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Regulatory Sanctions

79 Investment Advisors Plead Mea Culpa ‘All the Way to the Bank’ on Mutual Fund Sales

March 12, 2019

[Photo: The Mea Culpa /]


by Howard Haykin


The SEC announced on Monday that it had settled charges against 79 investment advisers [See list below] who will return more than $125 million to clients (with a substantial majority of the funds going to retail investors). The orders address advisers who directly or indirectly received 12b-1 fees for investments selected for their clients without adequate disclosure, including disclosures that were inconsistent with the advisers’ actual practices.



SEC’S SHARE CLASS SELECTION DISCLOSURE INITIATIVE.   The actions stem from an initiative launched in February 2018 by the Asset Management Unit of SEC Enforcement, with the objective of identifying and promptly correcting ongoing harm in the sale of mutual fund shares by investment advisers that had violated the Advisers Act due to undisclosed conflicts of interest. In exchange for self-reporting these violations, promptly compensating investors, and reviewing and correcting fee disclosures, the SEC agreed not to impose any monetary penalties.



SUMMARY OF SETTLEMENT TERMS.    The SEC’s orders found that the settling investment advisers violated Section 206(2) [Prohibited Transactions by Investment Advisors] and, except with respect to state-registered only advisers, Section 207 [Material Misstatements]  of the Investment Advisers Act of 1940 by:

  • Failing to include adequate disclosure regarding the receipt of 12b-1 fees; and/or
  • Failing to adequately disclose additional compensation received for investing clients in a fund’s 12b-1 fee paying share class when a lower-cost share class was available for the same fund.


Without admitting or denying the findings, each of the settling investment advisers agreed to the following undertakings within 30 or 40 days of these orders:


  • review and correct as necessary all relevant disclosure documents concerning mutual fund share class selection and 12b-1 fees.
  • evaluate whether existing clients should be moved to a lower-cost share class and move clients as necessary.
  • evaluate, update (if necessary), and review for the effectiveness of their implementation, their policies and procedures so that they are reasonably designed to prevent violations of the Advisers Act in connection with disclosures regarding mutual fund share class selection.
  • notify affected investors of the settlement terms of this Order in a clear and conspicuous fashion.
  • certify, in writing, compliance with the ordered untakings.


Finally, each investment advisor agreed to pay disgorgement and prejudgment interest to affected investors.





Ameritas Investment Corp.

AXA Advisors LLC

BB&T Securities LLC

Beacon Investment Management LLC

Benchmark Capital Advisors LLC

Benjamin F. Edwards & Co. Inc.

Blyth & Associates Inc.

BOK Financial Securities Inc.

Calton & Associates Inc.

Cambridge Investment Research Advisors Inc.

Cantella & Co. Inc.

Client One Securities LLC

Coastal Investment Advisors Inc.

Comerica Securities Inc.

Commonwealth Equity Services LLC

CUSO Financial Services LP

D.A. Davidson & Co.

Deutsche Bank Securities Inc.

EFG Asset Management (Americas) Corp.

Financial Management Strategies Inc.

First Citizens Asset Management Inc.

First Citizens Investor Services Inc.

First Kentucky Securities Corporation

First National Capital Markets Inc.

First Republic Investment Management Inc.

Hazlett, Burt & Watson Inc.

Hefren-Tillotson Inc.

Huntington Investment Company, The

Infinex Investments Inc.

Investacorp Advisory Services Inc.

Investmark Advisory Group LLC

Investment Research Corp.

J.J.B. Hilliard, W.L. Lyons LLC

Janney Montgomery Scott LLC

Kestra Advisory Services LLC

Kestra Private Wealth Services LLC

Kovack Advisors Inc.

L.M. Kohn & Company

LaSalle St. Investment Advisors LLC

Lockwood Advisors Inc.

LPL Financial LLC

M Holdings Securities Inc.


National Asset Management Inc.

NBC Securities Inc.

Next Financial Group Inc.

Northeast Asset Management LLC

Oppenheimer & Co. Inc.

Oppenheimer Asset Management Inc.

Park Avenue Securities LLC

PlanMember Securities Corporation

Popular Securities LLC

Principal Securities Inc.

Private Portfolio Inc.

ProEquities Inc.

Provise Management Group LLC

Questar Asset Management Inc.

Raymond James Financial Services Advisors Inc.

Raymond Lawrence Lent (d/b/a The Putney Financial Group, Registered Investment Advisors)

RBC Capital Markets LLC

Robert W. Baird & Co. Incorporated

Ryan Financial Advisors Inc.

SA Stone Investment Advisors Inc.

Santander Securities LLC

Select Money Management Inc.

Silversage Advisors

Sorrento Pacific Financial LLC

Spire Wealth Management LLC

SSN Advisory Inc.

Stephens Inc.

Stifel, Nicolaus & Company Incorporated

Summit Financial Group Inc.

Syndicated Capital Inc.

TIAA-CREF Individual & Institutional Services LLC

Transamerica Financial Advisors Inc.

Trustcore Financial Services LLC

Wells Fargo Clearing Services LLC

Wells Fargo Advisors Financial Network LLC

Woodbury Financial Services Inc.