Snowden Lane Companions pays $364,590 to settle Securities and Change Fee costs that it failed to inform advisory shoppers about funds that its affiliated broker-dealer obtained on margin loans and money sweep balances.
From February 2018 till June 2020, Snowden’s RIA positioned advisory shoppers into cash market funds that generated funds for its affiliated broker-dealer, in accordance with an SEC order on Friday.
The funds got here from an unnamed clearing agency and have been described as “distribution help,” in accordance with the SEC. Pay elevated based mostly on the quantity of belongings held in these funds, the company stated.
The settlement additionally cited Snowden for undisclosed markups on consumer margin loans from 2018 till 2023 and deceptive legal responsibility disclaimers that appeared in consumer agreements from at the least 2019.
The legal responsibility provision, generally known as a hedge clause, stated that Snowden Lane was not responsible for losses except a courtroom or arbitrator discovered gross negligence, willful malfeasance or a authorized violation. The SEC stated the disclaimer may discourage shoppers from exercising their authorized rights.
Snowden settled the allegations with out admitting or denying the findings and agreed to a censure and cease-and-desist order. The financial sanctions embrace $226,317 in disgorgement, $38,273 in prejudgment curiosity and a $100,000 nice that will likely be positioned in a fund for affected shoppers.
A spokesperson for Snowden stated in an announcement that the case grew out of a routine 2022 SEC examination and that it issues the “adequacy of sure disclosures, not a failure to reveal.”
The agency stated shoppers had no funding losses and that it up to date its disclosures and settlement language after the examination.
The order acknowledged that shoppers obtained normal disclosures from the clearing agency about margin curiosity and cash market fund compensation, however the SEC discovered that Snowden had not pretty and totally described the money sweep conflicts and made no disclosure concerning the margin markups.
The SEC additionally stated that Snowden had adopted a coverage towards deceptive hedge clauses in June 2023 however didn’t replace its advisory agreements.
“Whereas we respectfully disagree with the SEC’s place, we selected to resolve the matter with out admitting the SEC’s findings and are happy to have it resolved,” the Snowden spokesperson said.
The spokesperson didn’t reply questions on which clearing agency had offered the funds or what number of shoppers have been repaid.
Snowden stated in September that it had topped $15 billion in whole consumer belongings. In a Type ADV filed in March, the agency reported managing about $8.9 billion in advisory belongings, in accordance with the SEC.
The case provides to scrutiny of companies’ money sweep practices. Wells Fargo and Merrill Lynch paid a mixed $60 million in January 2025 to settle SEC costs that they didn’t disclose conflicts with sweeping consumer funds to applications that have been extra worthwhile for the agency.
The SEC additionally introduced the same hedge clause case in January, when FamilyWealth Advisers and FamilyWealth Asset Administration—RIAs based mostly in Florida and Texas, respectively—settled costs about deceptive legal responsibility disclaimers in advisory agreements.