SEC Charges San Jose Investment Adviser for Overcharging Fees
Nov. 19, 2018
File No. 3-18901
November 19, 2018 – The Securities and Exchange Commission today announced that registered investment adviser Retirement Capital Strategies, Inc. (RCS), based in San Jose, California, agreed to settle claims that it charged more than 290 client accounts higher advisory fees than those in its fee schedule.
According to the SEC’s order, RCS charged clients advisory fees calculated as a percentage of the assets under management. The advisor’s fee schedule included a series of “breakpoints” that reduced advisory fees as the total amount of client assets under management increased. For example, the fee schedule included eight breakpoints, ranging from a high of 1.5% for clients with less than $250,000 under management to a low of .4% for clients with $10 million or more under management. That fee schedule was incorporated into client advisory agreements, distributed to clients upon request, and, starting in 2011, disclosed in RCS’s Form ADV brochure filed with the Commission. The SEC order found that, beginning in 2010 and continuing through February 2018, RCS inconsistently applied the advisory fee discounts, and that, as a result, it overcharged more than 290 client accounts during that period by assessing approximately $304,000 in excess advisory fees.
The SEC’s order found that RCS willfully violated Sections 206(2), 206(4), and 207 of the Advisers Act, and Rule 206(4)-7 thereunder, which are antifraud and compliance provisions of the federal securities laws. Without admitting or denying the SEC’s findings, RCS consented to a cease-and-desist order, a censure, and a civil penalty of $50,000. The SEC’s order acknowledged RCS’s remedial efforts during the course of the investigations, including RCS’s reimbursements to its clients of all overcharged fees and revision of its policies and procedures and Form ADV.
The SEC’s investigation was conducted by Ariana Torchin and supervised by Jeremy Pendrey of the Asset Management Unit in the San Francisco Regional Office. The SEC examination that led to the investigation was conducted by James Marchi, Ricky Flanders, and Matthew O’Toole and supervised by Alice Schulman.
Counsel for RCS: Michelle L. Jacko, Jacko Law Group, PC, 619-298-2882