First Enforcement Action under New Fiduciary Rule

Posted on May 26th, 2016 at 3:29 PM
First Enforcement Action under New Fiduciary Rule

From the Desk of Jim Eccleston at Eccleston Law LLC:

In its first action brought forth under the new fiduciary requirement for municipal advisers, the SEC has charged a municipal adviser, its CEO, and two employees for their roles in failing to disclose a conflict of interest in breach of their fiduciary duty to their municipal client.

The SEC alleged that Central States Capital Markets took the place of the municipal adviser to a municipal entity which held bond offerings in 2011, according to a settled administrative proceeding announced in March. Employees Mark Detter and David Malone, working under CEO John Step, arranged for the offerings to be underwritten by the broker-dealer where all three of the named persons were registered as representatives.

In the municipal offering, Central States collected municipal adviser fees from its client in addition to 90% of the underwriting fees from the broker-dealer serving as the underwriter. Further, both Detter and Malone received commissions from Central States for the municipal advisor and underwriting services they performed.

Central States allegedly failed to disclose to its municipal client the conflict of interest created by its relationship to the underwriter and the financial benefit resulting from the dual roles. Central States, Detter, Malone, and Stepp agreed to the terms of a settlement without admitting or denying the allegations and consented to the entry of cease-and-desist orders and to the payment of civil penalties of $85,000, $25,000, $20,000, and $17,500, respectively.

Additionally, Central States agreed to pay $289,827.80 in disgorgement and prejudgment interest. Detter and Malone both agreed to a suspension from the financial services industry for a minimum of two years for Detter and one year for Malone. Stepp was suspended from acting in a supervisory role with any broker-dealer, investment adviser, or municipal adviser for six months. 

The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: Eccleston, Eccleston Law, Eccleston Law LLC, James Eccleston, SEC

Return to Archive



I am so blessed to have you and your dynamic team defending me. Your ethics, forward thinking and strategies are amazing.  You guys are the best group of attorneys in the country that I could hire to handle this complicated case.

Cindy C.


September 22, 2023
State Regulators Maintain Opposition to FINRA's Remote Supervision Pilot Program

The North American Securities Administrators Association (NASAA) and the Public Investor Advocate Bar Association (PIABA) has consistently opposed the Financial Industry Regulatory Authority's (FINRA) proposal for a voluntary three-year pilot program for remote inspections.

September 21, 2023
SEC Charges Private Equity Firm Over Fee Disclosure Failures to Affiliate

The Securities and Exchange Commission (SEC) has charged Prime Group Holdings LLC, a private equity firm specializing in alternative real estate asset investments, with
inadequate disclosure of millions of dollars in real estate brokerage fees paid to a brokerage firm owned by its CEO.

September 20, 2023
SEC Orders Legendary Capital Founder and REIT Advisors to Pay Nearly $5 Million

Corey Maple, co-founder of non-traded REIT sponsor Legendary Capital, has agreed to a $100,000 civil penalty to settle charges brought by the Securities and Exchange Commission (SEC).