Among recent enforcement actions, the SEC took on a hedge fund, two executives and its auditor over improper expense allocations and the New York attorney general reached a settlement with the trustees of a nonprofit that “squandered assets” intended for underprivileged kids.
In addition, FINRA fined Fidelity Brokerage Services for overcharging customers.
FINRA Censures, Fines Fidelity Brokerage Services for Overcharging
FINRA censured Fidelity Brokerage Services LLC and fined the firm $350,000 after it found that the firm overcharged 20,663 customer accounts approximately $2.4 million.
According to the agency, Fidelity did not have adequate supervisory systems or procedures to make sure that customers were charged accurate fees for for accounts managed by third-party investment advisors.
As a result, there were erroneous and duplicate fees on certain customer accounts utilizing asset-based pricing, duplicate fees on certain customer accounts managed by third-party wrap providers, and erroneous markups on certain fixed-income investments.
The firm voluntarily reimbursed customers, with interest.
In addition, FINRA also found the firm’s supervisory system and written procedures weren’t up to the tasks of making sure that customers got accurate disclosures relating to its Asset-Based Pricing Program for accounts managed by third-party investment advisors and to monitor billing in these fee-based brokerage accounts to ensure that customers were charged in accordance with the firm’s disclosures.
The firm neither admitted nor denied the findings but consented to the sanctions.
SEC Fines Hedge Fund, Execs, Auditor for Misusing Fund Assets
The SEC has charged Alpha Titans LLC, its principal Timothy McCormack and general counsel Kelly Kaeser, and its outside auditor Simon Lesser after it found that the firm and the executives were involved in improper allocations of fund assets to pay undisclosed operating expenses. Lesser, who conducted the outside audit of financial statements, was also charged.
According to the agency, the firm, McCormack and Kaeser used assets of two affiliated private funds to pay more than $450,000 in office rent, employee salaries and benefits, and similar expenses without fund clients’ authorization, and without disclosing how they used the money.
They also sent investors audited financial statements that failed to disclose almost $3 million in expenses tied to transactions involving other entities controlled by McCormack.