Recently, the SEC charged American Portfolios Advisors with conflict-of-interest issues, making us think about investor safety. The Securities and Exchange Commission fined American Portfolios Advisors $1.75 million for overcharging clients on alternative investments from August 2020 to March 2023.
This case highlights how important it is for firms to share all facts with their clients, especially about fees and extra payments from partners like clearing firms or affiliate broker-dealers.
Senior leaders documents during an SEC review. We see that the company also took advisory fees even when it should not have and did not return prepaid quarterly fees after accounts closed.
These actions led the SEC to order American Portfolios Advisors to stop such practices and accept censure without admitting or denying guilt. Before these problems came out, the parent company was sold in 2022 but Osaic did not get blamed by the SECâs order; later in October 2023, American Portfolios Advisors closed down after handling more than $13 billion in assets.
This story shows why we need clear rules between advisers and investors so everyone knows where their money goes next time someone invests through a registered adviser account. Stay with us as we explain what happened step by step.
Key Takeaways
Table of Contents
- The SEC fined American Portfolios Advisors $1.75 million for overcharging clients and hiding conflicts of interest between August 2020 and March 2023.
- The firm did not tell clients about extra fees and compensation it received from an affiliated broker-dealer, breaking its fiduciary duty.
- Senior executives at the firm backdated documents during a compliance exam to mislead regulators, which is against ethical rules.
- Clients were charged advisory fees on alternative investments when no fees were due, and did not get refunds for prepaid fees if they closed accounts early.
- Two senior executives, Colin Michael Moors and Gary Bruce Gordon, paid extra fines of $10,000 and $20,000 as part of the SEC’s enforcement action.
SEC Charges American Investment Adviser For Conflict Of Interest Issues
We see the SEC penalized an investment adviser for conflicts of interest and hidden fees. This case highlights why full disclosure matters in financial advisory services.
The Securities and Exchange Commission (SEC) penalized American Portfolios Advisors with a fine of $1.75 million.
The Securities and Exchange Commission (SEC) penalized American Portfolios Advisors with a fine of $1.75 million for conflict of interest violations. This penalty came after the firm overcharged clients on alternative investments in registered investment advisor accounts between August 2020 and March 2023.
We saw the SEC highlight how senior executives even backdated documents during a compliance examination. The firm settled the order without admitting or denying any findings.
American Portfolios Advisors failed to tell clients about compensation they received from an affiliated broker-dealer. They also did not disclose that this broker charged marked-up fees on trades and account services, creating undisclosed conflicts of interest.
According to the SEC, these actions breached fiduciary duties and raised serious concerns for investors looking for transparency.
âClients deserve clear information about where their money goes, said Gurbir S. Grewal, Director of the SEC Division of Enforcement.
The penalty was due to overcharging clients on alternative investments within registered investment advisor (RIA) accounts.
American Portfolios Advisors charged clients too much for alternative investments in their registered investment advisor (RIA) accounts. This overbilling happened between August 2020 and March 2023.
Wrong fee calculation methods caused these extra charges. Our industry already received a warning from the SEC about mistakes in advisory fees back in 2021, but the firm still failed to fix its billing system.
We also see that the firm did not give pro rata refunds on prepaid quarterly advisory fees when clients closed their accounts early. Improper prorating of charges made things worse for investors who trusted them with their money.
These compliance violations led to serious regulatory actions and a penalty of $1.75 million against American Portfolios Advisors. Let’s look at what else the SEC discovered during its investigation into conflicts of interest and fee practices at this firm.
The firm failed to disclose conflicts of interest related to compensation from a clearing firm.
These overcharges were only part of the SEC’s concerns. We also saw that the firm failed to disclose conflicts of interest related to compensation from a clearing firm. Our clients depended on full transparency, but they did not receive it.
Conflicts arose because the affiliated broker-dealer received extra fees and marked-up charges from a clearing firm. The company kept this information hidden from our clients between August 2020 and March 2023.
This lack of disclosure broke our fiduciary duty and put investor trust at risk. The SEC had already issued a risk alert about billing practices like these, stressing that firms must reveal all fee-related conflicts of interest.
