A California-based investment advisor failed to disclose financial conflicts, hid past disciplinary actions and used a radio program to defraud hundreds of clients, many of whom were retirees, according to charges filed by the Securities and Exchange Commission on Thursday, but the advisor has said he will challenge the commission, calling the charges "horribly unfair."
"Our complaint alleges that Springer actively targeted vulnerable retirees by misleading them about his prominence in the industry and promising to act in their best interests," Erin E. Schneider, the director of the SEC's San Francisco Regional Office, said.
The SEC accused Keith Springer, the owner of Springer Financial Advisors, with urging clients to purchase particular investment products without disclosing that he and his firm would financially benefit from the sale of those products. According to the complaint, Springer also inflated his financial expertise, calling himself an expert in managing retirement assets with a designation of “Qualified Retirement Advisor”—there is no such industry designation.
The complaint also claims that many of Springer’s clients discovered his firm through “Smart Money with Keith Springer,” a radio program broadcast throughout the Sacramento area. Springer claimed in marketing materials that he’d earned the role of host because of his financial experience, while not disclosing the fact that his firm paid for the broadcast time, according to the SEC.
Springer also produced marketing materials that falsely claimed the material had been published in leading consumer financial magazines, like Forbes and Money, according to the SEC.
In response, Springer argued that the SEC was attacking his firm for issues of conflict disclosures or record keeping that were either corrected or are in the process of being corrected, and asserted that after years of investigation, the commission had not found instances of funds being misappropriated, client complaints or lies about investments.
"I'm just an easy target for them," Springer said. "They know I don't have the resources to fight them properly. Now I know how David felt as the giant Goliath was charging at him."
The commission also accused Springer of trying to conceal past disciplinary actions, including a 1999 New York Stock Exchange decision barring Springer from membership for four years, and a 2005 cease-and-desist decision by the SEC accusing Springer of defrauding investors about a private hedge fund and for failing to disclose the 1999 charges. According to the complaint, Springer didn't provide prospects with the disclosures required about those actions, and would only sometimes provide the disclosures to clients after they signed up.
In fact, Springer’s firm spent substantial money on “multiple internet search suppression consultants” in order to keep his disciplinary history hidden when prospective clients would search his name on the internet, according to the complaint.
Springer advised clients to buy annuities without disclosing the firm had a financial interest in selling them, according to the complaint; in contrast to an asset-based management fee of 1% to 2%, the firm’s up-front commissions for selling annuities ran from 5% to 7%, in addition to other bonuses. Between July 2014 and April of this year, the firm pocketed at least $6 million in compensation and bonuses from selling annuities, a fact that was not disclosed to clients, according to the complaint.
Additionally, Springer Financial Advisors had an arrangement with an unnamed “third party asset manager” in which Springer's firm received additional compensation and bonuses from sales in addition to the established firm's flat fee charged to clients—which included fees of both the firm and asset manager—without telling clients, according to the complaint. Springer also consistently directed clients into investment portfolios in which the asset manager charged less in order to pocket the difference, according to the charges. On or around Aug. 31, 2017, the SEC claimed the asset manager confronted Springer on this point, arguing the savings in fees should go to investors.
“Springer rejected that suggestion and responded to Third Party Asset Manager in an email that same day that ‘we are keeping the difference,’” the complaint read. “Springer also instructed Third Party Asset Manager not to communicate with clients about this change.’”
According to the charges, the commission is “seeking injunctions, disgorgement of allegedly ill-gotten gains, and civil penalties.” Springer announced that it had retained the services of the law firm Orrick, Herrington & Sutcliffe LLC to represent Springer Financial Advisors from the SEC's charges.
In a recent letter to the SEC, the firm's attorneys argued the commission failed to consider Springer's "efforts to improve compliance, their exemplarry record of client service, absence of credible customer complaints and the absence of serious misconduct in the record of this investigation."