Dawn Bennett to SEC: The Fight Ain’t Over
Dawn Bennett, who was banned from the securities industry on Monday by an administrative law judge for consistently lying about her firm’s assets and investment prowess, will appeal the ruling before the Securities and Exchange Commission while fighting the SEC legal process in federal court, her lawyer told AdvisorHub on Tuesday.
Bennett and her Washington, DC-based registered investment advisory firm Bennett Financial Group were also fined $4.1 million by the law judge. She will appeal the decision to commissioners of the Securities and Exchange Commission while continuing her federal court battle against administrative law proceedings, the lawyer said.
“She now begins the next phase of the case, appealing the constitutionality of the ALJ appointment process, as was her plan all along,” Greg Morvillo wrote in an email. “We knew the ALJ would rule as he did when Ms. Bennett declined to participate in the proceeding.”
Bennett boycotted hearings held by Judge James E. Grimes in January on the grounds that the proceedings were unconstitutional because ALJ judges are not appointed by the SEC’s commissioners.
In a 48-page decision, Grimes excoriated Bennett’s “bald-faced lies made during the Commission’s examination and investigation,” characterized her as untrustworthy and unfit to serve as a financial advisor and said her fraudulent presentations to clients and prospects resulted in large investment losses.
“When confronted with her lies during investigative testimony, instead of coming clean, she doubled down and continued to lie,” the judge wrote.
Bennett touted returns from a model portfolio that did not reflect actual customer returns, worked with Barron’s editors to appear in the publication’s Top Advisor lists and promoted herself on episodes of her “Financial Myth Busting” radio broadcasts while she was being examined by SEC staffers, the decision said.
The Washington, DC-based advisor and broker is pressing her arguments about the constitutionality of SEC administrative proceedings in the Fourth Circuit Court of Appeals in Richmond, Virginia. A lower court last year dismissed her argument on grounds of lack of jurisdiction. A similar case brought by distressed-debt financier Lynn Tilton failed on appeal in June.
The SEC on Wednesday plans to tweak its administrative legal proceedings but the changes are not expected to mollify defense lawyers who argue that clients are deprived of their due process rights in the forum.
The five-person SEC, which is currently short two commissioners, can affirm, reverse, modify or remand an ALJ’s decision for further proceedings. Appeals from commission actions can ultimately be made to a U.S. Court of Appeals.