The Securities and Exchange Commission has settled charges against New York-based investment adviser deVere USA Inc. related to its alleged failure to disclose conflicts of interest to its retail clients.
The company has agreed to pay an $8 million civil penalty and establish a fair fund to distribute the penalty to affected clients. The SEC also announced the filing of a litigated action against two deVere USA investment adviser representatives, one of whom was the CEO of the firm.
According to the SEC’s order, deVere USA failed to disclose agreements with overseas product and service providers that resulted in compensation being paid to deVere USA advisers and an overseas affiliate.
The SEC claims that the undisclosed compensation—including an amount equivalent to 7 percent 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. DeVere USA is also accused of making materially misleading statements concerning tax treatment and available investment options.
The SEC separately filed charges against the former deVere USA CEO, Benjamin Alderson, and a former manager, Bradley Hamilton. The SEC’s complaint, filed in federal district court in Manhattan, alleges that Alderson and Hamilton misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including the compensation that the pair personally stood to receive.
“Investment advisers have an obligation to disclose direct and indirect financial incentives,” said Marc Berger, director of the SEC’s New York regional office. “DeVere USA brushed aside this duty while advising retail investors about their retirement assets, and the settlement will result in a fair fund distribution to deVere USA’s retail clients who were deprived of important information.”
Without admitting or denying the SEC’s findings, deVere USA consented to the SEC’s order, which finds that the firm violated the Investment Advisers Act of 1940, including the antifraud provisions, and imposes remedies that include an $8 million penalty and engaging an independent compliance consultant. The SEC’s complaint against Alderson and Hamilton alleges that they violated the Investment Advisers Act and seeks an injunction, disgorgement plus interest, and civil money penalties.