Fee Firm Falsified Figures, Hit Clients With Hidden Charges!

U.S. Securities and Exchange Commission Litigation Release No. 26319, dated June 4, 2025.

The SEC charged New Mexico investment firm New Line Capital, LLC and its owner, David A. Nagler, for defrauding clients. They allegedly made misleading statements about advisory fees, charging some clients more than the promised 2% cap. Additionally, they billed clients for hourly services without proper disclosure or informing them of conflicts of interest.

In Plain English

Imagine you hire a financial helper to manage your savings. You agree to pay them a fee based on a percentage of your savings, say, no more than 2% each year. This helper then secretly charges you more than 2% sometimes, and also charges you for extra phone calls or meetings without telling you beforehand, and without mentioning that this could benefit them. The SEC is saying this is like lying and cheating your clients, which is against the rules.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Promised Fee Cap New Line Capital, LLC and its owner, David A. Nagler, told their investment advisory clients that they would 'take care to assure' that annual advisory fees would not exceed 2% of a client's assets under management.
2. Exceeded Fee Cap Despite the promise, New Line and Nagler did not take steps to limit advisory fees to 2%. They charged numerous clients more than 2% annually, collecting approximately $125,000 in advisory fees beyond this disclosed limit during the relevant period (April 5, 2019, through December 2024).
3. Undisclosed Hourly Fees The firm also misleadingly disclosed that they 'may' offer hourly fee services. In reality, New Line was providing these services and charging clients without informing them about these specific hourly charges.
4. Hidden Conflicts of Interest Furthermore, New Line and Nagler failed to disclose the material financial conflicts of interest that arose from their practice of charging these undisclosed hourly fees.
5. Subjective Fee Determination Defendants also failed to disclose that Nagler used subjective criteria, such as how 'demanding' he found a client, to determine the amount of advisory fees charged, and did not disclose that New Line might charge clients more than 2%.
6. Collected Undisclosed Fees During the Relevant Period, clients paid approximately $325,000 in these undisclosed hourly fees, which New Line and Nagler received.

The Enforcement Action

On June 2, 2025, the SEC charged New Mexico investment advisory firm New Line Capital, LLC and its owner, David A. Nagler, with breaching fiduciary duties and defrauding clients. The SEC alleges they made false and misleading statements regarding fee disclosures and failed to disclose conflicts of interest. Specifically, they allegedly charged advisory fees exceeding a promised 2% cap and billed for hourly services without client notification or disclosure of conflicts. The SEC seeks permanent injunctions, conduct-based injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.

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