SEC Fines North Carolina RIA $505K For Overbilling Customers
The Securities and Exchange Commission on Tuesday ordered a registered investment advisor in North Carolina to pay $505,000 for allegedly overbilling clients and overstating assets under management.
The penalty comes as enforcement cases at the SEC rose 10% between 2018 and 2017, primarily on the back of a focus on “main street” investors and a rise in cases against RIAs. Last year, the Commission brought 108 enforcement cases against advisors and companies, up from 82 in 2017. The total, which is not broken out between individual advisors and firms or fund advisors, comprised 22% of the SEC’s 408 total actions last year.
“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,” Carolyn M. Welshhans, an associate director in the SEC’s enforcement unit, said in a prepared statement.
A spokeswoman for the SEC did not return a request for comment about how much it expects to collect from Anderson, who it said filed for personal bankruptcy in 2016.
Anderson agreed to the penalty without admitting or denying the charges. He did not return a call for comment at his practice, Balsam Capital Group, which is affiliated with Foundations Investment Advisors, a network of advisory practices that have a total of $695 million in assets under management, according to an ADV filing.
Anderson shuttered River Source in 2017, and most of his clients, who generally had under $1 million in assets under management, followed him to FIA, the SEC said. Anderson had allegedly overcharged some clients 40% more than the 1.25% maximum stated fee.
Anderson’s lawyer, Jason Alloy of Robbins Ross Alloy Belinfante Littlefield LLC, did not return a call for comment.
The SEC also said that Anderson misstated his assets under management on Form ADV filings with the SEC in 2015 and 2016 and failed to disclose two client lawsuits alleging fraud over the same time period.
Anderson stated in 2016 that he had $235.6 million in client assets, which was at least 35% higher than what he was actually managing. In 2015, he said he had been managing $227 million, $34 million, or 18%, higher than his actual tally.
The SEC also accused Anderson of misleading customers about why he transferred assets from an unidentified custodian. He claimed the break was mutual and amicable although the custodian had terminated the agreement because it noticed irregular billing practice, the SEC said.
The money that the SEC collects from Anderson will be distributed to harmed clients through a fair fund, according to the SEC order.