(HedgeCo.Net) The Securities and Exchange Commission has filed charges against Brite Advisors USA, Inc. (f/k/a deVere USA, Inc.) (“Brite USA”), a NY-based SEC-registered investment adviser, for failing to comply with Commission requirements for the safekeeping of client assets and for failing to disclose material risks and conflicts of interest associated with Brite USA’s recommendations to clients to use a related firm in Australia as a custodian.
Brite USA has been registered with the Commission as an investment adviser since 2013. The SEC’s complaint, filed in United States District Court for the Southern District of New York, alleges that Brite USA advises nearly $400 million of client assets maintained by Brite Advisors Pty Ltd. (“Brite Australia”), an Australian financial services company under common control with Brite USA. Registered investment advisers that have custody of client assets are subject to the “custody rule,” which requires that if a related person maintains client funds or securities, the investment adviser must obtain an internal control report as to the safeguarding of client funds and securities. The SEC alleges that since 2019, when Brite USA began having a related firm, Brite Australia, maintain its clients’ assets, it failed to comply with the SEC’s custody rule.
In addition, the SEC’s complaint alleges that Brite USA breached its fiduciary duties to its clients by failing to fully and fairly disclose the material risks and conflicts of interest resulting from Brite Australia’s use of clients’ assets. According to the SEC’s complaint, Brite Australia borrowed millions of dollars using client assets as collateral to provide operational funding to Brite USA and other related companies.
For these alleged violations, the SEC’s complaint charges Brite USA with violating Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2 thereunder and seeks permanent injunctive relief and civil monetary penalties.