Skip to main content

You are here

Advertisement

SEC Reaches Settlement with Adviser Firm over Misleading Retail Clients

The Securities and Exchange Commission has announced that it reached a settlement agreement with a New York-based investment firm for failing to disclose conflicts of interest to its retail clients.

According to the SEC’s June 4 announcement, investment adviser deVere USA, Inc. has agreed to pay an $8 million civil penalty, with the settlement resulting in the establishment of a Fair Fund for distribution of the penalty to affected clients. The SEC also announced the filing of litigation against two deVere USA investment adviser representatives — one of whom was the firm’s CEO.

The SEC’s order explains that between at least June 2013 and March 2016, deVere USA failed to disclose agreements with overseas product and service providers that apparently resulted in compensation being paid to deVere USA advisers and an overseas affiliate.

The order contends that the undisclosed compensation – including an amount equal to 7% of the pension transfer value – created an incentive for deVere USA to recommend a pension transfer and particular product or service providers that were obligated to make payments. Additionally, deVere USA made “materially misleading statements” concerning tax treatment and available investment options, the SEC notes.

Without admitting or denying the SEC’s findings, the firm consented to the order alleging that it violated the Investment Advisers Act, including the antifraud provisions. In addition to agreeing to the $8 million penalty, the firm agreed to engage an independent compliance consultant.

Executives Charged Separately

The SEC filed separate charges in the U.S. District Court for the Southern District of New York against Benjamin Alderson, the former deVere USA CEO, and Bradley Hamilton, a former manager. The SEC complaint alleges that Alderson and Hamilton misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including the “substantial compensation” that Alderson and Hamilton personally stood to receive.

“Though Alderson and Hamilton were investment advisers with a fiduciary duty to provide full and fair disclosure of all material facts, they nonetheless provided advice that was self-interested and designed to push clients and prospective clients toward a [pension] transfer, which, when effected, generated for Defendants millions of dollars in undisclosed commissions,” the complaint alleges.

Marc Berger, the SEC’s New York Regional Office Director, stated that, “Investment advisers have an obligation to disclose direct and indirect financial incentives. DeVere USA brushed aside this duty while advising retail investors about their retirement assets, and today’s settlement will result in a Fair Fund distribution to deVere USA’s retail clients who were deprived of important information.”

The complaint against Alderson and Hamilton alleges that they violated the Investment Advisers Act and seeks an injunction, disgorgement plus interest and civil monetary penalties.

Advertisement