SEC orders Snowden Capital to pay more than $364,000 over undisclosed revenue conflicts

The U.S. Securities and Exchange Commission announced settled charges on 30 October against Snowden Capital Advisors LLC. The case centres on revenue received by an affiliated broker-dealer from margin lending and cash-sweep arrangements, and on language in retail advisory agreements that purported to restrict the adviser’s liability. The order is a finding in a settled administrative proceeding; Snowden Capital consented without admitting the SEC’s substantive findings.[1]

From at least February 2018 through March 2023, according to the SEC, Snowden Capital failed to disclose that its brokerage affiliate marked up interest on customer margin balances and received compensation through its clearing firm. Some of the customers with margin accounts were also the adviser’s clients, creating an incentive that belonged in the adviser’s conflict disclosures. The SEC separately identified incomplete disclosure of payments based on clients’ cash invested in sweep money-market funds from February 2018 through June 2020.[1]

The economics ran through a different legal entity

For broker-affiliated wealth managers, the important feature is not simply that a clearing firm or broker earned revenue. The conduct identified by the SEC was the failure to give advisory clients a full and fair account of the associated conflicts. A client could compare an investment recommendation without seeing how a separately incorporated affiliate benefited from margin financing or cash balances; the common ownership therefore matters even when account documentation names different entities.[1]

The SEC also examined a hedge clause in advisory agreements used from at least July 2019. It found that, read as a whole, the language could discourage retail advisory customers from asserting rights that cannot be waived. The firm adopted internal policies in June 2023 prohibiting misleading clauses but, according to the order, did not revise its existing agreements. That illustrates why a written compliance policy and the contractual documents actually issued to clients are different items to inspect.[1]

Outcome and limits

The settlement includes a censure, a cease-and-desist order, $226,316.99 in disgorgement, $38,273.31 in prejudgment interest and a $100,000 civil penalty. The SEC says the monetary relief will be distributed to affected clients; it does not give an individual compensation calculation in the announcement. The case is a specific settled enforcement outcome, not a determination that all revenue-sharing arrangements or margin markups are prohibited.[1]

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