{"id":1301,"date":"2024-10-25T14:41:55","date_gmt":"2024-10-25T14:41:55","guid":{"rendered":"https:\/\/iqeq.com\/us\/insights\/sec-enforcement-case-highlights-affiliated-adviser-and-broker-conflicts\/"},"modified":"2024-10-25T14:41:56","modified_gmt":"2024-10-25T14:41:56","slug":"sec-enforcement-case-highlights-affiliated-adviser-and-broker-conflicts","status":"publish","type":"post","link":"https:\/\/iqeq.com\/us\/insights\/sec-enforcement-case-highlights-affiliated-adviser-and-broker-conflicts\/","title":{"rendered":"SEC enforcement case highlights affiliated adviser and broker conflicts"},"content":{"rendered":"
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By Alex Leonard, Director, U.S.<\/em><\/p>\n

On September 3, 2024, the U.S. Securities and Exchange Commission (SEC) instituted proceedings<\/a> against International Assets Investment Management, LLC (the Adviser). Without admitting or denying the SEC\u2019s findings, the Adviser agreed to settle the charges and pay disgorgement, prejudgment interest, and a civil penalty, totaling $900k.<\/strong><\/p>\n

The Adviser provides investment advisory services, portfolio management, education funding, and estate and retirement planning services to individuals, trusts, estates, and other business entities. International Assets Advisory, LLC (the affiliated broker-dealer) is a broker-dealer that shares common ownership, office space, management and employees with the Adviser.<\/p>\n

The proceedings arose out of the Adviser\u2019s alleged failure to provide full and fair disclosures to its clients regarding the following compensation and financial incentives that its affiliated broker-dealer received from an unaffiliated clearing broker:<\/p>\n

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  1. An incentive payment from the clearing broker contingent on the conversion of customer accounts to the clearing broker<\/li>\n
  2. Revenue sharing payments from advisory client investments in the clearing broker\u2019s FDIC-insured bank deposit cash sweep program<\/li>\n
  3. Revenue sharing payments from the clearing broker on the rate of interest charged to advisory clients on margin loans and lines of credit<\/li>\n<\/ol>\n

    Furthermore, the Adviser allegedly failed to adopt and implement written compliance policies and procedures related to the conflicts arising from the receipt of financial incentives and revenue sharing.<\/p>\n

    Like all registered investment Advisers, the Adviser has an obligation to disclose all material facts to its advisory clients relating to the advisory relationship, including any conflicts of interest between itself and its clients. The SEC emphasized the role a firm\u2019s Form ADV Part 2A Brochure plays in providing adequate disclosure to clients.<\/p>\n

    Takeaways for Advisers, especially those with affiliated service providers:<\/strong><\/h2>\n