Attorney General Kathy Jennings this week filed a complaint against former Delaware investment adviser Elbert C. Smalls and his investment advisory firm, Winyah Financial Services, LLC or Winyah Financial, LLC (formerly operating in Delaware as Sun Financial Services, Inc.). The complaint follows an investigation by the Investor Protection Unit (IPU), the division of the Delaware Department of Justice that oversees the registration and conduct of securities firms and professionals in the state.
The complaint alleges that Mr. Smalls and his firm charged clients unreasonably excessive fees, made misstatements to clients and regulators, and failed to maintain records in compliance with state law. In some instances, the fees charged by Smalls amounted to over thirty percent of the assets he managed for any given client annually. Although neither Mr. Smalls nor his firm are currently registered in Delaware, the complaint asserts that both continue to operate in Delaware under conditions requiring registration and oversight by the IPU.
"Protecting investors from unscrupulous financial professionals is at the core of investor protection," said Jennings. "Fees charged to clients must be reasonable, and investment advisers must live up to their fiduciary obligations not to take advantage of clients who lack familiarity with appropriate fee practices in the industry."
The IPU initiated administrative action against Mr. Smalls and his advisory firm seeking restitution for clients who paid unreasonable fees and an order for Mr. Smalls and his firm to cease operations in Delaware.
Proper registration of investment professionals is crucial as it allows regulators to monitor activity and ensure appropriate oversight of the industry and individuals. "Investment professionals may not simply choose to avoid IPU oversight by operating while unregistered," said Jennings.
For assistance checking the registration status of a financial professional or filing a complaint, contact the Investor Protection Unit at Investor.Protection@delaware.gov. The Investor Protection Unit also encourages investors to verify financial professionals' registration status at brokercheck.finra.org and adviserinfo.sec.gov.
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