Earlier this week, the Securities and Exchange Commission ordered investment advisor Raymond Lawrence Lent and his San Rafael, Calif.-based RIA firm Putney Financial Group, a sole proprietorship, to pay a settlement of about $1.1 million for alleged breaches of fiduciary duty and failure to provide accurate disclosures. Lent has accepted the terms without admitting or denying the charges.

Specifically, Lent and his firm are charged with recommending to advisory clients various variable annuities that paid up-front sales commissions of 6.8% of invested assets, on average, to Lent and the brokerage firm he co-owns, Portsmouth Financial Services, without “fully and fairly disclosing the related conflicts of interest,” according to the legal documents.

A year after purchase, clients were allegedly charged an ongoing advisory fee of some 1% of the assets per year.

At the same time, equivalent annuities without commissions and with lower ongoing fees were available, according to the charges. Yet Lent and his firm allegedly kept recommending the more expensive commission-based versions without adequately analyzing whether they were in the clients’ best interests, and without disclosing an inherent conflict of interest.

These activities, which allegedly occurred multiple times between April 2016 and October 2021, violated the firm’s “duty of care to its advisory clients,” the SEC charged.

Besides recommending expensive and self-dealing annuities, the firm is accused of having clients use cash-sweep money market funds for uninvested cash that charged revenue-sharing payments and were more expensive than other available funds of the same type. Again, the revenue-sharing payments were not disclosed to clients, according to the settlement.

Even after the SEC warned the RIA firm to disclose its potential conflict of interest from the revenue-sharing payments, it allegedly did not tell clients about the availability of equivalent, higher-yielding and lower-fee cash-sweep money market funds, nor evaluate whether these other funds would be better for clients.

The SEC said all these actions collectively violate both the Securities and Exchange Act of 1934 and the Investment Advisers Act of 1940.

According to the Financial Industry Regulatory Authority's BrokerCheck site, Lent started his career in 1976 with the Mutual Life Insurance Co. He served at several other firms before joining Portsmouth Financial Services, the broker-dealer, in 2010. In 2013, he became Portsmouth’s chairman, and Portsmouth is still an affiliate of his firm Putney LLC. Since 2010, he has settled six customer disputes, BrokerCheck reports.

In addition, in a 2019 SEC share-class settlement, Lent and his Putney RIA firm agreed to return some $40,000 to clients for alleged fee-disclosure violations. (They were among many other firms named in the settlement.)

In its most recent Form ADV, dated March 28, 2024, Putney reported having approximately $177 million in regulatory assets under management and more than 1,000 client accounts.

The SEC has instituted a cease-and-desist order against Lent and Putney for violating their duty of care and multiple compliance deficiencies. Besides paying the SEC a disgorgement of $707,129.58, prejudgment interest of $183,236.60, and civil penalties of $175,000, which can be paid in installments, they must make corrections to disclosure documents, determine whether any clients would be better served with lower cost products, and notify clients who were financially harmed by these implied conflicts of interest

Asked for comment, Lent acknowledged that he “should have been more diligent” and would “cooperate fully” with the SEC.