A dually registered firm has been ordered to pay more than $927,000 for breaching its fiduciary duty by collecting 12b-1 fees on mutual fund share classes when lower cost funds were available.
BPU Investment Management, Inc., a dually registered investment advisor and broker-dealer, was ordered on Feb. 13 to pay disgorgement, prejudgment interest, and a civil penalty totaling $927,107.
From December 2013 through May 2017 BPU purchased, recommended or held for advisory clients mutual fund share classes that charged 12b-1 fees instead of lower-cost share classes of the same funds that were available to the clients, according to the SEC order.
While BPU received 12b-1 fees in connection with the investments, the firm failed to adequately disclose this conflict of interest in its Forms ADV or otherwise, the order states.
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Further, BPU failed to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its mutual fund share class selection practices.
BPU, although eligible to do so, also did not self-report to the Commission pursuant to the Division of Enforcement’s Share Class Selection Disclosure Initiative.