Adviser/Sports Agent Charged Fees on Bank Accounts, Real Estate, Cars
The SEC has sued an investment adviser/sports agent for charging his clients to manage non-securities assets including bank accounts, equity in real estate, and the value of vehicles.
The SEC alleges that the adviser, without the knowledge or consent of his clients, applied his 1.00%-1.25% asset management fee against total assets including static assets not held in securities accounts. The SEC also charges the adviser with (i) falsifying agreements and using the client’s signature stamp to falsely evidence client execution, (ii) applying inflated asset management fees, and (iii) investing in unsuitable leveraged and inverse ETFs.
Advisers that operate a family office practice for professional athletes (and other high income non-financial professionals) must guard against crossing the line from extreme servicing to acting without consent. Regardless of the activities performed, an adviser will have a hard time justifying an asset management fee for managing static assets like real estate and cars.
To read the full SEC complaint, click here.