The SEC has settled charges against Bruderman Asset Management LLC (BAM) and its principal, Matthew J. Bruderman, for failing to disclose conflicts of interest when advising clients to invest over $6 million in Bruderman's affiliated companies.
BAM and Bruderman failed to disclose to clients that their investments would be used to fund BAM’s payroll and repay loans to Bruderman and his affiliates. BAM also failed to implement reasonably designed written policies and procedures concerning the disclosure of conflicts of interest.
The SEC also settled charges with RIA AssetMark for $18 million for failing to properly disclose to clients that it helped set the fee that its affiliate custodian received for operating a cash sweep program used by AssetMark's clients.
AssetMark also received custodial support payments from some third-party custodians based on assets held in certain no-transaction-fee mutual funds. Although the firm disclosed the receipt of payments, the SEC also claimed that AssetMark did not disclose that in some cases there were lower-fee share classes with lower expense ratios than the NTF share classes that resulted in payments to AssetMark.
The SEC is routinely bringing charges against registered and unregistered entities for failing to disclose conflicts of interest to clients or investors, regardless of whether a client/investor has suffered any economic harm from the conflict. The simplest and best way to avoid charges is to disclose conflicts - particularly in Form ADV Part 2B and, in some cases, in your investment advisory/management agreements.