Published on Jul 15th, 2025 |

RIA and CEO Charged for Fraudulent Billing

SEC Releases

Introduction

The SEC charged a Chicago RIA, and its CEO, on July 3rd for charging improper fees.

The SEC alleges that the Firm charged more than $2.4 million in fees to its clients that were unauthorized and undisclosed.

This recent charge is another example of how the SEC continues its efforts towards investor protection.

What Happened?

What Happened?

According to the SEC:

  • The Firm’s advisory agreement disclosed fees of either 2% or 2.4%.
  • There were no performance-based fees, and fees were billed in arrears.
  • The Brokerage Firm in use by the RIA allowed clients to pre-authorize quarterly invoicing, with a dollar limit that was referred to as a “Quarterly Fee Cap”.
  • When customers created accounts with the Brokerage Firm, the RIA would supply the contact information on behalf of the clients with a mobile number or email address controlled by the RIA.
  • Usually within 30 days of the account opening, the defendants would log into client accounts and approve the quarterly fee caps; they would then log in using its Adviser Login and invoice the client for the added fees.
  • Actual fees charged to the Firm’s clients averaged over 7% of AUM.
  • At least $2.4 million in additional fees were charged to at least 220 client accounts.
  • The CEO transferred at least $2.9 million from the Firm to their personal checking account, through which the CEO paid for personal expenses.

Vigilant's Conclusion

Vigilant’s Conclusion

The SEC has made it clear that investor harm continues to be one of their highest focus areas on the investigation front.

While the activity in this recent charge serves as an extreme case, it is important that Firms are aware that the SEC is looking carefully into billing practices and fee disclosures.

Firms should be sure that their compliance program provides proper supervision over the actions of employees and monitors the appropriateness of fees charged to clients.

Vigilant offers a wide range of Compliance Testing Services, including a Gap Analysis, to help create a better understanding of how well designed your compliance program is.

Reach out to us today with any questions you may have.

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