Compliance Corner - deVere USA

Editorial Staff

7 June 2018

deVere USA
New York-based investment advisor deVere USA Inc has agreed to pay an $8 million civil penalty related to its failure to disclose conflicts of interest to its retail clients, according to a statement by the Securities and Exchange Commission.

The settlement means a "fair fund" will be set up to distribute the penalty to clients affected by the affair, the SEC said. The SEC has also filed a litigated action against two deVere USA investment advisor representatives, one of whom was the chief executive of the firm.

The firm did not disclose agreements with overseas product and service providers that resulted in compensation being paid to deVere USA advisors and an overseas affiliate, the SEC statement said. The SEC order found that the undisclosed compensation - including an amount equivalent to 7 per cent of the pension transfer value - created an incentive for deVere USA to recommend a pension transfer and particular product or service providers that were obligated to make payments. The order also said deVere USA made materially misleading statements concerning tax treatment and available investment options.

The SEC filed charges against the former deVere USA CEO, Benjamin Alderson, and a former manager, Bradley Hamilton. The SEC’s complaint, filed in federal district court in Manhattan, alleged Alderson and Hamilton misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including the substantial compensation that Alderson and Hamilton personally stood to receive.

“Investment advisers have an obligation to disclose direct and indirect financial incentives,” Marc P Berger, director of the SEC’s New York Regional Office, said. “deVere USA brushed aside this duty while advising retail investors about their retirement assets, and today’s settlement will result in a Fair Fund distribution to deVere USA’s retail clients who were deprived of important information," Berger said.

Without admitting or denying the SEC’s findings, deVere USA consented to the SEC’s order, which found that the firm violated the Investment Advisers Act of 1940, including the antifraud provisions, and imposed remedies that include an $8.0 million penalty and engaging an independent compliance consultant. The SEC’s complaint against Alderson and Hamilton alleged they violated the Investment Advisers Act and seeks an injunction, disgorgement plus interest, and civil money penalties.

The SEC’s investigation was conducted by Michael Ellis, Haimavathi Marlier and Wendy Tepperman in the New York office. Assisting the investigation was Roseann Daniello in the New York office. The litigation against Alderson and Hamilton will be led by Ms Marlier and Mr Ellis, and the case is being supervised by Lara Shalov Mehraban. The SEC examination that led to the investigation was conducted by Michael Devine, Phillip Ma, Edward Perkins, and Joseph DiMaria of the New York office.