The successor to a former dually registered investment adviser and broker-dealer agreed to settle SEC charges relating to misleading advisory clients about the cost of its in-house brokerage services.
As alleged in the SEC Order, Valley Forge Asset Management, LLC ("Valley Forge") led clients to believe that its affiliated broker charged lower rates than were available elsewhere, even though the broker sometimes actually charged commissions that were over four times more than clients would have paid using alternative brokerage options. The Order also found that Valley Forge benefited from its clients' selection of its affiliated broker, and failed to adequately disclose this conflict of interest. According to the SEC, advisory clients paid Valley Forge over $4.7 million in excess compensation.
BB&T Securities, LLC ("BB&T Securities"), the successor-in-interest to Valley Forge, agreed to pay more than $5 million in disgorgement and prejudgment interest and $500,000 in civil money penalties in order to settle the charges. The SEC took into consideration remedial acts undertaken by BB&T Securities in determining to accept the settlement offer. In agreeing to the settlement, BB&T Securities neither admitted nor denied the findings in the Order.
Commentary / Kyle DeYoung
This case is the latest example of the SEC's ongoing focus to make sure investment advisers adequately disclose conflicts of interest, particularly in regards to retail investors. Investment advisers should expect this focus to continue in both the SEC's examination and enforcement programs. Dual registrants and investment advisers who have affiliated broker dealers should take steps to make sure that any conflicts of interests are adequately disclosed to investors, especially those arising out of their brokerage agreements.
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