American Portfolios Advisors breached its fiduciary duty to certain advisory clients by not fully disclosing compensation-related conflicts from its affiliated broker-dealer.
American Portfolios Advisors breached its fiduciary duty to clients from August 2020 to March 2023. We saw the firm fail to tell advisory clients about conflicts of interest involving compensation from its affiliated broker-dealer.
The broker-dealer charged marked-up fees on transactions and account services, but the firm did not fully disclose these details. This lack of disclosure put clients at a disadvantage because it hid important information that could affect investment decisions.
We learned that this violation led to overbilling on alternative investments in RIA accounts, even when no fees were due. Senior executives made things worse by backdating documents during an SEC compliance examination.
The SEC fined American Portfolios Advisors $1.75 million for these regulatory violations related to undisclosed compensation and conflict of interest issues.
SEC’s Findings and Actions
We can see that the SEC outlined actions taken by American Portfolios Advisors, and you can read more to understand how this may impact investors.
The SEC’s charges against American Portfolios Advisors covered the period from August 2020 to March 2023.
The SEC investigated American Portfolios Advisors for violations from August 2020 to March 2023. During this time, the firm failed to follow proper regulatory and compliance standards.
The agency found that senior executives backdated important documents during a compliance exam. We saw that the firm did not inform advisory clients about marked-up fees charged by its affiliated broker-dealer.
The investigation led to a $1.75 million penalty.
American Portfolios Advisorsâ parent company was sold to Osaic in 2022, but the SEC made clear that Osaic was not implicated in these actions. The firm stopped operations in October 2023 after settling with the SEC without admitting or denying any findings of liability or violation related to client overbilling and conflicts of interest.
This case shows how financial enforcement can impact firms and highlights our need for awareness as investors regarding settlement agreements and regulatory actions within advisory services.
The firm settled the SEC’s order without admitting or denying any findings.
We settled the SECâs order without admitting or denying any findings. Our agreement included a fine of $1.75 million. We also consented to a cease-and-desist order and received a censure as part of the enforcement action.
Colin Michael Moors, one of our executives, paid a penalty of $10,000. Gary Bruce Gordon, another senior executive, paid $20,000. By agreeing to these penalties from the investigation, we took steps toward accountability while maintaining our position regarding the SECâs findings.
In addition to overbilling, the SEC found that senior executives at American Portfolios Advisors backdated documents during an SEC compliance examination.
The SEC found that senior executives at American Portfolios Advisors backdated documents during a compliance audit. This act happened while they checked the firmâs records between August 2020 and March 2023.
By backdating documents, those executives tried to mislead regulators about the timing of certain actions. We know this action goes against strong ethics and transparency rules in our industry.
We also saw that inaccurate fee calculations led to client overcharges throughout RIA accounts. The firm did not give pro rata refunds for prepaid fees after clients closed their accounts.
These failures raise serious concerns about accountability, fraud prevention, and proper regulation within financial firms like ours or any investment advisor we choose to trust with our money.
The SEC claimed that the firm did not inform clients that its affiliated broker-dealer charged marked-up fees on transactions and account services.
Clients did not receive notice that the affiliated broker-dealer charged extra fees on their transactions and account services. From August 2020 to March 2023, we see that American Portfolios Advisors failed to provide clear fee disclosures.
This lack of transparency created a serious conflict of interest and breached fiduciary responsibility.
We also note that the firm overcharged clients by collecting advisory fees on alternative investments where no fees were due. These improper billing practices violate securities regulations and compliance standards.
Senior executives even backdated documents during an SEC compliance examination, further raising concerns about regulatory oversight at the firm. Honest disclosure and proper billing protect investors like us from unfair charges.
Conclusion
We saw how the SEC charged American Portfolios Advisors for serious conflict of interest issues and overcharging clients. The agency fined the firm $1.75 million after finding failures in disclosure and honesty.
Simple steps like full transparency can prevent costly mistakes in investment management. Using clear disclosures protects everyone and keeps trust strong between advisers and investors.
For those wanting to learn more, we recommend checking SEC resources on compliance or speaking with a trusted adviser. Together, we can make smarter choices by staying informed and demanding fair practices every step of the way.
