The Securities and Exchange Commission has ordered Foundations Investment Advisors, a Phoenix-based registered investment advisor overseeing $10.1 billion in client assets, and its former chief executive Bryon E. Rice to pay approximately $2.1 million in penalties and disgorgement for failing to disclose multiple conflicts of interest over a six-year period. The administrative order, issued June 8, found that the firm and Rice breached their fiduciary duties from 2019 through 2025, affecting roughly 25,000 clients served by about 200 affiliated investment advisor representatives.
At the heart of the case is a profit-sharing arrangement Rice entered in September 2020. An entity he wholly owned paid $100,000 for a 4.99% profit interest in the holding company of a third-party asset manager that provided model portfolios to Foundations' clients. Rice sat on the firm's investment committee, which continued directing client assets into that manager's products. By December 31, 2020, approximately 66% of Foundations' client assets were invested in the manager's exchange-traded funds. Foundations did not disclose Rice's ownership interest until its Form ADV update in March 2021—more than five months after the arrangement began. Rice received two payments totaling $434,162 from the profit-sharing arrangement before terminating it in 2023.
The SEC also cited an ETF launch and expense agreement Foundations entered into with a separate fund manager in August 2021. Under that agreement, Foundations was financially liable for certain fund expenses if assets under management did not grow sufficiently, creating a financial incentive to recommend those ETFs to clients. Yet the firm's Form ADV during the same period stated it had "no material financial interest in any securities being recommended," which the SEC found to be inaccurate.
After the ETF began trading in March 2022, Rice personally bought it on 87 separate days through 279 trades in his personal brokerage account while serving as CEO and sitting on the investment committee that had directed client assets into the same ETF. On 33 occasions, Rice's purchase was the last trade of the day and matched the closing price. By June 2022, Foundations' clients held approximately 80% of the ETF's outstanding float. The SEC found Rice did not financially benefit from the trading but concluded both he and the firm negligently breached their fiduciary duties.
Contemporaneous text messages sent by Rice to the chief investment officer, who was also CEO of the adviser to the ETF, showed Rice acknowledged his end-of-day trading was due to concern about the bid-ask spread and performance of the ETF in client portfolios, according to the SEC ruling. Rice was CEO of Foundations from April 2016 until his departure in October 2025 and retains an 88% ownership interest in the firm, which reported $10.1 billion in AUM in its latest Form ADV filed March 27, 2026.
Under the settlement, Foundations was fined $1.2 million and ordered to pay $152,628 in disgorgement plus interest. Rice was ordered to pay $434,162 in disgorgement, $5,395 in prejudgment interest, and a $354,675 civil penalty. Neither party admitted nor denied the SEC's findings, and Rice is not registered with the SEC. The case underscores the SEC's heightened scrutiny of undisclosed conflicts, as highlighted by SEC Enforcement Chief Woodcock's recent warnings on fees and conflicts.
This is not the only legal matter involving Rice. A racial discrimination and wrongful termination lawsuit filed by former employee Michael Ruiz of Magellan Financial—the marketing organization Rice previously ran before founding Foundations—alleged Rice repeatedly made racially derogatory remarks about Ruiz's Mexican heritage, contributing to his demotion and termination. The lawsuit went to trial in May 2026, and an Arizona federal jury cleared Magellan of the allegations after a seven-day proceeding. The case serves as a reminder that fiduciary lapses can have both regulatory and reputational consequences, much like the FINRA panel's $2.7 million award against Arkadios Capital over a Ponzi scheme.
