SEC Announces Fraud Charges Against Financial Adviser Accused of Greatly Exaggerating Assets Under Management and Investment Returns on Paid Radio Program
The Securities and Exchange Commission today announced fraud charges against a Maryland-based financial services firm and its founder/CEO accused of grossly inflating the amount of managed assets and exaggerating the investment returns actually obtained for customers.
The SEC Enforcement Division alleges that Dawn J. Bennett frequently touted to customers and more broadly on her paid radio program that highly profitable investment returns generated by Bennett Group Financial Services placed it in the “top 1 percent” of firms worldwide without disclosing that the returns were calculated for a model portfolio and not based on actual investor performance. The SEC Enforcement Division further alleges that Bennett and her firm claimed to be managing more than $2 billion in assets when the real number was no more than one-fifth of that amount.
“We allege that in a calculated effort to inflate their profile and prestige, Bennett and her firm overhyped the amount of assets they manage for customers and the actual returns on their investments,” said Sharon Binger, Director of the SEC’s Philadelphia Regional Office. “The investing public is entitled to a level of confidence that information they receive about brokerage and advisory services is accurate, and this case shows that so-called financial experts on the radio are often merely advertisers who may not be doing so truthfully.”
The matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate.
The SEC’s Enforcement Division alleges:
- Bennett and her firm made material misstatements and omissions from at least 2009 to February 2011 when they had a fledgling investment advisory business to which they hoped to attract new clients by luring them with claims of industry success and impressive investment returns.
- Knowing that their misstatements would be factored into rankings of independent financial advisors, Bennett and her firm falsely claimed in three submissions to a media organization that they managed assets of $1.1 billion to $1.8 billion. As a result, the media organization ranked Bennett fifth in the category of “Top 100 Women Financial Advisors” and second in its listing of the “2011 Top Advisors” in Washington D.C. Bennett and her firm touted these distinctions to existing and prospective clients.
- Bennett began hosting a weekly radio show on an AM radio station in the Washington D.C. area in 2010. Bennett Group paid for the show called Financial Myth Busting With Dawn Bennett, and she hosted it and determined all of its content.
- Bennett touted Bennett Group and its services on the radio and promoted the show to existing and prospective customers by adding references to “our highly regarded weekly talk radio program” to proposal packages prepared for them.
- During at least 18 radio programs aired in 2010 and 2011, Bennett falsely claimed that she and Bennett Group managed assets ranging from $1.5 billion to more than $2 billion. Bennett and Bennett Group never actually provided any form of management for assets exceeding approximately $407 million.
- Bennett and Bennett Group also made fraudulent claims about managed assets on the Facebook page they maintained for the radio program.
- During the SEC’s investigation, Bennett and her firm made additional false statements in an effort to substantiate their prior fraudulent claims about the assets they managed. They falsely asserted that they gave advice about short-term cash management to three corporate clients regarding more than $1.5 billion in corporate assets. In reality, they never provided such advice.
- Bennett also touted Bennett Group’s investment returns and performance during her Financial Myth Busting radio programs without disclosing that the returns were calculated for a model portfolio. A significant portion of customer accounts were not invested in accordance with the model.
The SEC Enforcement Division alleges that Bennett and Bennett Group violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1) and 206(2) of the Advisers Act. The SEC Enforcement Division further alleges that Bennett Group violated Section 206(4) of the Advisers Act and Rules 206(4)-1(a)(5) and 206(4)-7 (with Bennett further charged with aiding and abetting and causing Bennett Group’s violations).
The SEC Enforcement Division’s investigation was conducted by Brendan P. McGlynn and Patricia A. Paw of the Philadelphia Regional Office, and supervised by G. Jeffrey Boujoukos. The litigation will be led by Michael J. Rinaldi. The SEC examination that led to the investigation was conducted by Robert S. Thomas and Darren A. Goins of the Philadelphia office.