The payments were made as part of a settlement agreement following an investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA). The investigation found that DeWaay, as well as entities he owns and representatives he employed, violated federal law when they recommended certain investments to clients participating in ERISA-covered employee benefit plans between May 2007 and November 2011.
Investigators also found that DeWaay’s companies and advisers charged higher fees than those agreed to by their clients. Recommendations made to clients also resulted in DeWaay, his companies and former employees receiving commissions from third parties. DeWaay has also agreed to pay up to an additional $212,727 over the next five years to other ERISA-covered plans that he managed.
DeWaay owns or owned three companies based in Johnston, Iowa, which include: DeWaay Capital Management Inc., an investment advisory firm; DeWaay Benefit Administrators LLC, an employee benefit plan administrator; and DeWaay Financial Network LLC, a now-defunct brokerage services firm.
Under the terms of the EBSA settlement, DeWaay and four investment advisers he employed (Joshua Cross, Paul Espey, Andrew Kleis and Brenton Collins) have agreed to disclose to ERISA-covered plan clients whether they will act as fiduciaries to those plans. The investment advisers and companies will also provide their ERISA-covered plan clients a description of all compensation and fees received, in any form, from any source, involving any investment or transaction related to them.
DeWaay and the advisers have also agreed that either they will not collect commissions from third parties or, if they do, they will refund 100% of the commissions to their ERISA-covered plan clients. DeWaay also agreed to be removed as trustee of the DeWaay and Associates Inc. 401(k) Profit Sharing Plan, and to no longer serve or act as a fiduciary or service provider to the plan.
The investigation was conducted as part of the EBSA’s Fiduciary Service Provider Compensation Project, which focuses on the receipt of improper or undisclosed compensation by employee benefit plan consultants and other investment advisers.
More information about the Department of Labor and ERISA enforcement can be found here.