The Securities and Exchange Commission late Monday barred Dawn J. Bennett from the securities industry for exaggerating her firm's assets under management and investment performance to drum up business from wealthy clients. The commission also ordered Ms. Bennett and her firm to pay more than $4 million in fines and disgorgement.
The ruling, from Administrative Law Judge James Grimes, includes a civil penalty of $600,000 for Ms. Bennett and $2.9 million for Bennett Group.
In response to a request for comment regarding the ruling, Ms. Bennett's attorneys at Morvillo LLP emailed, “Ms. Bennett does not have a comment for you at this time.”
(More: Inside the SEC's case vs. Dawn Bennett)
The
48-page ruling, which Ms. Bennett's lawyers have 21 days to appeal, is the result of a January hearing that Ms. Bennett
refused to attend as part of unorthodox legal strategy.
The hearing and Judge Grimes' ruling focused on
Ms. Bennett's pattern of promoting inflated assets as a means of securing high rankings of Barron's lists of top advisers, and then using those rankings to solicit new clients for her advisory business, which is no longer working with clients.
Marc Freedman, chief executive of Freedman Financial, said Ms. Bennett is quickly becoming the “poster child for advisers who choose to use media to generate business.”
“This industry needs to be cleaned up more than people think,” he added. “This is a win for consumers, a win for our industry, and ultimately holds financial planners to a higher standard, which is the way it should be.”
Mr. Freedman, who also hosts a radio show, said Ms. Bennett is symbolic of much of what is happening in the financial advice space these days.
“I run into advisers all the time who like to brag about their AUM and their super-high-net-worth clients,” he said. “They are so full of (it), because they're just hunters and gatherers of assets. The puffery that exists around AUM and the value for the fee they charge has gone over the top.”
Tom Ajamie, managing partner at the law firm Ajamie LLP, praised the SEC for taking a hard stand against Ms. Bennett.
“The punishment is appropriate; right in line with what it should be,” he said.
In terms of how Ms. Bennett is likely to respond, from a legal perspective, Mr. Ajamie said, “There's nothing to appeal here because she didn't show up to defend herself. The evidence in the decision looks pretty bullet proof.”
From at least 2009 through 2011, the ruling states, Ms. Bennett and Bennett Group claimed to be managing between $1.1 billion and $2 billion, when in reality the firm never managed more than $407 million during that time period.
“Bennett is not fit to remain in the industry in any capacity,” Judge Grimes's ruling reads.
“Her numerous false statements regarding AUM and portfolio performance to attract new customers and retain existing ones caused investors to falsely place their trust in her and resulted in large losses,” the ruling continues. “Her behavior and bald-faced lies made during the Commission's examination and investigation further demonstrate her untrustworthiness and unfitness.”
