Finra goes after Merrill Advisor over Fee Shenanigans (Aug. 10)
In 2016 the most read story on FA-IQ about a wirehouse was our August 10 report about Finra going after an advisor at Merrill Lynch, alleging that he misled several IRA clients about fund fees and then falsified what he discussed with them in the company’s client relationship management system.
The complaint alleged that Landon Williams, at the time an advisor on Merrill’s platform for clients with less than $250,000 in their accounts, made false statements to five different customers from March to July 2014 while he was working in the company’s Merrill Edge Advisory Center where clients aren’t assigned an individual broker but rather dial into a call center and get assigned to Financial Solutions Advisors such as Williams.
On one occasion, Williams allegedly recommended a customer invest proceeds from the sale of two Class C funds into a Class A fund to save on annual operation expenses while in fact the new mutual fund came with a higher operating expense than he said and had a frontend sale charge that would have taken the customer not, as he had told the customer, three years to recoup, but seven years, Finra said in its complaint.
In another instance, Williams allegedly misstated the annual operation expenses of another fund to a different customer, according to the complaint.
Merrill terminated Williams in August 2014, about a year after he started work with the firm, according to the complaint. The regulator is seeking monetary sanctions against him, it said in its complaint.
In another case reported August 10, the SEC got a guilty plea from a former Rhode Island financial advisor for orchestrating a $21 million Ponzi scheme dating back to 2010, the regulator said in a press release.
Patrick Churchville, owner and president of investment advice firm ClearPath Wealth Management, in Providence, R.I., pled guilty to diverting investors’ money to pay other investors and to using it as collateral for loans in order to make further investments, as well as to using investors’ funds for investments directly for ClearPath’s benefit, according to the SEC’s complaint.
At the time of the article, ClearPath Wealth Management still appeared to be registered as an RIA in Rhode Island.
Churchville also stole $2.5 million of money borrowed on collateral of investors’ funds to buy a waterfront home, the regulator said in its complaint. Using “accounting tricks,” he covered his tracks from several professionals, including auditors, fund administrators, accountants and his own staff at ClearPath, according to the SEC.
In addition, the United States Attorney for the District of Rhode Island alleged Churchville didn’t report the $2.5 million stolen to buy the house as income and is therefore on the hook to the IRS for $820,000, according to the SEC’s press release. The regulator said at the time it was seeking disgorgement and penalties as well as a permanent injunction against Churchville.
Read the original story, published August 10, here.