New York-based investment advisor deVere USA has agreed to pay an $8 million civil penalty related to its failure to disclose conflicts of interest to its retail clients, the Securities and Exchange Commission said.
The settlement will result in the establishment of a Fair Fund for distribution of the penalty to affected clients. The SEC also announced the filing of a litigated action against two deVere USA investment advisor representatives, one of whom was the CEO of the firm.
According to the SEC's order, deVere USA failed to disclose agreements with overseas product and service providers that resulted in compensation being paid to deVere USA advisors and an overseas affiliate.
The SEC order finds that the undisclosed compensation — including an amount equivalent to 7% of the pension transfer value — created an incentive for deVere USA to recommend a pension transfer and particular product or service providers that were obligated to make payments. The order also finds that deVere USA made materially misleading statements concerning tax treatment and available investment options.
The SEC separately filed charges against the former deVere USA CEO, Benjamin Alderson, and a former manager, Bradley Hamilton. The SEC's complaint alleges that Alderson and Hamilton misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including the substantial compensation that Alderson and Hamilton personally stood to receive.
"Investment advisors have an obligation to disclose direct and indirect financial incentives," said Marc P. Berger, Director of the SEC's New York Regional Office. "DeVere USA brushed aside this duty while advising retail investors about their retirement assets, and today's settlement will result in a Fair Fund distribution to deVere USA's retail clients who were deprived of important information."
Without admitting or denying the SEC's findings, deVere USA consented to the SEC's order, which imposes remedies that include an $8 million penalty and engaging an independent compliance consultant. The SEC's complaint against Alderson and Hamilton alleges that they violated the Investment Advisers Act and seeks an injunction, disgorgement plus interest, and civil money penalties.
SEC Charges 'Whale Whisperer' Musician for Defrauding Investors in Fraudulent 'Soundwave' Investment Offerings
The Securities and Exchange Commission announced fraud charges against musician Paul Gilman and his companies, alleging that nearly all of the money they raised in securities offerings went to fund Gilman's lavish personal spending in Las Vegas and California.
The SEC's complaint charges Gilman used his companies — Oil Migration Group LLC, WaveTech29 LLC and GilmanSound LLC — to fraudulently solicit retail investors, including a nurse, a minister and a businessman.
Gilman, a self-dubbed "Whale Whisperer" who produced and starred in a documentary of his encounters with whales, claimed to be developing a revolutionary "soundwave" technology that would transform the oil and gas industry.
According to the complaint, Gilman told OMG and Wavetech investors that he would use their funds to test, validate, further develop and license the soundwave technology for use in oil and gas industry applications, and he promised the investors substantial profits.
Instead, Gilman is alleged to have used substantially all of the investor funds for his personal benefit, including to pay for luxury Las Vegas hotels, restaurants, designer clothing and large cash withdrawals at casino ATMs.
