The Securities and Exchange Commission penalized 17 investment advisers for picking more expensive mutual fund share classes for clients.
The regulator ordered these firms to pay disgorgement and prejudgment interest of about $10 million and to return money to investors, among other things. As 16 of the advisers reported their violations, the SEC did not impose civil penalties in those cases.
The investment advisers who reported their violations are 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 & Co. Wealth Management LLC, Hilltop Securities Inc. and 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. and Wedbush Securities Inc.
The SEC also penalized Mid Atlantic Financial Management Inc. for committing the same violations. The company's affiliate did not disclose conflicts of interest regarding its receipt of 12b-1 fees from certain mutual fund classes the firm invested in, when there were lower-cost options available instead. The regulator also noted the company was eligible to participate in the self-reporting initiative but did not do so.
Mid Atlantic will pay more than $1 million in disgorgement and prejudgment interest, but unlike the companies that self-reported, it will pay a civil penalty of $300,000.
The SEC launched the self-reporting initiative in February 2018, and companies that participate will get "standardized settlement terms," which include no civil penalties. The regulator on March 11 settled charges against 79 investment advisers who reported their violations.
