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SEC fines three investment advisers over breaching fiduciary duties

BBR Staff Writer Published 09 April 2018

The US Securities and Exchange Commission (SEC) has imposed a fine of $15m on three investment advisers over breaching fiduciary duties and raising improper fees from the clients

As per the SEC’s orders, PNC Investments, Securities America Advisors and Geneos Wealth Management have been failed to disclose conflicts of interest and violated their duty to seek best execution by investing advisory clients in higher-cost mutual fund shares when lower-cost shares of the same funds were available.

Geneos has also been fined for failing to identify its revised mutual fund selection disclosures as a “material change” in its 2017 disclosure brochure.  

The firms will collectively pay a fine of $15m, of which $12m will be distributed to harmed clients.

PNCI required to pay $6.4m in disgorgement and prejudgment interest along with a $900,000 penalty, while Geneos need to pay $5m in disgorgement and prejudgment interest along with a $775,000 penalty.

SAA required to pay $1.5m in disgorgement and prejudgment interest along with a $250,000 penalty

SEC’s orders determined that PNCI and Geneos failed to disclose the conflict of interest associated with compensation they secured from third parties for investing clients in specific mutual funds.

SEC also found that PNCI improperly charged advisory fees to client accounts for periods when there was no assigned investment advisory representative.

SEC said that the share class selection disclosure initiative will allow eligible advisers until 12 June of this year to self-report similar misconduct and take advantage of the Enforcement Division’s willingness to recommend favorable settlement terms, including no civil penalties against the adviser

US SEC asset management unit co-chief Dabney O’Riordan said: “These disclosure failures cause real harm to clients.

 “We strongly encourage eligible firms to participate in the recently announced Share Class Selection Disclosure Initiative as part of an effort to stop these violations and return money to harmed investors as quickly as possible.” 


Image: The US SEC has imposed a fine of $15m on three investment advisers. Photo: courtesy of hywards / FreeDigitalPhotos.net.