In May 2019, the Securities and Exchange Commission (SEC) charged owner and operator of River Source Wealth Management, LLC Stephen Anderson (CRD# 4062846) with defrauding clients by overcharging advisory fees of at least $367,000.
River Source Wealth Management, LLC is a now-defunct registered investment adviser in North Carolina that had a primary revenue stream for customer advisory fees based on each customer’s assets under management.
According to the SEC’s order, in 2015 and 2016, Anderson overcharged a majority of his clients. “The amount and percentages of the overcharges varied but, in the aggregate, amounted to approximately 40% more than the agreed-upon maximum customer advisory fees. As described in the order, Anderson also misled his clients about the reason he transferred their assets from River Source’s long-time asset custodian, falsely stating that it was his decision and that the separation was ‘amicable.’ In fact, as the order finds, the asset custodian ended the relationship with River Source after it noticed irregular billing practices and failed to receive sufficient supporting documentation from Anderson. Furthermore, the order finds that Anderson made material misstatements in reports filed with the Commission, including overstating River Source’s assets under management by at least $34 million (18%) in 2015 and $61 million (35%) in 2016, and failed to implement required compliance policies and procedures. The order prohibits Anderson from acting in a supervisory or compliance capacity or from charging advisory fees without supervision for at least three years, and requires Anderson to provide notice of the SEC order to clients and prospective clients.”
Anderson agreed to a cease-and-desist order and a censure, and agreed to pay disgorgement and prejudgment interest of $405,381 and a $100,000 penalty.
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