On March 5, 2019, the U.S. Securities and Exchange Commission (the “SEC”) announced that BB&T Securities had agreed to a $5.7 million settlement with the SEC. According to the regulatory agency, BB&T encouraged clients to pay for “full-service brokerage services in-house” through misleading statements and inadequate disclosures when external, less expensive options were available.
BB&T has agreed to return $4.7 million to retail investors, pay nearly $500,000 in interest and pay a $500,000 penalty to settle the charges. At the center of the dispute was an investment advisor called Valley Forge Asset Management, a company acquired by BB&T in the 2016 takeover of Susquehanna Bank. Valley Forge allegedly charged clients significantly higher commissions for in-house services that they could have obtained at an outside brokerage firm for a much lower rate. Valley Forge claimed to be giving a substantial discount to retail investors when clients were in truth paying commissions up to 4.5 times higher than they would have if they used an external brokerage firm.
The company was previously fined for failing to disclose material conflicts of interest adequately. In September 2018, the SEC announced charges against BB&T Securities for failing to reveal details of a compensation agreement between the company and an affiliated adviser. BB&T was ordered to pay a civil penalty of $100,000.
In both BB&T cases, the SEC found that BB&T violated Sections 206(2) of the Investment Advisers Act of 1940. In the present case, the company was found (as Valley Forge successor) to have also violated Section 207 of the same act. According to the SEC Press Release, BB&T has “has ended Valley Forge’s existing directed brokerage program by amending its cost structure and disclosures.”