The U.S. Securities and Exchange Commission is ordering WFG Advisors to pay a $100K penalty for charging clients too much on their investments business development companies and real estate investment trusts. The Dallas-based firm is the registered investment advisory arm of Williams Finance Group.
According to the regulator, the purported overcharges took place from 1/11 through 8/13. The SEC claims that WFG Advisors had policies and procedures that were inadequate, which kept it from identifying and stopping incidents of overcharging. Because of these inadequacies, including what the regulator considered a lack of technological capabilities, 35 accounts were collectively overcharged $34,640.63 in advisory fees.
The Commission said client’s in the firm’s wrap account program were told that they would be charged a commission to buy alternative investment product interests, including interests in BDCs and REITs. However, there wasn’t supposed to be an advisory fee. Instead, said the Commission, WFG Advisors charged both a commission and an advisory fee. (Forms submitted to the regulator included false statements saying that wrap program participants would not have to pay commissions for transactions that took place in their accounts.)
The SEC said that the Texas-based RIA had known since at least since 2007 that it was at risk of overcharging clients. That was the year a compliance consultant told the firm that some of its fees could not be accurately calculated or tested. WFG Advisors depended on random, manually conducted sampling to supervise billing for accuracy.
Overcharging clients may not sound like a huge offense but it can cost investors a lot of money and prevent them from making money on their investments. At Shepherd Smith Edwards and Kantas, LTD LLP, our Texas securities fraud lawyers are here to help investors recoup their investment funds that they lost because of the negligent, careless, or wrongful actions of a brokerage firm, a registered investment adviser, a broker, or another party. Contact one of our REIT fraud attorneys to request your free case consultation.
Read the SEC order instituting an administrative proceeding in this case (PDF)