Breach of Fiduciary Responsibility and Conflicts of Interest

The Securities and Exchange Commission publicizes the transgressions of a New York-based investment adviser, deVere USA, Inc. The firm, for its wrongdoing, agrees to an $8 million civil penalty for its failure to disclose conflicts of interest. A secondary effect of the SEC settlement results in the creation of a “Fair Fund.” The purpose of the fund is to facilitate the distribution of the penalty to the victims. In addition to the penalty, the SEC announces a litigation action against two of the deVere USA investment adviser representatives. Surprisingly, one of the litigants is the deVere USA CEO.

According to the SEC’s order, deVere USA fails to disclose agreements with overseas product and service providers. The lack of disclosure results in favorable compensation to deVere USA advisers and an overseas affiliate.  The SEC order indicates that the undisclosed compensation creates an incentive for deVere USA to recommend a pension transfer and particular product or service. Furthermore, the order finds that deVere USA articulates materially misleading statements regarding tax treatment and investment options.