Investment Adviser Fined for Overcharging Clients

An investment adviser settled SEC charges for overcharging approximately 10,000 clients an aggregate of $26.8 million.

In its Order, the SEC found that, although the investment adviser agreed to a reduced advisory fee rate for certain clients, the investment adviser’s account processing employees failed to input the reduced advisory fee rate into the firm’s billing system on multiple occasions. As a result, clients were charged the adviser's standard rates rather than the lower negotiated rates. The SEC concluded that the investment adviser failed to (i) adopt written compliance policies and procedures to prevent overbilling or (ii) conduct sufficient back-testing until becoming aware of the issue.

The SEC determined that the investment adviser violated Advisers Act Sections 206(2) and 206(4) ("Prohibited transactions by investment advisers") and Rule 206(4)-7 ("Compliance procedures and practices") thereunder.

To settle the charges, the investment adviser agreed to (i) cease and desist from further violations, (ii) a censure and (iii) pay a civil money penalty of $35 million.