What You Need to Know
- HighPoint avoided transaction fees by recommending share classes from a no-transaction-fee program offered by its clearing firm.
- Those shares had a higher cost to investors, the SEC said.
- The RIA was ordered to pay disgorgement, prejudgment interest and a civil penalty, totaling $764,737.
The Securities and Exchange Commission on Wednesday charged HighPoint Advisor Group with investing certain clients’ assets in higher-cost mutual fund share classes — as part of a wrap fee arrangement — that included 12b-1 fees.
According to the SEC’s order, HighPoint Advisor Group LLC, a registered investment adviser, invested certain clients’ assets in higher-cost mutual fund share classes than were otherwise available while failing to disclose the conflicts of interest associated with those investment recommendations.
HighPoint offers a wrap program option to its advisory clients.
“Under its arrangement with clients in wrap accounts, HighPoint was responsible for paying client trading costs — including transaction fees on mutual fund investments — as part of the overall management fee clients paid HighPoint,” the SEC said.
The SEC said in late March that its exam priorities for 2022 include RIAs’ use of 12b-1 fees in wrap accounts where the RIA may be responsible for paying transaction fees.