Former Waynesville investment adviser Brandon Anderson has dealt with multiple civil suits, property liens and even a personal bankruptcy over the last several years.
But now, bigger ramifications for Anderson’s allegedly unethical and illegal practices have manifested. Although he is not currently facing criminal charges for fraud, Anderson has been penalized in the form of sanctions and a cease and desist letter issued by the Securities and Exchange Commission (SEC) via an order that requires him to pay a $100,000 fine in addition to the more than $367,000 the SEC determined Anderson overcharged his clients.
The order states that Anderson overcharged customers up to 40 percent while operating the now-defunct River Source Wealth Management, LLC, out of Waynesville.
“When advisors breach their duty to clients by misleading and overcharging them, they can expect the SEC will craft a package of remedies that will compensate harmed investors, provide additional safeguards for prospective investors, and deter similar conduct,” Carolyn M. Welshhans, an associate director for the SEC’s Division of Enforcement, told wealthmanagement.com last week.
The news comes on the heels of two hefty civil judgments against Anderson and his companies — Balsam Capitol Group, TMS Group, RiverSource Wealth Management and Anderson Financial Services — over the last couple years. First, a suit brought in 2017 against Anderson by his former partner, Tim Phelan, ended in a $574,161.50 judgment, while a suit brought by First Citizens Bank ended in $211,977.95 of combined judgments. These are in addition to several unpaid property liens filed by the Internal Revenue Service, Employment Security Commission and even the Villages of Plott Creek.
Prior to these judgments, Anderson had multiple other suits brought by former clients dismissed. A stay was placed on Anderson on two of those suits due to his filing for personal bankruptcy in November 2016, meaning he could face a judgement in the event that the bankruptcy is revoked.
The $367,000 Anderson was ordered to pay will be in the form of a “disgorgement.” Attorney Adam Gana, an investment lawyer who is a managing partner of Gana Weinstein LLP, said disgorgement is essentially a refund of money.
“It should be what happens to the money,” he said, adding that the SEC will “take some money off the top” before refunding anything.
Gana had some advice on how anyone who’s worked with Anderson and thinks they might have been overcharged can figure out if they can get anything from the disgorgement.
“They can call the SEC, but more often than not, the best thing for them to do is to call an attorney,” he said.
Gana said the problem with registered investment advisers (RIA) like Anderson is that they aren’t subject to the same regulations as brokers, meaning some may think they have a better chance to get away with fraud.
“I’m seeing far more inappropriate conduct with RIAs than I did in the past,” he said.
“Overcharging advisory fees is a real problem,” he added. “It seems as if the SEC caught this guy Anderson with his hand in the cookie jar.”
While the large majority of Anderson’s clients had less than $1 million in assets, Gana said he sees these cases frequently, and they involve all types.
“They span the gamut,” he said. “I see predatory advisory and brokerage conduct with grandmas with less than a million to sophisticated multi-millionaires.”
“I see it in all walks,” he added. “I see it in small towns, too … bad brokers can take advantage of local churches and everything.”
Gana’s advice to anyone wanting to invest is to pay attention and put in the time researching whomever they are going to work with.
“Look at your account statements,” he said. “Google your broker or advisor … Don’t be afraid to ask a lot of questions.”
Once a person has selected an RIA, Gana said it’s important to continue to give due diligence.
“Be very clear about objectives and risk tolerances … confirm all representations made to you by your broker or advisor,” he said. “Don’t rely on unrecorded phone calls. Produce everything in writing.”