Embattled Ex-CEO Pledges He’ll Fight SEC Fraud Charges
The former CEO of New York-based investment advisor deVere USA – Benjamin Alderson – is facing charges filed by the SEC for allegedly defrauding hundreds of clients and prospective clients. But Alderson tells FA-IQ he “will be disputing” the charges.
In the complaint filed by the SEC before the U.S. District Court of the Southern District of New York, the watchdog alleges Alderson defrauded clients by misleading them about the benefits of irreversibly transferring their U.K. pensions to an offshore pension plan while “concealing serious conflicts of interest.” The SEC alleges Alderson and deVere USA former manager Bradley Hamilton earned “lucrative commissions” because of the recommendations.
In his defense, Alderson says: “I was not responsible for the compliance disclosures for the firm.”
Thomas Potter, a Nashville, Tenn.-based partner at the Burr & Forman law firm, who is not involved in this case, says that by using that defense, Alderson “must mean that he delegated that responsibility to someone else.”
Yet Potter believes “the SEC will regard him as having ultimate supervisory accountability.”
The SEC does, indeed, say in its complaint that Alderson – being the “senior-most officer” of deVere USA – “was responsible for and involved in the false filings” that the firm made with the commission.
SEC records show Alderson was registered with deVere USA from August 2013 until May 2017. Alderson has been registered since November 2017 with Touchstone Advisory, which he founded. He has relocated from New York to the U.K.
Hamilton, identified by the SEC complaint as a former area manager at deVere USA, is a co-defendant in the complaint filed by the watchdog. SEC records show Hamilton was registered with deVere USA from July 2014 to June 2017. He has been registered since December 2017 with Blacktower Financial Management (US), where he is a senior wealth manager, according to his LinkedIn profile. Hamilton could not be reached for comment as of this writing.
The SEC alleges Alderson and Hamilton violated the Investment Advisers Act. The SEC is asking the court to: permanently restrain the defendants from violating securities laws and rules; order the defendants to disgorge any ill-gotten gains and pay pre-judgement interest on those amounts; and order the defendants to pay civil monetary penalties.
Alderson insists he gave his former clients at deVere USA “valuable retirement strategy” advice “that the SEC does not understand fully.”
He counters the SEC’s accusations by saying: “Across the company we had a lot of very happy clients and personally I had not received any client complaints.”
FA-IQ reached out to deVere USA regarding Alderson’s claim that he wasn’t responsible for the firm’s compliance disclosures. A spokesman for deVere USA didn’t directly address Alderson’s claim, but shared a statement about the firm having a new management team and strengthening its overall systems and controls.
deVere USA says it is hiring an independent consultant to conduct annual reviews of the firm’s compliance policies and procedures over the next three years, a condition of a settlement the firm entered with the SEC.
As reported, the SEC slapped deVere USA with an $8 million civil penalty for failing to disclose conflicts of interest to its retail clients. The firm has agreed to pay the amount in a settlement that will lead to the creation of a Fair Fund from which the penalty will be distributed to affected clients, according to the SEC.
Without admitting or denying the SEC’s findings, deVere USA consented to the watchdog’s order, which states that the firm violated the Investment Advisers Act of 1940, including the antifraud provisions.
deVere USA says it reached the settlement with the SEC “in the interest of putting the matter behind us.”
The settlement “clears the way for the company to continue to develop its investment advisory business in the U.S.," deVere USA says. deVere USA is part of the Dubai-based deVere Group, which says it has $10 billion in assets under advisement from more than 80,000 clients in 100 countries.
From June 2013 to March 2017, deVere USA’s client and prospective client base consisted mainly of British expatriates who resided in the U.S. and had pensions based in the U.K. from their previous employers, according to the SEC.
The SEC claims Alderson and Hamilton recommended these investors transfer their U.K. pensions to an offshore pension plan, known as a Qualifying Recognised Overseas Pension Scheme (QROPS).
The complaint alleges the defendants “concealed their significant financial motivation to consummate a QROPS transfer.” The transfer generated for the defendants “millions of dollars in undisclosed commissions,” including an upfront commission of 7%, according to the complaint.
The SEC claims Alderson also “instructed” other deVere USA advisors “to make the same misleading representations” to clients and prospective clients.
The SEC further claims that while the defendants “misleadingly touted” QROPS as an open architecture that would give clients access to more than 15,000 securities, in reality deVere USA advisors “were only permitted to recommend to clients and allow clients to choose from a limited number of investment options that at most, was less than one hundred.”
The “handful of European multi-asset funds and certain structured notes” recommended by deVere USA to clients “paid front-end load fees” to an overseas affiliate, which then split the fee with the deVere USA advisors, according to the complaint.
The defendants each received “more than $100,000 in front-end fees that they misleadingly presented to clients as required entry fees," the complaint says.
The complaint also alleges the defendants misled clients about the tax benefits of the QROPS without informing them of the risks.
The case continues.