Snowden Lane Partners to Pay $364,590 Over Undisclosed Conflicts and Misleading Client Agreements
From the desk of Jim Eccleston at Eccleston Law
Snowden Lane Partners will pay $364,590 to settle Securities and Exchange Commission (SEC) charges that it failed to disclose compensation arrangements tied to client cash sweep investments and margin loans. According to AdvisorHub, the SEC also found that the firm used misleading liability disclaimers in its advisory agreements.
Snowden Lane's registered investment adviser (RIA) placed advisory clients in money market funds from February 2018 through June 2020. Those investments generated payments for the firm's affiliated broker-dealer from an unnamed clearing firm. The clearing firm characterized the payments as "distribution assistance," with compensation increasing as the assets held in the funds grew, according to an SEC order.
The SEC also found that Snowden Lane failed to disclose markups on client margin loans between 2018 and 2023.
In addition, the firm's advisory agreements contained a liability disclaimer, known as a hedge clause, that appeared at least as early as 2019. The provision limited the firm's liability for losses unless a court or arbitrator found gross negligence, willful malfeasance or a violation of law. The SEC concluded that the language could discourage clients from exercising their legal rights.
AdvisorHub reports that although the clearing firm provided clients with general disclosures about margin interest and money market fund compensation, the SEC found that those disclosures did not adequately explain the conflicts arising from Snowden Lane's cash sweep arrangements.
Snowden Lane settled the allegations without admitting or denying the SEC's findings. The firm agreed to a censure and cease-and-desist order and will pay $226,317 in disgorgement, $38,273 in prejudgment interest and a $100,000 civil penalty. AdvisorHub reports that the Commission will place the penalty in a fund for affected
The enforcement action adds to the SEC's scrutiny of conflicts involving client cash sweep programs. In January 2025, Wells Fargo and Merrill Lynch agreed to pay a combined $60 million to settle SEC charges that they failed to disclose conflicts arising from transferring client cash into sweep programs that generated greater profits for the firms.
AdvisorHub reports that the SEC has also pursued enforcement actions involving misleading hedge clauses. In January, Florida-based FamilyWealth Advisers and Texas-based FamilyWealth Asset Management settled similar charges concerning liability disclaimers in their advisory agreements.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, sec enforcement, conflict of interest, cash sweep investments, margin loans, sec settlement





