On November 1, 2022, following a five-day trial, a federal jury in Nashville returned a verdict in favor of three Bulso PLC clients on civil charges brought by the Securities and Exchange Commission. The Defendants were represented at trial by Gino Bulso. The SEC was represented by five lawyers from its Atlanta office and—following a court order that they have local counsel—from the Nashville US Attorney’s office.
In 2020, the SEC filed a complaint alleging that a middle Tennessee investment-advisor firm and two of its principals had violated the Investment Advisers Act, 15 U.S.C. § 80b-6, and its related regulations, by engaging in fraud and breaches of fiduciary duty and by failing to implement proper policies and procedures. According to the SEC, the firm and its principals had engaged in conflict-of-interest transactions and misled clients by unnecessarily investing in mutual funds that charged “12b-1 fees” (so called because the fees are authorized by SEC rule 12b-1). The firm was also charged with failing to adopt written policies designed to prevent such improper investments.
At trial, however, the Defendants showed that they had made full and adequate disclosures to clients, had discounted other fees for clients incurring 12b-1 fees to offset those, and that their approach was designed to (and did) maximize tax efficiency for clients.
The jury agreed, finding after five hours of deliberation that neither the firm nor either of its principals had misled any client in violation of the Investment Advisers Act and that the firm had not failed to implement appropriate written policies.
The case is one of a long string of actions the SEC has brought in recent years charging advisers with misleading investors over mutual funds charging 12b-1 fees. Many of these cases have resulted in settlements or judgments in favor of the SEC requiring advisers and their firms to pay hundreds of thousands or millions of dollars in fines, penalties, and disgorgement.