEC, any other federal regulatory
agency, any state regulatory agency, or any foreign financial regulatory authority involving
either CCM or any member of its management team.
4. There have been no self-regulatory organization (SRO) proceedings involving either CCM or
any member of its management team.
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1. Neither CCM nor its management persons are registered or have a pending registration as a
broker-dealer or a registered representative of a broker-dealer.
2. Neither CCM nor its management persons are registered or have a pending registration as a
futures commission merchant, commodity pool operator, a commodity-trading adviser, or as an
associated person of the foregoing types of entities.
3. Neither CCM nor its management persons have relationships with other entities in the financial
services industry that materially affect CCM’s advisory business or its clients.
4. CCM does not recommend or select other investment advisers.
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TRADING
1. CCM has a Code of Ethics that sets forth its policies on personal and client security
transactions. Copies of the CCM Code of Ethics are available free of charge upon request.
2. Neither CCM nor any related person recommends a security in which CCM or investment
persons related to CCM have material financial interests.
3. In order to prevent conflicts of interest, CCM has adopted a set of procedures for its officers
and employees (including a pre-clearing procedure) with respect to transactions by its officers
and employees for their “personal accounts.”
4. In order to monitor compliance with its personal trading policy, CCM has adopted a quarterly
securities transaction reporting system for all of its employees. In addition, CCM employs
numerous other safeguards to ensure compliance in this area including the following:
employees cannot buy or sell a security until all client trades have been completed on a given
day. An employee “personal account” may participate in block trades if such participation does
not preclude client orders from being fully filled.
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Description of Factors in Selecting/Recommending Broker-Dealers
CCM has discretion to determine which broker-dealers it uses for client transactions, and to determine
the amount of commissions and other transaction costs paid by client accounts. The following
disclosures describe how CCM uses its discretionary brokerage authority when placing transactions for
client accounts. Certain individual clients may have different guidelines or restrictions for their
accounts. When CCM places orders for the execution of portfolio transactions for clients, CCM
allocates transactions to broker-dealers that CCM in its good faith judgment believes is in the best
interest of its clients – taking into consideration all circumstances surrounding the transactions.
As an investment adviser, CCM is a fiduciary with respect to its clients. As a fiduciary, CCM has a
duty to act in the best interest of its clients. When selecting broker-dealers for client transactions,
CCM has a duty to obtain the most favorable available execution. In certain circumstances, the most
favorable execution may not necessarily have the lowest transaction cost. For example, discount
broker-dealers may charge lower transaction fees, but they may be lacking in other factors needed to
provide the most favorable execution for client accounts. CCM believes that it has a duty to consider
the full range of factors that result in execution that is more favorable.
When selecting broker-dealers for client account transactions, CCM considers a number of factors.
While the transaction cost associated with client transactions is always an important consideration,
there are a myriad of considerations, when taken together, are as important as the cost of transactions.
Other relevant factors taken into account include such things as:
• execution capabilities;
• custodial and other services provided by such brokers and dealers which are expected to
enhance the general portfolio management capabilities of CCM;
• the size of the transaction;
• the difficulty of execution;
• the operational facilities of the broker-dealer involved;
• the risk in positioning a block of securities;
• the quality of the overall brokerage and research services provided by the broker-dealer
• ; and
• the value of an ongoing relationship of CCM with such brokers and dealers.
Research and Other Soft-Dollar Benefits
Under Section 28(e) of the Securities Exchange Act of 1934, as amended, an investment adviser with
investment discretion over an account is permitted to pay a broker-dealer commissions in excess of
commissions that may be charged by another broker-dealer if the adviser:
1. Determined in good faith the amount of commissions paid was reasonable in relation to the
value of the brokerage and research provided by the broker-dealer.
2. Determined the arrangement was reasonable in light of a specific transaction or the adviser’s
overall responsibilities for its client accounts.
3. Obtained “brokerage and research” services from a broker-dealer who:
• furnishes advice, either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities;
• furnishes analyses and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts; or
• effects securities transactions and performs functions incidental thereto (such as clearance,
settlement, and custody) or required in connection therewith by rules of the Commission or
a self-regulatory organization of which such person is a member or person associated with a
member or in which such person is a participant. [Securities Exchange Act, Section 28(e),
Subsections (2)(A)-(C)].
