The Department of Labor has reached a settlement with an Iowa-based investment advisor over investment recommendations he, his firms and former employees made and the resulting fees and commissions charged to pension plans.
In addition, the SEC has charged brokerage firm executives in connection with a kickback scheme to bring in business from a Venezuelan bank, and FINRA has censured and fined firms over anti-money laundering and written supervisory procedure failures and censured and fined Banesto Securities for custody fee failures.
Iowa Advisor, Firms and Former Employees Repay 68 Pension Plans
As part of a settlement with the Department of Labor, Iowa-based investment advisor Donald Gene DeWaay Jr. has paid $341,487 to 68 Employee Retirement Income Security Act-covered pension plans. An investigation by DOL’s Employee Benefits Security Administration found violations of federal law in investment recommendations made and fees and commissions received by DeWaay, entities he owns and former employees.
DeWaay owns or owned three companies based in Johnston: DeWaay Capital Management Inc., an investment advisory firm; DeWaay Benefit Administrators LLC, an employee benefit plan administrator; and DeWaay Financial Network LLC, a now defunct full-service brokerage company.
The violations occurred between May 2007 and November 2011. EBSA investigators found that DeWaay’s companies and advisors not only charged higher fees than those agreed to by their clients, but in addition, recommendations made to clients also resulted in DeWaay, his companies and former employees receiving third-party commissions. DeWaay has also agreed to pay up to an additional $212,727 over the next five years to other ERISA plans he managed.
Under the terms of the settlement, DeWaay and four investment advisors he employed, Joshua Cross, Paul Espey, Andrew Kleis and Brenton Collins, have agreed moving forward to disclose to ERISA plan clients whether they will act as fiduciaries to those plans.
The investment advisors and companies will also provide their ERISA plan clients a description of all investment or transaction compensation and fees received, regardless of its source or form. They have also agreed that either they will not collect commissions from third parties or, if they do, will refund 100% to their ERISA plans clients. DeWaay also agreed to be removed as trustee of the DeWaay and Associates Inc. 401(k) Profit Sharing Plan, and to no longer serve or act as a fiduciary or service provider to the plan.
SEC Charges Brokerage Firm Execs in Venezuelan Bank Kickback Case
The SEC has taken additional action in the ongoing kickback scheme that was designed to win the bond business of a state-owned Venezuelan bank.
According to the agency, two executives at New York City-based brokerage firm Direct Access Partners (DAP) were integral participants in the wide-ranging fraud. Benito Chinea, a cofounder and CEO of the firm, and Joseph DeMeneses, who was DAP’s managing partner of global strategy, put together sham actions to cover up multimillion-dollar kickback payments to a high-ranking Venezuelan finance official of the bank.
In just one part of the scheme, DeMeneses made kickback payments from funds he controlled to a shell entity controlled by the Venezuelan official, and Chinea arranged for the firm to reimburse DeMeneses. The SEC filed an amended complaint to include these allegations in the action already pending against five other DAP-connected individuals who have already been charged for their part in the plot. Chinea and DeMeneses were also charged by the U.S. Attorney’s Office for the Southern District of New York and the U.S. Department of Justice’s Criminal Division in a parallel criminal action.
The SEC is seeking disgorgement of ill-gotten gains plus interest and financial penalties against Chinea, who lives in Manalapan, N.J., and DeMeneses, who lives in Fairfield, Conn., as well as the five previously charged defendants with ties to DAP, which has filed for bankruptcy. The investigation is continuing.
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