The Securities and Exchange Commission announced fraud charges against a Maryland-based financial services firm and its founder/CEO for “grossly inflating” its assets under management on a radio talk show and on Facebook.
The SEC Enforcement Division alleges that Dawn J. Bennett frequently touted to customers and "more broadly" on her paid radio program, "Financial Myth Busting With Dawn Bennett," that highly profitable investment returns generated by Bennett Group Financial Services placed it in the “top 1%” of firms worldwide without disclosing that the returns were calculated for a model portfolio and not based on actual investor performance.
Bennett Group Financial Services is located just outside Washington, D.C.
The SEC Enforcement Division further alleges that Bennett and her firm claimed to be managing more than $2 billion in assets when “the real number was no more than one-fifth of that amount.”
During at least 18 radio programs aired in 2010 and 2011, Bennett falsely claimed that she and Bennett Group managed assets ranging from $1.5 billion to more than $2 billion, the SEC states. However, “Bennett and Bennett Group never actually provided any form of management for assets exceeding approximately $407 million.”
Sharon Binger, director of the SEC’s Philadelphia Regional Office, said in a statement that the SEC alleges that “in a calculated effort to inflate their profile and prestige, Bennett and her firm overhyped the amount of assets they manage for customers and the actual returns on their investments.”
The investing public, Binger said, “is entitled to a level of confidence that information they receive about brokerage and advisory services is accurate, and this case shows that so-called financial experts on the radio are often merely advertisers who may not be doing so truthfully.”
The SEC says the matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate.
The SEC’s Enforcement Division alleges that Bennett and her firm made “material misstatements and omissions from at least 2009 to February 2011” in hopes of attracting new clients to their fledgling investment advisory.
Said the SEC: “Knowing that their misstatements would be factored into rankings of independent financial advisors, Bennett and her firm falsely claimed in three submissions to a media organization that they managed assets of $1.1 billion to $1.8 billion.”
As a result, the SEC states, a media organization ranked Bennett fifth in the category of “Top 100 Women Financial Advisors” and second in its listing of the “2011 Top Advisors” in Washington. Bennett and her firm touted these distinctions to existing and prospective clients.
During the show, “Bennett touted Bennett Group and its services on the radio and promoted the show to existing and prospective customers by adding references to ‘our highly regarded weekly talk radio program’ to proposal packages prepared for them."
The SEC further alleges that Bennett and Bennett Group also made fraudulent claims about managed assets on the Facebook page they maintained for the radio program.
During the SEC’s investigation, Bennett and her firm made additional false statements in an effort to substantiate their prior fraudulent claims about the assets they managed.
Both Bennett and her firm also “falsely asserted that they gave advice about short-term cash management to three corporate clients regarding more than $1.5 billion in corporate assets,” the SEC says. “In reality, they never provided such advice.”
Bennett also “touted Bennett Group’s investment returns and performance during her 'Financial Myth Busting' radio programs without disclosing that the returns were calculated for a model portfolio," the SEC says. "A significant portion of customer accounts were not invested in accordance with the model.”
According to FINRA Broker Check, Bennett has been a registered rep with Western International Securities since late-2009.
Prior to this affiliation, she was with Royal Alliance (2006-2009), Citigroup Global Markets (1996-2006), Legg Mason (1996-2006) and Wheat First Securities (1987-1996).
She has three pending customer disputes and two resolved compliance matters.
One pending dispute dates to July 14, 2015, and involves a client who alleged that the portfolio lacked diversification from November 2010 to May 2014; this individual is requesting nearly $17,000 in damages. A second pending case concerns a dispute filed in late-March 2015 by a client who alleges misrepresentation, which Bennett denies.
The third pending matter dates to April 2014. In this case, a client says certain transactions “violated a breach of duty and negligence” from May 2010 to November 2013 and is asking for $850,000 in damages. Bennett denies the allegations and says they are without merit, stating: “The records reflect the customer authorized the transactions.”
In early-2013, a client was granted $100,000 in damages from Bennett after requesting $1.6 million. The client, a non-practicing attorney, alleged the advisor “violated a duty owed to her,” the FINRA records state, “despite her approval on all transactions in her [non-discretionary] accounts during the period 2006-2012.” The advisor denied the claim its entirety.
Also in early-2013, a client received $200,000 in damages from Bennett after asking for $1.9 million. In this instance, the advisor says, the client was a CPA and head of a private-equity firm. The client alleged “breach of various duties arising from ‘unsuitable’ transactions’ from 2010-2012,” the FINRA records explained.
Bennett explained that this customer “admitted … to never opening a single confirmation or monthly statement.” Furthermore, “Under oath, the co-founder of his company contradicted claimant’s assertions of being unaware of his trading activity over seven years of investing,” the FINRA records stated.
In mid-1995, Bennett was involved in a dispute in which clients requested $1.12 million and was granted $450,000. The clients said the margin-trading accounts’ records were “misrepresented” and “excessively traded.” Plus, the margin account’s maintenance “was unsuitable given the magnitude of losses and suffered therein.”
On her part, the advisor – who did not admit any liability – settled, noting that the clients involved “are extremely sophisticated and experienced investors and business persons who maintained accounts in excess of $5 million with the firm … Clients’ claims for damages include mostly unrealized losses caused solely by market declines in mid-1994 and not by any action” of the advisor, according to FINRA records.
Bennett, who did not return requests for comments as of press time, has served as a contributing author to several advisor-focused trade publications.
Janet Levaux contributed to this article.