$19.5M Fine for Failures in Disclosing Conflicts of Interest
SEC Releases
Introduction
On August 29, 2025, the SEC ordered a well-known Adviser ($300 Billion RIA – $9.3 Trillion Globally) to pay a fine of $19.5 Million, citing failures in disclosing conflicts of interest and deficient internal controls.
These violations involved their Personal Advisor Services (“PAS”) program.
Violations That Occurred
During the period from August 2020 through December 2023, the Adviser’s performance review system incentivized Financial Advisors to enroll and retain clients in PAS, yet the Adviser failed to consistently disclose this conflict of interest.
- Contradictory Disclosures
- The PAS ADV Part 2 Brochure acknowledged that certain Advisors were eligible for bonuses based on referrals and retention, creating a financial incentive.
- However, the Form CRS and the Supplement to the PAS ADV Part 2 Brochure incorrectly stated that advisors received no extra compensation.
- Misleading Public Statements
- The Adviser’s website described PAS Advisors as salaried, without financial incentives, misleadingly implying impartial advice.
- Lack of Written Policies or Procedures
- The Adviser did not have written policies reasonably designed to ensure full and fair disclosure of such conflicts or prevent misleading statements.
These shortcomings led to willful violations of:
- Section 206(2) of the Advisers Act, addressing fraudulent or deceitful conduct, and
- Section 206(4) and Rule 206(4)-7, requiring written policies and procedures to prevent violations of the Advisers Act.
How This Can Be Prevented
Organizations can avoid similar mistakes by adopting the following best practices:
1. Consistent and Transparent Disclosures
- Ensure that client communications, including brochures, supplements, Form CRS, websites, and marketing materials clearly and consistently disclose potential conflicts and incentives (if any).
2. Internal Policies & Procedures Tailored to your Firm
- Establish written compliance policies and procedures focused on conflict identification, disclosure protocols, and review processes.
- Conduct regular audits to verify that disclosures are accurate and uniformly applied.
3. Training & Monitoring
- Provide on-going training to Advisors and Staff about fiduciary responsibilities and the importance of disclosure.
- Monitor marketing materials and public communications for alignment with internal policies and procedures.
4. Governance & Oversight
- Ensure someone has been assigned the responsibility for compliance oversight and has the appropriate expertise and resources externally or internally.
- Consider requiring Senior Management or the Board to review and approve conflict-related communications.
Conclusion: How Vigilant Compliance Can Help
The Adviser’s case underscores how misaligned incentive structures and inconsistent disclosures can severely undermine client trust and result in major enforcement action.
At Vigilant, we offer comprehensive Solutions to assist in safeguarding against such risks:
- Disclosure Audit & Alignment: We examine client communication that comes from websites, brochures, Form CRS, and internal documents to help ensure consistency and full transparency regarding disclosures.
- Policy Development: We craft customized, written compliance frameworks tailored to your advisory model, built to meet regulatory expectations and help minimize risk.
- Training & Oversight Programs: We deliver structured training for Advisors and design monitoring protocols to keep your disclosures accurate over time.
- Governance Support: From board-level policy approval to internal compliance reviews, we assist in establishing governance channels suited to your organization’s size and complexity.
By partnering with Vigilant, we seek to help Firms in proactively identifying and managing conflicts of interest, while maintaining regulatory alignment.