New Mexico investment advisory firm New Line Capital, LLC and its owner and managing member David A. Nagler have been charged with violations by the Securities and Exchange Commission, Advisor Hub reports.
Nagler and New Line are accused of breaching their fiduciary duties and defrauding their advisory clients by making false and misleading fee disclosures and failing to disclose related conflicts of interest.
The SEC’s complaint states that the defendants falsely disclosed that they would “take care to assure” that New Line’s annual advisory fees would not exceed 2% of a client’s assets under management. They allegedly did not take steps to hold those fees to 2% and charged numerous advisory clients more than 2%.
The SEC also alleges “that New Line and Nagler misleadingly disclosed that New Line ‘may’ offer hourly fee services when, in fact, New Line was providing such services without informing clients about those charges and without disclosing the financial conflicts of interest arising from their charging of hourly fees.” New Line and Nagler are accused of receiving at least $450,000 from improper fees charged between April 2019 and December 2024.
Furthermore, it was alleged that Nagler added hourly consulting fees without informing customers and set fees based on arbitrary factors, including how “demanding” a customer had been. “Several clients were unaware that Nagler had ever performed any work related to the subjects his notes indicate they were billed for,” the SEC alleges. “Moreover, multiple clients were surprised by the amount of time Nagler indicated in his notes that he spent on particular tasks.”
The SEC’s complaint, filed in the U.S. District Court for the District of New Mexico, charges New Line and Nagler with violating the anti-fraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The agency is seeking permanent injunctions, conduct-based injunctions, disgorgement of ill-gotten gains with pre-judgment interest, and civil penalties from both defendants.
Nagler could not be reached for comment, AdvisorHub reported.
The attorneys at Hyman Cotter PC were formerly senior attorneys in the SEC’s Division of Enforcement. We have represented clients in regulatory matters while working at Morgan Stanley and in private practice at some of the world’s largest law firms. Therefore, we understand the complexities that come with being the subject of a regulatory inquiry, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a free consultation.
