Adviser, Firm Challenging SEC Judges Face Fines

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By Rob Tricchinelli

July 11 — Dawn Bennett, an investment adviser who protested an SEC enforcement action by not showing up, and her firm were hit with multimillion dollar penalties by an agency judge ( In re Bennett Grp. Fin. Srvs., LLC, SEC, Admin. Proc. File No. 3-16801, initial decision of default 7/11/16 ).

Bennett overstated the firm's assets under management in magazines and on the radio, and misstated the firm's profitability, then tried to cover it up once the Securities and Exchange Commission began investigating, Administrate Law Judge James E. Grimes found in a July 11 initial decision of default.

‘More Successful Players.'

They overstated assets to give the impression they “were larger and more successful players in the industry than was actually the case,” Grimes found.

Bennett and her firm, Bennett Group Financial Services LLC, didn't participate in the hearing that preceded the decision, but the SEC's Enforcement Division called 11 witness and introduced more than 300 exhibits.

Gregory Morvillo of Morvillo LLP, Bennett's attorney, didn't return a message seeking comment.

Grimes ordered Bennett and the firm to pay $556,000 in disgorgement. Bennett got slapped with a $600,000 civil penalty, with another $2.9 million penalty for the firm.

Constitutional Challenge

Bennett is also challenging the constitutionality of the in-house courts in federal court, claiming that the judges are hired in violation of the Appointments Clause.

She didn't succeed in halting the administrative proceeding during that challenge but argued in the U.S. Court of Appeals for the Fourth Circuit in February that her “time-honored right to see a federal judge and assert that the proceeding is unconstitutional” was being stifled (30 SLD, 2/16/16).

The Second, Seventh and D.C. Circuits have rejected similar challenges, holding that the respondent must wait until the SEC's administrative proceeding concludes, with an opinion from the commission as well, to bring the constitutional claims (108 SLD, 6/6/16).

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

For More Information

For the initial decision, visit https://www.sec.gov/alj/aljdec/2016/id1033jeg.pdf

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