- Charged 79 investment advisors, who directly or indirectly received 12b-1 fees
on investments for clients, with disclosure that was inadequate or inconsistent.
- Most of the advisory clients harmed by disclosure practice were retail investors.
- Firms charged include BB&T, DB, Janney Montgomery, LPL Financial, TIAA-CREF, Oppenheimer Asset Management, Raymond James, RBC, Santander, Wells Fargo.
- Follows SEC Feb. 2018 initiative on share class selection disclosure.
- Initiative to incentivized advisers to self-report undisclosed conflicts of interest.
- Advisers failed to adequately disclose conflicts of interest, for the sale of higher
cost mutual fund share classes, where similar lower-cost classes were available.
- Placed clients in fund share classes that charged 12b-1 fees, despite lower cost
classes of same fund being available, did not disclose that higher cost selected.
- 12b-1 fees were routinely paid to the investment advisers in capacity as broker,
to their broker-dealer affiliate, or reps who were also registered representatives.
- IAs created conflict of interests with their clients, since investment advisers had
stood to benefit from clients paying them more fees on higher cost share classes.
- The settling IAs will disgorge improperly disclosed fees and distribute to clients.
- Advisers will review and correct relevant disclosure documents, and evaluate if
clients should be moved to available lower-cost share class, and execute moves.
- SEC has agreed not to impose other penalties against these investment advisers.