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April 06, 2018 at 03:21 PM
SEC headquarters in Washington. (Photo: National Law Journal)
The Securities and Exchange Commission said Friday that three investment advisory firms — PNC Investments, Securities America and Geneos Wealth Management — have agreed to collectively pay nearly $15 million for failing to disclose conflicts and putting clients into higher-cost mutual fund shares. More than $12 million will go to harmed clients.
The orders against the three advisory firms states they breached their fiduciary duties to clients and generated “millions of dollars of improper fees in the process.”
All three “failed to disclose conflicts of interest and violated their duty to seek best execution by investing advisory clients in higher-cost mutual fund shares when lower-cost shares of the same funds were available.”
“These disclosure failures cause real harm to clients,” said C. Dabney O’Riordan, co-chief of the SEC’s Asset Management Unit. “We strongly encourage eligible firms to participate in the recently announced Share Class Selection Disclosure Initiative as part of an effort to stop these violations and return money to harmed investors as quickly as possible.”
The firms invested advisory clients in mutual fund share classes that charged 12b-1 fees instead of less expensive share classes of the same funds that were available without 12b-1 fees, the SEC states.
Steven Peikin, co-director of the Securities and Exchange Commission’s Enforcement Division, said during the SEC Speaks conference in Washington in late February that “investment advisors putting their clients into higher fee share classes when lower cost ones are available “is a widespread problem.”
Ameriprise Financial Services agreed in late February to settle charges that it recommended and sold higher-fee mutual fund shares to retail retirement account customers and failed to provide sales charge waivers.
