The Securities and Exchange Commission (SEC) announced today settled charges against Snowden Capital Advisors LLC, a registered investment adviser, for breaches of its fiduciary duty to its retail advisory clients by failing to fully and fairly disclose its conflicts of interest involving its affiliated broker-dealer’s receipt of revenue sharing compensation and for including liability disclaimer language that contained misleading statements in its retail advisory agreements.

According to the SEC’s order, from at least February 2018 through March 2023, Snowden Capital made no disclosure to its advisory clients that its affiliated broker-dealer was marking up the margin interest rates and receiving those amounts as compensation from its clearing firm for margin balances in its brokerage customers’ margin accounts.

The order finds that, although some of the brokerage customers were also Snowden Capital’s advisory clients, Snowden Capital also did not disclose the actual and potential conflicts of interest related to the compensation received by its affiliated broker-dealer.

The SEC’s order further finds that, during the period from February 2018 through June 2020, Snowden Capital did not provide full and fair disclosure regarding its conflicts of interest associated with the revenue that its affiliated broker-dealer received from its clearing firm based on the assets of Snowden Capital’s advisory clients invested in cash sweep money market funds.

The SEC’s order finds that, from at least July 2019, Snowden Capital used a hedge clause in advisory agreements with its retail clients containing language that purported to limit Snowden Capital’s liability. According to the SEC’s order, the language of the hedge clause, when read in its entirety, is inconsistent with an adviser’s fiduciary duty because it may mislead Snowden Capital’s retail advisory clients into not exercising their non-waivable rights. The SEC’s order also finds that Snowden Capital failed to revise its client agreements despite adopting, in June 2023, written policies and procedures prohibiting client agreements from containing a hedge clause that was likely to mislead a client regarding Snowden Capital’s liability.

The SEC’s order finds that Snowden Capital willfully violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder.

Without admitting the SEC’s findings, Snowden Capital consented to a cease-and-desist order, a censure, payment of $226,316.99 in disgorgement and $38,273.31 in prejudgment interest, and a civil penalty of $100,000. The ordered monetary relief will be distributed to affected clients.