Commonwealth Financial Network, Waltham, MA – Charged with Failing to Disclose Revenue Sharing
According to a press announcement on August 1, 2019, the Securities and Exchange Commission (SEC) charged broker-dealer Commonwealth Financial Network in Waltham, Massachusetts, with failure to disclose material conflicts of interest related to revenue sharing Commonwealth received for certain client investments.
Commonwealth allegedly made several material omissions leading its advisory clients to invest without a full understanding of the firm’s compensation motives and incentives, according to the SEC’s complaint.
Since at least 2007, Commonwealth reportedly had a revenue sharing agreement with the broker it required most of its clients use for trades in their accounts, according to the SEC’s Complaint.
Under that agreement, Commonwealth reportedly received a percentage of what certain mutual fund companies paid to the broker to be able to sell their funds through the broker in certain share classes of those funds.
According to the SEC, between July 2014 and December 2018, Commonwealth allegedly received over $100 million in revenue sharing from the broker related to client investments in certain share classes of “no transaction fee” and “transaction fee” mutual funds.
The SEC charges Commonwealth with allegedly breaching its fiduciary duty to its clients by failing to disclose the conflicts of interest created by its receipt of compensation through the revenue sharing agreement.
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