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SEC charges Cetera Advisors for defrauding advisory clients

The Securities and Exchange Commission charged Cetera Advisors LLC for allegedly failing to disclose conflicts of interest related to the its receipt of more than $10 million in undisclosed compensation.

The company invested clients' money in mutual funds that charged 12b-1 fees despite knowing they were eligible to invest in products that did not charge these recurring fees, according to the complaint. The SEC also alleged that Cetera Advisors participated in a revenue and fee-sharing program with its clearing broker, thus it had an incentive to invest in mutual funds that charged the fees, and that the company ordered its broker to mark-up certain fees charged to advisory clients.

The SEC argued that the company did not provide adequate disclosures on these practices and the conflicts of interest associated with them. The regulator is seeking to penalize the company together with a permanent injunction and disgorgement of ill-gotten gains plus prejudgment interest.