June 18, 2019
Investment Adviser Overcharges Clients by $367,000, Charged with Fraud
WHAT HAPPENED?
On May 28, 2019, the Securities and Exchange Commission charged an investment adviser with overcharging clients by at least $367,000. In 2015 and 2016, Stephen Brandon Anderson, owner and operator of River Source Wealth Management, charged a majority of customers advisory fees which were incongruent with the terms of their service agreements. Customers were charged an average of 40% more than the stated maximum for advisory fees.
The North Carolina based investment adviser also knowingly misled customers about why assets were moved from River Source’s asset custodian. Anderson claimed that the split was civil, although, in truth, the custodian dropped River Source for failing to provide information to support unusual billing practices. The adviser also filed false reports with the Commission during the time of the fraudulent charging, overstating its assets under management by up to 35%.
WHAT DOES THIS MEAN FOR ME?
The order finds that Anderson’s actions were in violation of Sections 206(2) and 207 of the Advisers Act, which bar fraudulent behavior and material misstatements, and aided and abetted and caused violations of the books and records and compliance provisions of the Advisers Act.
The Commission’s order requires that Anderson receive supervision when charging advisory fees and not act in supervisory or compliance role for at least three years. In addition, without admitting or denying the findings, Anderson agreed to a cease and-desist order and censure. The adviser must pay a total of over $500,000 in disgorgement, prejudgment interest, and penalties.
Anderson’s fraudulent behavior and non-compliance with the Advisers Act led to an investigation by the Commission and subsequent disciplinary action. Fairview continuously works with clients to maintain fully documented and comprehensive compliance programs. Contact Fairview with questions about the Advisers Act and how it affects your firm.
