Brokerage firm and investment adviser BB&T Securities has agreed to give back over $5M to retail investors, as well as pay the US Securities and Exchange Commission (SEC) a $500K penalty, to resolve charges that Valley Forge Asset Management misled advisory clients into thinking they were getting complete “full-service brokerage services in-house” at an up to 70% reduced rate, even as less costly alternatives were available. BB&T Corp. previously acquired Valley Forge, now a subsidiary called Sterling Advisors.
The regulator contends in its order that Valley Forge, which was registered as a broker and investment advisor, made “misleading statements and inadequate disclosures” about these services and their prices to persuade customers to retain their in-house services. Meantime, Valley Forge purportedly failed to give these advisory clients more services than what they provided to their other advisory clients who had selected other brokerage options. These options charged substantially lower commissions—about 4.5 times less than what the firm charged for its full-service in-house broker services. This, even as those who had chosen the in-house broker services were led to believe they would be getting a “high level of service at a low cost” and beyond what the other clients were getting from the firm.
The SEC is accusing Valley Forge of placing its own interests before that of its advisory clients, costing them money in higher commissions so that the firm could profit. The regulator noted that it was the firm’s duty to fully disclose any material facts to its advisory clients that could impact their relationship, including conflicts of interest. Such disclosures are important so that a client is able to give their informed consent (or not) to these conflicts.
BB&T Securities, as Valley Forge’s successor in interest, is settling the SEC charges without admitting or consenting to the regulator’s findings. The firm will pay over $4.7M of disgorgement and more than $497K of prejudgment interest—both of which will be paid back to retail investors that were harmed via a Fair Fund.
At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm), our brokerage firm misconduct lawyers and investment adviser fraud attorneys are here to help investors in recouping their losses caused by negligence, fraud, or other wrongdoing. Please contact SSEK Law Firm today. Allow us to help you explore your legal options during your free, no obligation, initial case consultation.