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NEWSLETTERS & ALERTS
79 Investment Advisors Plead Mea Culpa ‘All the Way to the Bank’ on Mutual Fund Sales
[Photo: The Mea Culpa / Superyachts.com]
by Howard Haykin
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.
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.
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.
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.
Sorrento Pacific Financial LLC
Spire Wealth Management LLC
SSN Advisory 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.