SEC Charges Dallas-Based Investment Adviser for Disclosure Failures Concerning Conflicts of Interest and Fee Calculations

ADMINISTRATIVE PROCEEDING
File No. 3-22171

September 24, 2024 – The Securities and Exchange Commission today announced settled charges against registered investment adviser Fusion Investment Advisors LLC, d/b/a Coppell Advisory Solutions, LLC and Fusion Capital Management, for breaches of its fiduciary duty relating to Fusion’s false and misleading disclosures relating to its receipt of certain compensation and its fee calculations.    

According to the order, from January 2019 through March 30, 2022, Fusion disclosed that it had an agreement with a third-party adviser whereby the third-party adviser paid Fusion a fee based on the amount of funds invested on Fusion’s platform in the third-party adviser’s model portfolios.  However, Fusion falsely represented in its Form ADV Part 2A (“brochure”), a filing submitted to the Commission and available to clients and the general public, that this arrangement should not create a material conflict of interest.  The order also finds that Fusion also made misleading disclosures to clients about its portfolio management fees by presenting the annual asset management fees as a flat percentage of the client’s managed assets, when in fact Fusion calculated this fee using a tiered or “blended” method, which resulted in certain accounts being assessed higher fees than represented.  In addition, the order finds that Fusion failed to maintain required books and records, to implement written compliance policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940 and the rules thereunder, and to conduct certain annual reviews of the adequacy of its written compliance policies and procedures.

The SEC’s order finds that Fusion violated the antifraud, books and records, and compliance provisions of Sections 204, 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 204-2(a)(7) and 206(4)-7 thereunder.  Without admitting or denying the findings, Fusion consented to a cease-and-desist order and a censure and agreed to pay $94,412.35 in disgorgement, $14,054 in prejudgment interest, and a civil penalty of $150,000.

The SEC’s investigation was conducted by staff of the Fort Worth Regional Office and supervised by Nikolay V. Vydashenko, Andrew B. Dean, and Corey Schuster, all of the Enforcement Division’s Asset Management Unit.  John Farinacci, an Asset Management Unit industry specialist and Paul Rash and Andrew Conders of the Fort Worth Regional Office Division of Examinations staff assisted with the investigation.