SEC Sues Investment Adviser for Fee Misconduct

A complaint, Securities Exchange Commission v. David A. Nagler and New Line Capital LLC, has been filed in the US District Court for the District of New Mexico. It accuses the defendants of fee misconduct and failing to disclose financial conflicts of interest.

An article on Holland and Knight’s Second Opinion blog explains that the SEC is alleging that the firm charged advisory account clients, many of them elderly retirees, more than the disclosed 2% annual fee cap, and levied hourly consulting fees without proper notice or client consent.

Defendant Nagler, New Line’s founder and chief commercial officer, operated the firm from April 2019 through December 2024 without SEC registration. Both he and New Line were registered in several states.

In regulatory filings and internal compliance documents, the defendants acknowledged their fiduciary duties and explicitly promised to prioritize client interests and avoid conflicts.

The SEC contends that despite these acknowledgments, the defendants routinely violated their fiduciary duties through misleading fee disclosures and opaque billing practices.

The complaint says that New Line charged approximately $125,000 in excessive advisory fees and more than $325,000 in undisclosed hourly consulting fees.

The complaint also alleges that fees were sometimes based on subjective assessments of behavior, such as how insistent a client was for an explanation, and that clients never received itemized billing.

Violations include breaches of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, which prohibit fraud by all advisers, regardless of SEC registration.

This case indicates that the SEC under Trump is still on the lookout for advisory fee misconduct and conflicts of interest involving elderly clients. Firms should ensure full transparency, accurate disclosure, and compliance with fiduciary duties, especially when serving vulnerable clients.