The SEC recently entered a cease-and-desist order against an SEC-registered investment adviser Federal Prep Advisors, Inc. (“Federal Prep”) and its principal regarding its rollover recommendations from Thrift Savings Plan (“TSP”) accounts to advisory Individual Retirement Accounts (“IRAs”). The SEC determined that Federal Prep did not adequately evaluate and disclose the costs associated with the TSP and its services or the available investment options under the TSP, among other things.[1]
The Thrift Savings Plan is a defined contribution retirement plan for federal employees and members of the uniformed services, and generally has lower fees compared to private employer-sponsored 401(k) plans. From at least June 2020 until around June of 2023, Federal Prep advised approximately 300 clients to rollover assets from a TSP account to an IRA managed by Federal Prep.