A New York-based advisor and two of its former managers have been sued by the SEC for allegedly defrauding hundreds of clients — most of them British expatriats — by charging them millions of dollars in undisclosed fees.

The SEC has struck a deal with deVere USA Inc. (DVU) under which the firm will pay an $8 million civil penalty, which will be used to create a "Fair Fund" for victims of the fraud. The SEC said it has filed an additional civil suit in U.S. District Cout in Manhattan against two former firm managers, including the firm's former CEO, who carried out the fraud.

Benjamin Alderson, the former CEO and a U.K. citizen who resides in the Bahamas, and Bradley Hamilton, a citizen and resident of the U.K., and a former DVU New York area manager, are accused of orchestrating a scheme that targeted hundreds investors through the social media platform LinkedIn. The pair targeted mostly British expatriats living in the U.S. who had U.K.-based pensions, most of them in accounts valued at 100,000 pounds ($133,000) or more, from former jobs they held in the country, the SEC said.

From June 2013 to March 2017, Alderson and Hamilton reaped millions in undisclosed commissions by convincing these clients to transfer their U.K. pensions to an offshore plan called a "Qualifying Recognised Overseas Pension Scheme" (QROPS), the SEC said. In doing so, the agency said, the advisors violated their fiduciary duties by failing to disclose the lucrative commissions they received for the transfers, and for failing to inform clients of further losses they could sustain from the transfer.

The SEC noted that between June 2013 and March 2016, Alderson and Hamilton generated $2.6 million and $2.1 million, respectively, in undisclosed compensation from the transfers, and were the top two revenue generators at the company during the time of the scheme. Most of their profits came from an upfront commission, equivalent to 7 percent of the value of each pension, that was paid to DVU for each transfer and then split with the representatives, according to the SEC.

"When clients and prospective clients asked about fees or how [Alderson and Hamilton] were renumerated, defendants misleading referred to a 1 percent advisory fee, while purposely omitting mention of the 7 percent upfront commission or their share thereof," the SEC said in the complaint.

The agency cited one instance in July 2014: "When trying to convince an existing client to agree to pay the 1 percent AUM fee or some portion thereof, Alderson falsely stated to the client that, 'We are taking zero fee revenue from [your] account."

Alderson and Hamilton also lied about the benefits of the QROPS, telling prospective clients that it provided access to 15,000 securities when it actually only offered less than 100, the SEC said. They also misled clients about the tax benefits of the QROPS, failing to disclose that a QROPS transfer could be a taxable event in the U.S. and falsely stating that the transfers were not viewed as taxable by the IRS, the SEC said.

"Defendants instructed and trained other DVU [representatives] to make similar misrepresentations and omissions to potential clients regarding tax treatment," the SEC said in the complaint.

Alderson, as CEO, also submitted false filings to the SEC that failed to disclose the commissions, the SEC said.

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