The SEC has charged Voya Investments LLC and Directed Services LLC of failure to disclose conflicts of interest and making misleading disclosures related to their practice of recalling securities on loan to give tax benefits to their affiliates.
The Voya Holdings Inc. investment adviser subsidiaries will pay about $3.6 million to settle the charges. The amount includes more than $2 million that will be directly paid to the affected insurance-dedicated mutual funds for the benefit of their investors.
The Voya investment advisers allegedly lent securities held by the funds to parties looking to borrow the securities to generate additional income for the mutual funds and their investors. They then recalled loaned securities before their dividend record dates so that insurance company affiliates, as record shareholders of the funds' shares, could receive a tax benefit based on the dividends received. The practice allegedly caused the funds and their investors to lose securities lending income without receiving any offsetting tax benefit.
The Voya investment advisers did not admit nor deny the findings but agreed to cease and desist from committing any further violations.
