SEC Settles Charges for Mutual Fund Disclosure Failures
According to a press announcement on Sept. 30, the Securities and Exchange Commission reportedly settled charges against 17 investment advisers for disclosure failures regarding their mutual fund share class selection practices.
The firms include 16 advisers that self-reported as part of the SEC’s Share Class Selection Disclosure Initiative and one adviser that allegedly did not self-report and was ordered to pay a $300,000 civil penalty.
The Division of Enforcement reportedly agreed in February that for eligible firms that self-reported by the deadline, the Division would recommend standardized settlement terms to the Commission, and would not impose a civil penalty.
On March 11, 2019, the Commission instituted actions against 79 advisers that participated in the initiative, ordering the payment of over $125 million in disgorgement and prejudgment interest to investors. Now, the Commission reportedly issued orders against 16 additional advisers that self-reported as part of the initiative, bringing the total amount ordered to be returned to investors to over $135 million. These firm were not required to pay a civil penalty.
The regulator also reportedly charged Mid Atlantic Financial Management Inc., which was eligible to self-report as part of the initiative but did not. The Commission found that Mid Atlantic, whose affiliate received 12b-1 fees, allegedly failed to fully disclose the conflicts arising from its selection of more expensive mutual fund share classes for clients when lower-cost share classes for the same fund were available.
The SEC reportedly ordered Mid Atlantic to pay over $1 million in disgorgement and prejudgment interest and a $300,000 civil monetary penalty.
The regulator reportedly ordered that these firms are censured, that they cease and desist from future violations, that they pay disgorgement and prejudgment interest totaling nearly $10 million and that they comply with certain undertakings, including returning the money to investors
Firms Charged That Self-Reported as Part of the Initiative:
Bill Few Associates Inc.
Cargile Investment Management Inc.
Comprehensive Capital Management Inc.
Equity Services Inc.
Essex Financial Services Inc.
Folger Nolan Fleming Douglas Capital Management Inc.
Henley & Company Wealth Management LLC
Hilltop Securities Inc.
Hilltop Securities Independent Network Inc.
IC Advisory Services Inc.
Independent Financial Group LLC
Investment Partners Ltd.
IPG Investment Advisors LLC
Michigan Advisors Inc.
Saxony Capital Management LLC
Wedbush Securities Inc.
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