SEC Institutes Order Against Firm for Breaching Fiduciary Duty and Undisclosed Conflicts of Interest

July 7, 2026

What happened?

On June 8, 2026, the SEC announced settled charges against an investment adviser and its former CEO for breaches of fiduciary duty and other violations. According to the order, the firm failed to disclose conflicts of interest connected to investments it recommended to advisory clients.  Specifically, the conflicts included:

1. A profit-sharing interest the CEO had in a sub-adviser, which provided an investment model portfolio to the firm’s clients that included an exchange-traded fund that another adviser managed (the “ETF”);
2. An expense sharing agreement the firm had related to four other exchange-traded funds, giving the firm an incentive to recommend these products to clients; and
3. Affiliations between the firm’s former Chief Investment Officer and other parties that acted as an adviser and sub-adviser to the firm and the ETF.

In addition to these undisclosed conflicts of interest, the CEO had personally traded the ETF while serving as the CEO of the investment adviser and while also aware the ETF was included as part of the sub-adviser’s investment model portfolio recommended to clients. Clients of the firm held approximately 80% of the outstanding float of the ETF, and the CEO held 12,500 shares personally. On 33 occasions, the CEO’s end-of-day purchase of the ETF was the last trade of the day and matched the closing price. As a result of the CEO’s trading, the CEO and the firm were found to have breached their fiduciary duty.

The CEO failed to pre-clear these trades as required by the compliance program. The firm also failed to properly implement its compliance policies, including provisions relating to disclosure of conflicts of interest and conducting annual reviews, and failed to enforce its code of ethics relating to pre-clearance of trades.

As a result, the firm consented to a cease-and-desist order, a censure, and to pay disgorgement of $152,628, prejudgment interest of $15,031.17, and a civil penalty of $1,200,000. Without admitting the SEC’s findings, the CEO consented to a cease-and-desist order, a censure, and to pay disgorgement of $434,162, prejudgment interest of $5,395.28, and a civil penalty of $354,675.

What does this mean for me?

Around the same time this order was published, the SEC also published a Risk Alert on undisclosed conflicts of interest (see our prior coverage here). The CEO in this enforcement action received $430,000 from a profit-sharing arrangement with a sub-adviser that was not fully disclosed, likewise, the firm did not disclose expense sharing agreements with multiple ETFs. Chairman Atkins has spoken about directing resources towards “the types of misconduct that inflict the greatest harm.” A quantifiable conflict of interest that is not properly disclosed appears to fit into the Chairman’s idea of investor harm. Failing to remedy such conflicts cost the firm and CEO over $2.2 million.

We will continue to monitor new developments that impact investment advisers and compliance programs. If you have questions about disclosing conflicts of interest, completing an accurate ADV filing, or upgrading your compliance program, contact us. Fairview is here to help.