South Florida Arbitration & Litigation Lawyer Blog
In the Matter of Tilden Loucks & Woodnorth, LLC, Lasalle St. Securities, LLC, and Ralph B. Loucks
Recently, the Securities and Exchange Commission, (“the Commission”) issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (the Order) against Tilden Loucks & Woodnorth, LLC (Tilden), an investment adviser registered with the Commission, LaSalle St. Securities, LLC (LaSalle), a broker-dealer registered with the Commission, and Ralph B. Loucks (Loucks), a former senior vice president of Tilden who is a registered representative of LaSalle. The Order finds that, from October 1, 2007 through March 22, 2012, Tilden obtained undisclosed compensation by charging increased commissions on trades for its clients through its affiliated broker-dealer, LaSalle. The Order also finds that Tilden failed to seek best execution for its clients’ securities transactions and made misleading statements in its Forms ADV concerning the steps it would take to evaluate execution of client trades and ensure that commission rates were reasonable.
Specifically, the Order finds that most trades for Tilden’s clients are executed by LaSalle. From October 1, 2007 through March 22, 2012, Tilden’s clients paid commissions at LaSalle that averaged more than $143 per trade, even though the majority of trades consisted of buys and sells of large cap equities. Tilden did not tell its clients the true nature of the commissions it charged by stating in its Forms ADV that clients obtained a significant “discount” to LaSalle’s scheduled retail brokerage charges. However, LaSalle had no scheduled retail brokerage charges or commission schedules. Instead, unbeknownst to Tilden’s clients, Tilden set LaSalle’s commission charges at rates exceeding LaSalle’s charge to Tilden to execute a trade and the “discount” was in reality only a price lower than those reflected on a commission schedule supplied by Tilden that dated to at least 1988. Tilden’s undisclosed compensation practices netted it more than $186,000 in higher commissions paid by advisory clients. Ralph B. Loucks (“Loucks”), Tilden’s former senior vice-president, who also served as a registered representative of LaSalle, shared in these commissions.
The Order finds that Tilden willfully violated Sections 206(2) and 207 of the Investment Advisers Act of 1940 (Advisers Act); Loucks caused Tilden’s violations of Section 206(2) of the Advisers Act and willfully caused Tilden’s violations of Section 207 of the Advisers Act; and LaSalle, through Loucks, caused Tilden’s violations of Section 206(2) of the Advisers Act. Without admitting or denying the Commission’s findings, Tilden, Loucks and LaSalle agree to cease and desist from committing or causing any violations and any future violations of these provisions. Further, Tilden and LaSalle agree to jointly and severally disgorge $170,319.94 in ill-gotten gains and to pay prejudgment interest of $16,531.06, and Tilden, LaSalle and Loucks agree to jointly and severally disgorge $16,288.18 in ill-gotten gains and to pay prejudgment interest of $1,579.43. Additionally, Tilden agrees to be censured, pay $100,000 in penalties, and undertake within thirty days to: (1) revise its Form ADV to disclose its compensation structure, how commissions charged to its clients by LaSalle are determined and the amounts LaSalle charges Tilden to execute trades; (2) provide the revised Form ADV to its clients; and (3) provide a copy of the Order to its clients. Further, LaSalle agrees to pay $100,000 in penalties and Loucks agrees to be censured and pay $25,000 in penalties.
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