SEC Charged McDermott Investment Advisors with ‘double-dipping’ with advisory fees, transactional costs
According to Investment News on July 12, 2022, a federal jury in Pennsylvania ruled in favor of the SEC Tuesday after the regulator accused McDermott Investment Advisors and its CEO with breaching its fiduciary duty by charging improper transaction costs for unit investment trusts (UITs).
The Securities and Exchange Commission reportedly filed a complaint against McDermott Investment Advisors and its CEO in September 2019 alleging that from March 2013 to December 2014 they unlawfully invested advisory clients in a version of a UIT that carried significant transactional costs when another version of the same product without the fees was available.
According to the complaint, the firm violated its fiduciary duty to its clients not only by charging them avoidable fees but also by failing to disclose that the unnecessary costs were paid to a broker-dealer owned by the firm, McDermott Investment Services.
The SEC claimed that the firm was “double-dipping by receiving both the advisory fees and the fees generated by the more expensive securities.”
The CEO and the firm were reportedly liable for fraud against their investment advisory clients, according to the SEC.
Investment advisors are required to uphold their fiduciary duties to act in their client’s best interest. They must seek the best execution of client transactions, and disclose all material facts relating to potential conflicts of interest.
Potential Lawsuits to Recover Financial Losses
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Tags: fiduciary duty, McDermott Investment Advisors, securities fraud attorneys, UIT fees Last modified: December 6, 2022