The Securities and Exchange Commission today announced that BB&T Securities has agreed to return more than $5 million to retail investors and pay a $500,000 penalty to settle charges that a firm it acquired misled its advisory clients into believing they were receiving full service brokerage services in-house at a discount while significantly less expensive options were available externally.
According to the SEC’s order, Valley Forge Asset Management used misleading statements and inadequate disclosures about its brokerage services and prices to convince customers to choose the in-house broker. Despite promises of a high level of service at a low cost, the SEC’s order finds that Valley Forge did not provide any additional services to advisory clients using its in-house brokerage than it did to advisory clients who chose other brokerages with significantly lower commission rates. According to the order, Valley Forge charged commissions averaging roughly 4.5 times more than what clients would have paid using other brokerage options, and the firm obscured the price difference by claiming that it was giving clients a 70 percent discount off of its supposed retail commission rate.
“Valley Forge put its own interests ahead of its advisory clients, causing them to spend more money unnecessarily by portraying inaccurate costs and benefits of using its in-house brokerage,” said Kelly L. Gibson, Associate Director of Enforcement in the SEC’s Philadelphia Regional Office. “Dual registrants and advisers with affiliated broker-dealers must accurately disclose all conflicts of interest arising from their brokerage arrangements. The SEC’s examination and enforcement programs will