Federal Prep Advisors

Attorneys at ChapmanAlbin are investigating Federal Prep Advisors, Inc. and its principal, Michael Kerper, following the SEC’s recent enforcement action. Federal Prep and Kerper have been charged with providing inaccurate and misleading information to federal employees and retirees, leading them to make costly rollovers from Thrift Savings Plan (TSP) accounts to advisory IRAs.

Since June 2020, Federal Prep Advisors advised over 300 clients to roll over more than $80 million in assets from their TSP accounts into advisory IRAs. However, in doing so, they provided inaccurate information about TSP fees—claiming they were 0.50% when, in fact, TSP fees were closer to 0.05%. This misrepresentation led many clients to believe that the higher fees associated with advisory IRAs—often between 1.50% and 2.00%—were only marginally more expensive than TSP accounts.

Despite being notified of the inaccuracy by the SEC, Kerper and Federal Prep continued to provide this false information, resulting in clients making decisions without a full understanding of the costs involved.

Federal Prep also failed to properly investigate or explain the investment options available within the TSP, including the Mutual Fund Window and other low-cost options. Clients were not informed about the suitability of their current TSP investments compared to those offered through the advisory IRA platform, resulting in advice that often did not align with clients’ best interests.

In addition to the misleading fee information, Federal Prep and Kerper did not fully disclose conflicts of interest arising from commissions earned on life annuity sales. These commissions, which ranged from 2% to 5% of the annuity purchase, were not clearly communicated to clients, further exacerbating the conflict of interest in their advice.

As a result of these violations, the SEC has censured Federal Prep and Kerper. Federal Prep has been ordered to pay a $200,000 civil penalty, while Kerper is personally responsible for an additional $80,000 penalty. Furthermore, Kerper is prohibited from acting in a compliance capacity for any investment adviser, broker, or dealer.

If you or someone you know has been affected by misleading investment advice from Federal Prep Advisors or Michael Kerper, contact ChapmanAlbin today. Our experienced attorneys can help you recover your losses. We offer free consultations to review your case and discuss your legal options.