The SEC has filed charges against Raskob Kambourian Financial Advisors, a Tucson-based investment advisory firm, for failing to inform clients about millions of dollars worth of fee increases in their accounts.
According to a complaint filed by the SEC on September 5, the firm breached its fiduciary duty by charging higher fees than those stated in client agreements between May 2019 and July 2022.
The SEC complaint alleges that the firm implemented fee hikes without properly notifying clients, as required by its fiduciary duties.
In 2019, the firm reportedly adopted a tiered billing system, which hiked AUM fees for clients with over $1 million in assets managed with the firm. In separate instances during January 2020 and April 2021, the firm also raised its AUM and financial planning fees. While Raskob Kambourian generated monthly billing summaries with detailed calculations to support the fees it charged clients, those summaries were never sent out.
"Instead, the only account statements that clients received were from third-party, brokerage account custodians ... [which] merely noted the fee amounts debited as a single line item," the SEC complaint said.
Over the relevant period, the SEC found the firm charged its clients $805,631 more in AUM fees and $558,882 more in financial planning fees than were expressly authorized in each of their agreements. All in all, it said about 59 clients were charged a total of $1.36 million more than what was agreed upon in the fee schedules detailed in their respective agreements.
The charges also highlight how Raskob Kambourian did not comply with the SEC’s “brochure rule,” which mandates that fee increases be classified as material changes and disclosed in the firm’s annual Form ADV Part 2A filings. The SEC claims the firm failed to meet this obligation each year from 2019 to 2022.
Under the same rule, the SEC is also holding Raskob Kambourian accountable for failing to deliver updated brochures or summaries of material changes to clients within 120 days of the firm’s fiscal year-end.
Raskob Kambourian has been charged with violating sections of the Investment Advisers Act of 1940, including failure to maintain adequate records and adhere to compliance requirements. Without admitting or denying the allegations, the firm consented to a final judgment, which includes an injunction against future violations of the charged provisions.
The proposed settlement includes an order for Raskob Kambourian to pay $1.36 million in disgorgement, $256,000 in prejudgment interest, and a $225,000 civil penalty.
The judgment is subject to court approval.
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