The provisions in Section 28(e) create a “safe harbor” for investment advisers who receive brokerage
and research services from broker-dealers in view of the commissions paid, if advisers comply with
Section 28(e) regarding the services received and the advisers’ disclosure of its policies. Underscoring
Section 28(e) is an adviser’s good faith belief that the amount of commissions paid is reasonable in
view of the brokerage and research services received.
CCM is not required to use the broker-dealers who provide research to CCM for any specific level of
brokerage. The research provided to CCM includes economic forecasts, investment strategy advice,
fundamental advice on individual securities, valuation advice and market analysis. The research that
CCM receives falls within the “safe harbor.”
Brokerage for Client Referrals
CCM does not have a client referral arrangement with any broker-dealer used for client account
transactions.
Directed Brokerage
Clients may direct CCM to use broker-dealers for custodial services and/or account transactions.
When clients do so, they may not receive the benefits of aggregated transactions as described below.
Aggregating Client Transactions
If CCM believes that the purchase or sale of a security is in the best interest of more than one client,
and it is consistent with CCM’s duty to obtain the most favorable available execution for all clients, it
may (but is not obligated to) aggregate the securities to be sold or purchased to obtain the most
favorable available execution or lower brokerage commissions, to the extent permitted by applicable
laws and regulations. Aggregation should, on average, reduce slightly the costs of execution and CCM
will not aggregate a client’s order, if, in a particular instance, it believes that aggregation would cause
the client’s cost of execution to be increased. Where trades are aggregated, the transactions, as well as
the expenses incurred in the transactions, will be allocated by CCM according to a policy designed to
ensure that such allocation is equitable (no advisory client will be favored over any other client) and
consistent with our fiduciary duty to our clients (including our duty to obtain the most favorable
available execution of client trades). Pursuant to this policy, each client that participates in an
aggregated order will participate at the average share price for that aggregated order. Transaction costs
will be shared pro-rata based on each account participating in the transaction.
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Account Reviews
CCM’s portfolio accounting system is reconciled with custodian records generally on a daily basis.
All accounts are reviewed as needed. Global account reviews, which encompass decisions regarding
initiating, maintaining, increasing or decreasing one or more security positions, performance, and
suitability may be triggered by events such as additions to or subtractions from funds under
management, modifications in client objectives, risk profile, investment time constraints, etc.
Account Reports
All clients receive independent trade confirmations and monthly statements of their account(s) from
the custodian(s) where the account is held. CCM sends monthly reports that are reconciled with
custodian records.
Clients receive at least quarterly statements from the custodian(s) for the clients’ account(s). Most
custodians provide monthly reports. The custodian statements represent the official account
statements.
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CCM may enter into client referral arrangements through which CCM would pay for client referrals. In
these cases, CCM would enter into a written referral agreement with the entity referring clients. The
referral fees paid by CCM would not increase the advisory fees paid by clients. The referral fees
would be deducted from CCM’s advisory fees. Should CCM enter into a referral agreement, CCM
would disclose the details of the referral fee arrangement to its clients.
CCM currently does not receive other compensation associated with its clients account, in addition to
its advisory fees.
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CCM provides investment management services on a discretionary basis. Each client enters into an
investment management agreement that gives CCM the discretionary authority to determine which
securities to buy or sell for the client’s account. In addition to the agreement with CCM, each client
must also sign an agreement with custodian for its account enabling CCM to place trades for the
client’s account.
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Generally, CCM votes proxies for all of its client accounts, unless proxy-voting rights are retained by
the client. Each proxy is reviewed and voted in a manner that is consistent with the interests of CCM’s
clients.
Clients may request a copy of CCM’s proxy voting policies as well as information concerning how a
specific proxy was voted by contacting CCM in writing at the address shown on the cover sheet of this
Form ADV Part 2A.
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1. CCM does not require or solicit payment of more than $1,200 in fees per client, six months or
more in advance.
2. CCM has no financial condition that is reasonably likely to impair CCM’s ability to meet
contractual commitments to its clients.
3. CCM has not been subject to a bankruptcy petition.
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