SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

A Chicago-based investment advisory firm and its CEO are facing federal charges for allegedly extracting millions in unauthorized fees from hundreds of client accounts belonging to Filipino clients over a four-year period, the Securities and Exchange Commission announced Thursday.

According to the SEC, Eliseo Prisno and his firm, P/E Capital Investment Management Partners, billed more than $2.5 million in undisclosed and unapproved fees to more than 220 client accounts between February 2019 and July 2023.

Before founding P/E Capital in 2010, Prisno was affiliated with Merrill Lynch in Cincinatti, Ohio from 2007 to 2009, according to his public record with the SEC.

In its complaint filed in the Northern District of Illinois, the SEC said many of its clients were of Filipino descent and either lived in the US or the Philippines.

Aside from being CEO, Prisno serves as chief compliance officer of the firm, which he co-owned with his wife, according to the SEC complaint.

As of January, the firm reportedly had 120 clients and approximately $20.5 million in AUM. In July 2021, the firm reported having 150 clients and roughly $40.5 million in AUM.

According to the complaint, Prisno and P/E Capital purportedly breached their fiduciary duties by exploiting the billing systems of two brokerage firms to invoice clients beyond the standard advisory fees they had agreed to.

The firm’s stated advisory fee ranged from 2% to 2.4% of assets under management, but the SEC alleges that some accounts were billed at rates more than double or triple that amount, in some cases averaging over 7%.

The SEC said that for client accounts held at one brokerage, the firm would secretly access clients' accounts, resetting the “Quarterly Fee Cap” on those accounts without the account owner's knowledge.

In multiple instances, Prisno and his team allegedly accessed clients’ brokerage accounts using login credentials they had created when onboarding their Filipino clients, circumventing multi-factor authentication by rerouting security codes to devices under their control.

“Defendants – still posing as their client – would then pretend to approve P/E Capital’s request to establish a Quarterly Fee Cap,” the SEC’s complaint stated.

The agency alleges this process was repeated across numerous accounts, including instances where both the fee request and the purported client approval came from the same IP address. All in all, more than $2.4 million in added fees were charged to at least 220 client accounts at that brokerage.

The complaint also outlines that more than $100,000 in excess fees were billed to accounts held at a second brokerage. These overcharges occurred both in amount and frequency, violating the agreed billing schedule of every 60 days.

In total, P/E Capital allegedly collected over $3.3 million in client fees during the period under review. Of that, at least $2.9 million was transferred from the firm’s accounts into Prisno’s personal checking account, the SEC said.

“The complaint seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against both defendants, and a conduct-based injunction against Prisno,” the agency said in a press release on Thursday.

A May news release attributed to P/E Capital Investment touted an opportunity for overseas Filipino workers to secure brighter financial futures via a token that will be launched on the blockchain.

"The future will be brighter for our OFW’s [sic] through this program," Prisno said in the release. "The vision is to allow these OFW’s to have a long-term investment that they can enjoy after their stint abroad."