Last updated: 10:36 / Thursday, 14 March 2019
Over 12b-1 fees

SEC Gets RIAs to Return 125 Million Dollars to Investors

SEC Gets RIAs to Return 125 Million Dollars to Investors

The Securities and Exchange Commission announced on Monday that it settled charges against 79 investment advisers who will return more than $125 million to clients, with a substantial majority of the funds going to retail investors.  The actions stem from the SEC’s Share Class Selection Disclosure Initiative, which the SEC’s Division of Enforcement announced in February 2018 in an effort to identify and promptly correct ongoing harm in the sale of mutual fund shares by investment advisers. 

The initiative incentivized investment advisers to self-report violations of the Advisers Act resulting from undisclosed conflicts of interest, promptly compensate investors, and review and correct fee disclosures. 

In a statement,  SEC Chairman, Jay Clayton said:  “I am pleased that so many investment advisers chose to participate in this initiative and, more importantly, that their clients will be reimbursed.  This initiative will have immediate and lasting benefits for Main Street investors, including through improved disclosure.  Also, I am once again proud of our Division of Enforcement for their vigorous and effective pursuit of matters that substantially benefit our long-term, retail investors.”

The SEC’s orders found that the investment advisers failed to adequately disclose conflicts of interest related to the sale of higher-cost mutual fund share classes when a lower-cost share class was available.  Specifically, the SEC’s orders found that the settling investment advisers placed their clients in mutual fund share classes that charged 12b-1 fees – which are recurring fees deducted from the fund’s assets – when lower-cost share classes of the same fund were available to their clients without adequately disclosing that the higher cost share class would be selected. 

According to the SEC’s orders, the 12b-1 fees were routinely paid to the investment advisers in their capacity as brokers, to their broker-dealer affiliates, or to their personnel who were also registered representatives, creating a conflict of interest with their clients, as the investment advisers stood to benefit from the clients’ paying higher fees.

The RIAs involved are:

  •     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.
  •     MIAI 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.