Adviser Hid Affiliate's Revenue Sharing and Used a Misleading Liability Disclaimer: SEC Settles Charges for More Than $360,000
WASHINGTON — The U.S. Securities and Exchange Commission announced on October 30 that it has instituted settled charges against Snowden Capital Advisors LLC, a registered investment adviser, for breaches of its fiduciary duty to its retail advisory clients and for including misleading liability disclaimer language in its retail advisory agreements.
According to the SEC's order, from at least February 2018 through March 2023, Snowden Capital made no disclosure to its advisory clients that its affiliated broker-dealer was marking up margin interest rates and receiving those amounts as compensation from its clearing firm for margin balances in its brokerage customers' margin accounts. Some of those brokerage customers were also the firm's advisory clients, and the firm likewise did not disclose the actual and potential conflicts of interest created by that compensation.
The order further finds that, from February 2018 through June 2020, the firm did not provide full and fair disclosure of conflicts tied to revenue its affiliated broker-dealer received from its clearing firm based on advisory clients' assets invested in cash sweep money market funds.
A second problem involved contract language. The SEC found that, from at least July 2019, Snowden Capital used a hedge clause in advisory agreements with retail clients that purported to limit the firm's liability. Read in its entirety, the SEC said, that language is inconsistent with an adviser's fiduciary duty because it may mislead retail clients into not exercising their non-waivable rights. The firm also failed to revise its client agreements even after adopting written policies in June 2023 prohibiting hedge clauses likely to mislead clients about its liability.
The SEC found that Snowden Capital willfully violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Without admitting the SEC's findings, the firm consented to a cease-and-desist order and a censure, and agreed to pay $226,316.99 in disgorgement, $38,273.31 in prejudgment interest and a $100,000 civil penalty, more than $360,000 in total. The SEC said the ordered monetary relief will be distributed to affected clients. The investigation was conducted by Peter Altenbach and Danielle Sallah of the SEC's New York Regional Office, supervised by Lindsay Moilanen and Thomas P. Smith, Jr. (Source: U.S. Securities and Exchange Commission)
Source: U.S. Securities and Exchange Commission
Published by GSM · USA (original Chinese edition)
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