A Franklin, Tennessee RIA with $1.1 billion in assets under management and advisement, along with its principal officer and an advisor at the firm, have been charged with failing to disclose conflicts of interest, the Securities and Exchange Commission said Tuesday.
In a complaint filed Friday in U.S. District Court for the Middle District of Tennessee in Nashville, the SEC claimed CapWealth Advisors; Timothy J. Pagliara, its founder, chairman and chief investment officer; and Timothy R. Murphy, an advisor at the firm and managing director of wealth management, did not adequately disclose conflicts of interest related to their mutual fund share class selection practices.
Pagliara was named the top advisor in Tennessee by Forbes and Barron’s in 2020, with a minimum account size for new business of $750,000, custodied team assets of $836 million and a typical size of household accounts ranging from $1-$30 million.
“We do not negotiate with regulatory thugs that harass our clients, who to a person back our efforts to provide cost-effective professional advice and financial services,” Pagliara told ThinkAdvisor on Wednesday.
Pagliara singled out a claim on page 22 of the complaint that he alleged “illustrates the frivolous nature of these charges.” The SEC said there were a total of 95 instances “where we collectively overcharged clients $6,800 out of” $18 million in revenue the 2016-2018 period, he noted.
“Unlike some in the industry who [choose] to settle these rulemaking enforcement claims, we choose to fight and look forward to our day in court,” he added.
The SEC’s complaint alleged that, from at least June 2015 until June 2018, the defendants “failed to disclose adequately the material conflicts of interests with respect to the 12b-1 fees Pagliara and Murphy received, through CapWealth’s affiliated broker-dealer, from their advisory clients’ investments in mutual funds.”