SEC Charges Milwaukee-Based Advisory Firm for Receiving Undisclosed Compensation On Client Transactions
Dec. 12, 2018
File No. 3-18926
December 12, 2018 - The Securities and Exchange Commission today announced that Landaas & Company (L&C), a dually registered investment adviser and broker-dealer, and Robert W. Landaas, the company's owner and Chairman, have agreed to settle charges that they received undisclosed compensation from an unaffiliated clearing broker on client transaction fees, creating a conflict of interest.
According to the SEC's order, L&C added $20 to client transactions, which it described to customers as a "Service Charge" for an unaffiliated third-party clearing broker's execution and clearing services. . L&C used what was often a small portion of the Service Charge to pay the third-party broker, and the balance, which ranged from $3 to $20, was then credited to L&C. The SEC's order found that L&C earned more than $320,000 from the undisclosed credits and did not disclose the receipt of these payments to its clients. In addition, L&C also failed to disclose over $80,000 in revenue sharing payments it received from the third-party broker based on investments L&C selected for its clients.
The SEC's order found that L&C and Landaas violated the antifraud and compliance provisions of the federal securities laws. L&C willfully violated Sections 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 (Advisers Act) and Rule 206(4)-7 thereunder and Landaas willfully violated Section 206(2) and caused L&C's violations of Sections 206(4) and 207 and Rule 206(4)-7. Without admitting or denying the findings, L&C and Landaas consented to the entry of a cease-and-desist order requiring them to pay disgorgement and prejudgment interest totaling $468,941 and a civil penalty of $130,000. The order also censures the respondents, requires them to retain an independent compliance consultant, and establishes a Fair Fund to compensate harmed advisory clients.
The SEC's investigation was conducted by Andrew Shoenthal and Paul Montoya of the Asset Management Unit in Chicago. The examination that led to the investigation was conducted by Malinda Pileggi, Stacey Gohl, and Will Davis of the Chicago Regional Office.