A U.S. Securities and Exchange Commission judge has banned a radio host and investment adviser from the securities industry after she protested the regulator's enforcement case against her by ignoring it.
In a decision on Monday, SEC Administrative Law Judge (ALJ) James Grimes also fined Dawn Bennett $600,000 and her Washington, D.C.-based Bennett Group Financial Services LLC $2.9 million, and ordered them to give up $556,102 of gains.
Bennett's civil case has drawn extra attention because the Chevy Chase, Maryland resident chose not to show up at her SEC hearing in January, part of her unusual strategy in challenging the regulator's use of in-house judges in enforcement cases.
The SEC had accused Bennett of using her weekly program "Financial Myth Busting with Dawn Bennett" and other media from 2009 to 2011 to exaggerate her firm's assets under management and investment performance, in order to attract and retain clients.
"Bennett is not fit to remain in the industry in any capacity," after working there for nearly three decades, Grimes wrote in a 48-page decision.
The judge said her "numerous false statements" instilled a false sense of trust among her investors and resulted in large losses, while her "bald-faced lies" during the SEC probe "further demonstrate her untrustworthiness and unfitness."
Bennett plans to appeal Grimes' decision to the full commission, and if unsuccessful can ask a federal appeals court to review her case.
Many defendants have said SEC administrative proceedings have procedural advantages over federal courts that make it easier for the regulator to win, and that the appointment process for the judges is unconstitutional.
"We knew the ALJ would rule as he did when Ms. Bennett declined to participate in the proceeding," Bennett's lawyer Gregory Morvillo said in a statement. "She now begins the next phase of the case, appealing the constitutionality of the ALJ appointment process, as was her plan all along."
An SEC spokesman declined to comment.
Four federal appeals courts have said constitutional challenges to SEC administrative proceedings cannot be pursued in federal court until those proceedings have ended.
The SEC accused Bennett of claiming that her firm managed as much as $2 billion though it never oversaw more than $407 million, and touting market-beating returns without revealing they were based on a model portfolio and not actual performance.
On Wednesday, the three SEC commissioners will vote on tweaks to rules governing in-house administrative proceedings.
The case is In re: Bennett Group Financial Services LLC et al, SEC Administrative Proceeding No. 3-16801.
(Reporting by Jonathan Stempel in New York; Editing by Jeffrey Hodgson)
