Improper Disclosure: BB&T to Return $5+ Million to Retail Investors and Pay Penalty

BB&T Securities, a brokerage subsidiary of BB&T Corp., has settled with the Securities and Exchange Commission (SEC) over charges that a firm it had acquired misled clients and overcharged them for advisory services.


According to the charges, Valley Forge Asset Management, acquired by BB&T in 2015 from Susquehanna Bancshares Inc., persuaded roughly 1,200 clients to use their in-house brokerage services by making false claims of providing “full-service brokerage services.”

Misleading Statements and Improper Disclosures Lead to Charges

From at least 2013 until 2016, Valley Forge Asset used misleading statements and inadequate disclosures to suggest that clients would receive a high level of service at a low cost.

However, Valley Forge Asset failed to provide any additional services to advisory clients using their in-house brokerage services compared to clients using outside brokerages charging significantly lower commission rates and fees.

Per the SEC’s order, Valley Forge charged commissions roughly 4.5 times more than what clients would have paid at other brokerage firms, while obscuring the price difference with claims that clients were receiving a 70% discount off retail commission rates.

Significant Penalties for BB&T Securities

According to Kelly Gibson, associate director of enforcement in the SEC’s Philadelphia regional office:

“Valley Forge put its own interests ahead of its advisory clients, causing them to spend more money unnecessarily by portraying inaccurate costs and benefits of using its in-house brokerage.”

The SEC has ordered that BB&T Securities, as the successor in interest to Valley Forge, violated Sections 206(2) and 207 of the Investment Advisers Act of 1940.

BB&T agreed to pay $4.7 million in disgorgement to retail investors, roughly $500,000 in interest, and a $500,000 penalty to settle charges handed down by the SEC, while neither admitting nor denying the findings.

Additionally, BB&T Securities has amended Valley Forge’s existing directed brokerage program, including its cost structure and disclosures.

Read the full SEC press release here.

Accurate Disclosure Required to Avoid Conflict of Interest

Associate Director Gibson made another statement about the lessons to be learned from the BB&T charges:

“Dual registrants and advisers with affiliated broker-dealers must accurately disclose all conflicts of interest arising from their brokerage arrangements. The SEC’s examination and enforcement programs will continue to identify these types of violations and return money to harmed retail investors as quickly as possible.”

Firms must be sure they have robust policies and procedures in place to test and review their directed brokerage services in order to ensure clients are not misled or being forced to pay unfair costs for services.

Accurate and full disclosure regarding the comparative benefits and associated costs of having an account at an affiliated agency must be clearly made to avoid conflicts of interest.

The SEC is making it clear that these actions will not be tolerated.

Questions Regarding Disclosure? — Contact Us for Help

The consultants at Core Compliance & Legal Services, Inc., have extensive experience in the investment advisory industry and can help you to understand the complexities of disclosure at all levels.

For assistance with any and all disclosure needs, contact us here.

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