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Investment Adviser Fined for Insufficient Conflict of Interest Disclosures
Submitted by: Scotty Franks, Senior Compliance Consultant, Red Oak Compliance Solutions
The Securities and Exchange Commission (“Commission”) fined deVere USA, Inc. (‘DVU”) $8 million for failure to stay in compliance with SEC Rules that require full and fair disclosure to clients and prospective clients of material conflicts of interest regarding compensation obtained from third-party product and service providers.
The firm primary serviced U.S. residents or citizens who held U.K. defined benefit and contribution pensions. The firm serviced these clients by providing investment advice on these assets. The main strategy the firm employed was transferring assets overseas to retirement plans that qualified under the U.K. tax authority’s regulations as a Qualifying Recognised Overseas Pension Scheme. As part of this strategy, DVU and its investment adviser representatives (“IARs”) received compensation from third-party product service providers and an overseas affiliate of DVU. The compensation received from the third-parties and the affiliate constituted the primary form of compensation received by DVU’s IARs for their advisory services. This material compensation arrangement was not fully disclosed to DVU’s clients.
The Commission deemed DVU failed to fully and accurately update the firm’s ADV Part 2A and ADV Part 2Bs Brochure Supplements of the firms IARs. DVU was instructed to update the documents to fully disclose third party product and service arrangements and the material conflict of interest they create.
In addition to updating the ADV, DVU entered into an undertaking, was censured, and will pay a civil money penalty in the amount of $8,000,000.00 to the Securities and Exchange Commission.
Click here to view the full administrative proceeding.
Red Oak is here to help! Please contact us for assistance in conflict of interest disclosures to ensure your firm is in compliance with all relevant regulatory rules and laws.