Recently, the US Securities and Exchange Commission (SEC) brought an enforcement action against a registered investment adviser alleging fraud based on purported non-compliance with investment advisory agreement provisions involving fee calculations.

• The SEC, through both its examination and enforcement divisions, continues to be active in scrutinizing practices of registered investment advisers, despite news media accounts of retrenchment at the SEC;
• Discrepancies and inconsistencies between terms of an investment advisory agreement with a client and actual practice by the investment adviser may be viewed by the SEC as fraud;
• Where there may be differing interpretations over contractual provisions, the SEC is likely to accept the interpretation that is most favorable to investment advisory clients;
• The SEC particularly scrutinizes non-compliance with contractual terms involving fees and expenses and involving conflicts of interest; and
• Investment advisers should have ongoing compliance monitoring to reasonably ensure that their operations and practices comply with material contractual terms of their investment advisory agreements.

On July, 31 2026, the SEC instituted a settled enforcement action (announced in this news release) against a New York-based investment adviser, Papamarkou Wellner Asset Management, Inc. (“Papamarkou”), for failing to comply with the terms of its advisory agreements relating to advisory fee calculations, providing disclosures to clients that were materially inconsistent with the firm’s actual advisory fee offset practices, and failing to implement certain written compliance policies and procedures.

According to the SEC order, Papamarkou, a registered investment adviser with approximately USD 358 million in assets under management, primarily provides investment advisory services to high net-worth retail clients. Papamarkou offered its services to its advisory clients pursuant to a standardized investment advisory agreement that governed the terms and conditions of its services and fees.

The SEC alleged that Papamarkou calculated and charged client fees in a manner inconsistent with its advisory agreements and the firm’s Form ADV Part 2A disclosures. According to the SEC, contrary to the terms of these documents, Papamarkou did not deduct from client advisory fees a portion of the compensation its affiliated broker-dealer received from six third-party private fund managers. The non-compliance also created a conflict of interest in light of an incentive, in the form of higher fees, to recommend investments to the six fund managers. As a result, the SEC found that Papamarkou negligently violated the antifraud provision of the Investment Adviser Act of 1940 in addition to compliance provisions of the Act.

The settlement resulted in disgorgement, prejudgment interest and a civil penalty totaling USD 488,959.05.

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