The Securities and Exchange Commission charged North Carolina-based financial adviser
Stephen Brandon Anderson with defrauding clients by padding his asset-based advisory fees by at least $367,000 over a two-year period.
The
SEC order prohibits Mr. Anderson from acting in a supervisory or compliance capacity or charging advisory fees without supervision for at least three years, and requires him to provide notice of the SEC order to clients and prospective clients.
Mr. Anderson, who could not be reached for comment, owned and operated River Source Wealth Management, which was a registered investment adviser in Waynesville, N.C., from November 2010 through March 2017.
According to the SEC's order, River Source's primary revenue stream was asset-based advisory fees. The investigation found that in 2015 and 2016, Mr. Anderson "overcharged a majority of his clients."
The overcharging varied, but, in aggregate, amounted to "approximately 40% more than the agreed-upon maximum customer advisory fees," the SEC's investigation found.
The SEC also found that Mr. Anderson exaggerated the RIA's assets under management in public filings by at least 18% in 2015, and by 35% in 2016, and failed to implement required compliance policies and procedures.
Mr. Anderson agreed to a cease-and-desist order and a censure, and agreed to pay disgorgement and prejudgment interest of $405,381 and a $100,000 penalty.
Securities attorney Adam Gana, who was not involved in this case, said overcharging clients is becoming more common in the advisory space.
'Without a more robust enforcement arm, I'm finding advisers trying to get away with more of this kind of thing," Mr. Gana said. "With a growing pool of investment advisers, the SEC has to be more diligent than ever, particularly when it comes to overcharging clients, because it's not something they would notice."
