More On Legal & Compliancefrom The Advisor's Professional Library
- The Custody Rule and its Ramifications When an RIA takes custody of a clients funds or securities, risk to that individual increases dramatically. Rule 206(4)-2 under the Investment Advisers Act (better known as the Custody Rule), was passed to protect clients from unscrupulous investors.
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
Ameriprise Financial Services, Inc., has agreed to pay the Securities and Exchange Commission $17.3 million to settle an enforcement action the SEC levied against the Minneapolis-based broker/dealer. The SEC alleges that Ameriprise received millions of dollars in undisclosed compensation as a condition of offering and selling certain real estate investment trusts (REITs) to its brokerage customers.
The SEC's order says that "Ameriprise demanded and received so-called 'revenue sharing' payments related to its sales of REITs and failed to disclose the payments as required. Ameriprise also sold more than $100 million of unregistered shares of one particular REIT in violation of the registration provisions of the federal securities laws."
Robert Khuzami, Director of the SEC's Division of Enforcement, said in a prepared statement announcing the enforcement action that "Few things are more important to investors than getting unbiased advice from their financial advisers. Ameriprise customers were not informed about the incentives its brokers had to sell these investments."
According to the SEC, the Commission's order finds that "neither Ameriprise nor the REITs disclosed to investors that additional payments were being made in connection with the sale of REIT shares, or the conflicts of interest these additional payments created. The SEC's order also finds that Ameriprise issued a variety of mislabeled invoices to the REITs as a means of collecting the undisclosed revenue sharing payments that appeared to be legitimate reimbursements for services provided by Ameriprise."
Ameriprise has consented to the issuance of the SEC's order without admitting or denying the findings.