The Securities and Exchange Commission said Thursday that Voya Financial Advisors has agreed to pay about $3.1 million to investors and regulators due to its failure to tell clients about revenue collected from a third-party broker-dealer.
Since at least 2006, Voya participated in a no-transaction-fee mutual fund program offered by its clearing broker in which the clearing broker gave Voya a percentage of revenues received from mutual funds in the program.
In addition, since 2014, Voya had a separate arrangement with the clearing broker through which Voya agreed to provide certain administrative services in exchange for the clearing broker’s sharing of a percentage of service fees tied to mutual funds on the platform.
The SEC says the payments under both arrangements “created conflicts of interest because they provided a financial incentive for Voya to favor the mutual funds in the program over other investments when giving investment advice to its advisory clients.”
In its disclosures to advisory clients, though, Voya did not discuss these arrangements or the resulting conflicts of interest.
Without admitting or denying the SEC’s findings, Voya consented to a censure, a cease-and-desist order from committing or causing further violations of these provisions, and the payment of disgorgement of about $2.6 million, interest of roughly $175,000 and a $300,000 penalty.
The SEC’s investigation was conducted by members of the Asset Management Unit.
"We are pleased to have reached an agreement on this matter," Voya said in a statement. "Voya is committed to providing clear and comprehensive information to our clients, including transparent and candid disclosures. Effective July 2016, VFA ceased receiving the payments that are the subject matter of this action."
--- Check out SEC to Probe Advisor, BD Fiduciary Compliance With ReTIRE Initiative on ThinkAdvisor.