June 18, 2018
SEC Charges Advisory Firm with Conflict of Interest Fine
The Securities and Exchange Commission (SEC) announced on June 4th, 2018 that a charged investment adviser agreed to pay $8 million in civil penalty fees for failing to disclose conflicts of interest to its advisory clients.
The adviser allegedly failed to disclose agreements with overseas products and service providers through which the adviser and its overseas affiliate received compensation. The undisclosed compensation incentivized the investment adviser to make certain recommendations concerning pension transfer and product or services providers, as they were obligated to make payments. The investment adviser was also charged with making “materially misleading statements” regarding tax treatment and available investment options.
The SEC has separately filed charges against two former managers, including the former CEO, of the investment advisory firm on alleged claims of misleading clients about the benefits of pension transfers and concealing substantial conflicts of interest, including potential payments the managers personally. The SEC’s complaint against the two managers seeks an injunction, disgorgement plus interest, and civil money penalties.
The advisory firm has consented to the SEC’s order, without admitting or denying the findings. The settlement penalty will establish a Fair Fund to be distributed among the affected clients.
WHAT DOES THIS MEAN FOR ME?
As a fiduciary, it is critical for advisers to disclose any conflicts of interest and act in the best interest of the client. Failure to make the appropriate disclosures can lead to public enforcement action.
Fairview is committed to working with clients to ensure relevant disclosures are correctly found in policies and procedures and the Form ADV. If you would like more information about how Fairview can assist you, please reach out directly.