A Chicago-based investment advisory firm is facing serious allegations from the Securities and Exchange Commission (SEC) for allegedly extracting millions in unauthorized fees from client accounts, most of which belonged to individuals of Filipino descent. The charges highlight critical lapses in billing transparency, client trust, and the misuse of custodial access.
According to the SEC complaint, the firm and its CEO—who also served as chief compliance officer—allegedly billed over $2.5 million in undisclosed and unapproved fees across more than 220 client accounts from early 2019 to mid-2023. Many of the affected clients resided in the U.S. or the Philippines and were targeted due to their shared heritage and trust in the firm’s outreach.
How Did It Happen?
The SEC alleges that the firm manipulated billing systems at two separate brokerage platforms to extract fees far beyond the 2%–2.4% AUM advisory rate disclosed in client agreements. Some clients were charged as much as 7% of AUM, tripling the agreed rate.
At one brokerage, the firm is said to have:
- Accessed client accounts without permission
- Reset quarterly fee caps without the client’s knowledge
- Circumvented multi-factor authentication
- Rerouted security codes to devices under their control
- Approved their own fee increases while posing as the client
In some cases, both the fee request and the supposed client “approval” originated from the same IP address, signaling fraudulent self-dealing. At a second brokerage, the firm allegedly violated the agreed-upon billing schedule by overcharging both in frequency and amount, resulting in more than $100,000 in additional fees.
In total, the firm collected over $3.3 million in client fees during the reviewed period, with at least $2.9 million allegedly diverted into the CEO’s personal bank account.
What’s Next?
The SEC is seeking:
- Permanent injunctions
- Disgorgement with prejudgment interest
- Civil penalties
- A conduct-based injunction against the firm’s executive
The situation underscores growing concerns around internal controls, billing oversight, and custodial access abuses, particularly in smaller advisory firms where the same individual may wear multiple hats — CEO, CCO, and billing administrator.
Compliance Takeaway: Preventing Billing Misconduct Starts with Oversight
This case illustrates how unchecked control over client accounts and billing systems can result in serious breaches of fiduciary duty — and regulatory consequences. To safeguard your firm and protect clients, compliance professionals should consider the following best practices:
- Segregate Roles and Responsibilities:
Avoid concentrated authority by separating key roles such as billing, account access, and compliance oversight. No single individual — including firm leadership — should control the full billing process from setup to execution without checks in place. - Implement Dual Authorization for Fee Changes:
Require a second layer of approval for any adjustments to fee schedules, billing caps, or custodial account settings. Ideally, changes should trigger alerts to both clients and a designated compliance officer. - Review Custodial Access Controls:
Regularly audit who has access to client credentials, especially in cases where advisors assist with account setup. Custodial login details should never be retained by the firm, and all multi-factor authentication methods should be client-controlled. - Conduct Periodic Billing Audits:
Run internal or third-party audits at least annually to verify that actual billed fees match disclosed rates and agreed schedules. These reviews should include a sampling of accounts across custodians, looking for anomalies in frequency or percentage of assets billed. - Reinforce Ethical Culture:
Train all staff — especially those in billing, operations, and compliance — on the importance of fiduciary duty, client consent, and the reputational damage that can result from even perceived misconduct.
By proactively addressing these areas, firms can reduce their exposure to billing-related enforcement actions and foster a stronger culture of transparency and trust.
