Snowden Capital SEC Order: The Policy Fix That Became a Violation

Snowden Capital Pays $364,590.30 Over Conflicts and a Hedge Clause

Snowden Capital Advisors LLC, a New York registered investment adviser, settled SEC charges on October 30, 2026 that it breached its fiduciary duty by failing to fully disclose affiliated broker-dealer revenue and by using a misleading hedge clause. Law360 reported the settlement as a $364,000 fine. The SEC's order, Advisers Act Release No. 7031, puts the total at $364,590.30: $226,316.99 in disgorgement, $38,273.31 in prejudgment interest, and a $100,000 civil monetary penalty.

But here is the part the headlines are missing. Snowden Capital adopted written policies in June 2023 prohibiting hedge clauses likely to mislead clients. It then failed to revise its existing client agreements, and the SEC charged that gap under Rule 206(4)-7.

What the SEC Found: Two Revenue Streams and One Clause

The order describes three problems.

• Margin interest markups. From at least February 2018 through March 2023, Snowden Capital made no disclosure to advisory clients that its affiliated broker-dealer, Snowden Account Services, marked up margin interest rates over the clearing firm's base rate and kept the markup.
• Cash sweep revenue sharing. From February 2018 through June 2020, the firm did not fully and fairly disclose the conflict tied to revenue its affiliate received from its clearing firm based on advisory client assets held in cash sweep money market funds. AdvisorHub reports the payments were described as "distribution assistance" and rose with assets in those funds.
• The hedge clause. From at least July 2019, two retail advisory agreements limited liability absent gross negligence, willful malfeasance, or a legal violation. The SEC found that, read in its entirety, the clause could mislead retail clients into not exercising non-waivable rights.

The SEC found willful violations of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7. Without admitting or denying the findings, the firm consented to a censure and a cease-and-desist order.

Adequate Disclosure Versus No Disclosure: The Distinction That Matters

Snowden told AdvisorHub the case grew out of a routine 2022 SEC exam and concerns the "adequacy of certain disclosures, not a failure to disclose." The firm also said clients had no investment losses. That framing deserves a careful read.

The SEC's standard is full and fair disclosure of the conflict, not the existence of some disclosure somewhere. AdvisorHub notes the order acknowledged clients received general disclosures from the clearing firm. The SEC still found that the adviser did not fully and fairly disclose its conflicts.

The firm's statement that clients had no investment losses did not prevent a $226,316.99 disgorgement order. If your affiliate earns money on client cash or margin balances, the question is not whether clients lost money. It is whether your Form ADV and agreements explain who gets paid and why.

What Your Leadership Team Should Decide This Quarter

Revenue and conflicts

First, inventory every dollar an affiliate earns on advisory client assets. Margin markups, sweep revenue, and "distribution assistance" payments all belong on the list, with the exact disclosure language that covers each one.

Second, test disclosures against the revenue, not the template. If the ADV says an affiliate may receive compensation but omits a markup over a base rate, treat that as a gap.

Agreements

• Pull every version of your advisory agreement still in force, not only the current template.
• Flag any liability limitation that a retail client could read as waiving non-waivable rights.
• Set a dated remediation plan for legacy agreements whenever a policy changes.
• Have your CCO certify to leadership that each new policy has been applied to existing documents.

Ask your general counsel or outside counsel to run this review before your next exam, because, as the Snowden order shows, examiners can compare policy dates to agreement dates.