For years, Edward A.H. Siedle has been on a soapbox about the lax policing of investment consultants. He's urged consultants to come clean about quid pro quo relationships with money managers and brokerage firms. And, he's campaigned before pension and securities regulators to act against consultants that fail to tell their clients about arrangements that could cloud the objectivity of their advice.
But it appears Mr. Siedle doesn't follow his own rules.
Mr. Siedle, a securities lawyer who worked briefly at the Securities and Exchange Commission in the 1980s, is the founder, principal and sole employee of Benchmark Financial Services Inc., an Ocean Ridge, Fla., investment consulting firm that audits the work of other pension consultants. For several years, his website may have led potential and existing clients to believe that his firm also managed money for private, public and union pension funds, endowments, foundations and trusts through a registered investment adviser, Benchmark Advisory Services.
Calls to several clients, including the Metropolitan Government of Nashville & Davidson County Benefit Board, and the Aircraft Mechanics Fraternal Association, Washington, were not returned.
Mr. Siedle's website, www.benchmarkalert.com, described Benchmark Advisory Services as an investment manager and manager of managers for three Benchmark trusts: Equity-Growth Trust, Equity-Value Trust and Fixed Income Trust. But Benchmark Advisory has never managed money for any institutional investor.
In its February 2001 and May 2002 filings with the Florida Department of Financial Services, the only assets reported were $2,500 in cash. And Benchmark Financial Services' 2003 and 2004 annual financial statements reported no income from investment advisory services.
The real shocker came when the Florida securities regulator informed me, in response to an inquiry, that although Benchmark Advisory Services registered as an investment adviser on Sept. 8, 2000, Mr. Siedle withdrew the registration on Oct. 31, 2002.
Yet, in 2004, Benchmark Advisory participated in a search for a manager of managers by the $10.8 billion Chicago Public School Teachers' Pension & Retirement Fund, and was one of the five firms interviewed by the pension fund. Kevin Huber, executive director, said he could not recall if he was aware of Benchmark's credentials at the time, but said it was a moot point because the firm was not selected by the fund. To encourage small and minority managers, the pension fund might pick firms even if they're unregistered, but requires that they become registered before receiving any money, Mr. Huber added.
Indeed, Mr. Siedle said pension fund executives invited him to participate in the search.
In a telephone interview, Mr. Siedle said he saw nothing wrong with the description of his firm's businesses on his website. "Our website is not misleading, because we don't manage any money," he said. When reminded that Section 206 of the Investment Advisers Act of 1940 prohibits "deceptive, manipulative or fraudulent activities," Mr. Siedle said: "What difference does it make? We don't manage any money."
Following that conversation, however Mr. Siedle removed the listing for Benchmark Advisory Services from his website.
Another potential problem is that Buchbinder Tunick & Co. LLP, Rockville, Md., the outside accounting firm that assists Benchmark with its forensic audits of consultants, also audits Benchmark's financial statements. This could raise questions about how closely Buchbinder audits Benchmark's financials. John Zimmerman, partner in charge of Buchbinder's Maryland office, did not return phone calls.
CORRECTION: Karl Dean, director of law for the Metropolitan Government of Nashville & Davidson County, had said he had found Edward A.H. Siedle to be a very capable investigator and helpful to the Metropolitan Government of Nashville & Davidson County Benefit Board in obtaining $10 million in a settlement with a consultant.
Also, Mary Anne DeMarco, legislative liaison for the Aircraft Mechanics Fraternal Association, Washington, had said the AMFA is not a client of Mr. Siedle's firm, Benchmark Financial Services Inc. The column said AMFA is a client and did not return calls.
