BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Regulatory Sanctions
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Advisor to Pay $505K for Overcharging Clients (But Where’s the Whistleblower?)
by Howard Haykin
WHAT WENT WRONG. River Source’s primary source of revenue was advisory fees charged to clients, that were supposed to be based on a percentage of each client’s assets under management (“AUM”). Most of those clients had less than $1 million invested with River Source, meaning that they were subject to the firm’s maximum advisory fee rate of 1.25% or 1.5% in 2015 and 2016, respectively.
However, according to the SEC, Anderson overcharged his clients, in the aggregate, by about 40% more than the agreed-upon maximum customer advisory fee rate. In 2015, at least $186,000 of the firm’s $650,000 in total advisory fees received were overcharges, while in 2016, $181,000 of the firm’s $640,000 in total advisory fees were overcharges.
In addition to his fiscal breaches, Anderson committed fraud and regulatory violations by:
- Materially overstating River Source’s AUM on Forms ADV for years 2015 and 2016 - by at least $34 million and $61 million, respectively.
- Failing to disclose 2 lawsuits filed against Anderson and River Source by former River Source clients.
- Failing to keep accurate and current books and records.
- Maintaining “off the shelf” compliance policies that were not tailored to the firm’s business.
- Misleading clients about the reason their assets were transferred from the firm’s long-time asset custodian.
FINANCIALISH TAKE AWAYS. Yet, it’s perhaps that last violation that concerns me most. As more fully noted in Paragraph 15 of the SEC Order …
If, as it appears, the asset custodian attempted to investigate River Source’s “irregular billing practices,” but was stymied but the firm’s refusal to cooperate with a request for documents, why then did the custodian not report any concerns/suspicions/suspicious activities to the SEC?
Was it that the asset custodian was not required by law to report such suspicions, even though it was troubled enough to drop its relationship with its long-time advisory client? If so, that seems to come across as a lame excuse.
Just as there are rules and regulations requiring financial institutions to submit SARs (Suspicious Activity Reports) based only on suspicion – and ultimately, many of these filings do not “bear fruit” - why should there not be similar reporting obligations for such instances as the one that prompted this custodian to terminate its client relationship?
[For further details on this case, click on SEC Order.]