On Dec. 21, SEC fined IAs $18mn for fund disclosure violations.
- American Portfolios Advisors, PPS Advisors, and CEO/CIO, Lawrence Passaretti.
- Invested clients in mutual fund share classes that paid 12b-1 fees to the firms'
investment adviser representatives (IARs), even when cheaper class available.
Alleged Violations
- Firms did not disclose conflicts of interest, violated duty to seek best execution.
- Failed to implement policies and procedures designed to prevent fee violations.
- American Portfolios incorrectly stated IARs either did not receive 12b-1 fees or
chose more expensive classes, when less expensive of same fund unavailable. - PPS incorrectly stated selected higher-cost share classes for "long-term benefit”
of clients, and only where less expensive classes of same fund were unavailable.
Settlement
- American Portfolios $895k in disgorgement, prejudgment interest, $250k penalty.
- PPS and Passaretti paid $631k disgorgement, prejudgment interest, $75k penalty.
- Collectively, firms and Passaretti pay $1.8mn to harmed clients through fair funds.
