SEC Charges Investment Adviser with Fraud for Overcharging Advisory Fees
The Securities and Exchange Commission has charged investment adviser Stephen Brandon Anderson with defrauding clients by overcharging advisory fees of at least $367,000.
The Securities and Exchange Commission has charged investment adviser Stephen Brandon Anderson with defrauding clients by overcharging advisory fees of at least $367,000.
According to the SEC’s order, Anderson owned and operated River Source Wealth Management LLC, a now-defunct registered investment adviser in North Carolina.
River Source’s primary revenue stream was customer advisory fees that were supposed to be based on each customer’s assets under management. The SEC’s order finds, however, that in 2015 and 2016, Anderson overcharged a majority of his clients by approximately 40 percent more than the agreed-upon maximum customer advisory fees.
The SEC claims that Anderson also misled his clients about the reason he transferred their assets from River Source’s long-time asset custodian, falsely stating that it was his decision and that the separation was “amicable.”
However, the asset custodian reportedly ended the relationship with River Source after it noticed irregular billing practices and failed to receive sufficient supporting documentation from Anderson.
Furthermore, the order finds that Anderson made material misstatements in reports filed with the SEC, including overstating River Source’s assets under management by at least $34 million (18 percent) in 2015 and $61 million (35 percent) in 2016, and failed to implement required compliance policies and procedures.
“When advisors breach their duty to clients by misleading and overcharging them, they can expect the SEC will craft a package of remedies that will compensate harmed investors, provide additional safeguards for prospective investors, and deter similar conduct,” said Carolyn Welshhans, associate director in SEC’s enforcement division.
The SEC’s order prohibits Anderson from acting in a supervisory or compliance capacity or from charging advisory fees without supervision for at least three years and requires Anderson to provide notice of the SEC order to clients and prospective clients.
Anderson also agreed to pay disgorgement and prejudgment interest of $405,381 and a $100,000 penalty. Payments will be distributed to harmed investors through a fair fund.
Anderson consented to the order without admitting or denying the findings.
