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ÍøÆØ³Ô¹Ïlls Fargo Resolves SEC Dispute Over Advisory Fees

Posted on September 5th, 2023 at 1:18 PM
ÍøÆØ³Ô¹Ïlls Fargo Resolves SEC Dispute Over Advisory Fees

From the desk of Jim Eccleston at ÍøÆØ³Ô¹Ï 

The Securities and Exchange Commission (SEC) announced charges against ÍøÆØ³Ô¹Ïlls Fargo Clearing Services LLC and ÍøÆØ³Ô¹Ïlls Fargo Advisors Financial Network LLC (collectively, “ÍøÆØ³Ô¹Ïlls Fargo”). The charges are related to overcharging advisory fees to over 10,900 investment advisory accounts, resulting in a total excess of $26.8 million. To resolve the SEC's charges, ÍøÆØ³Ô¹Ïlls Fargo has agreed to pay a civil penalty of $35 million.

The SEC's order states that specific financial advisers from ÍøÆØ³Ô¹Ïlls Fargo and its predecessor firms agreed to lower standard advisory fees for particular clients. When opening their accounts, they manually changed the clients' investment advisory agreements to reflect these reduced fees. However, in some instances, the account processing employees at ÍøÆØ³Ô¹Ïlls Fargo and its predecessor firms neglected to input the agreed-upon lower advisory fee rates into the billing systems while setting up the clients' accounts.

Furthermore, ÍøÆØ³Ô¹Ïlls Fargo failed to establish and implement written compliance policies and procedures that could reasonably ensure the accuracy of data in the adopted billing systems and prevent the overbilling of clients acquired from predecessor firms and some new clients. Consequently, ÍøÆØ³Ô¹Ïlls Fargo and its predecessor firms inaccurately billed certain clients who opened accounts before 2014 for advisory fees until the end of December 2022.

ÍøÆØ³Ô¹Ïlls Fargo compensated the impacted account holders around $40 million, encompassing interest, as reimbursement for the excessive charges. Alongside a $35 million penalty, ÍøÆØ³Ô¹Ïlls Fargo, without admitting or denying the SEC charges, consented to the Commission's order, which acknowledged the firm's violation of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. The firm also agreed to a cease-and-desist order and censure.

 

ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

 

Tags: eccleston, eccleston law

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