SEC reaches $3.6 million settlement with Voya over securities lending

Voya wrongly recalled securities it had loaned out to mutual fund clients early in order to give a tax benefit to their insurance affiliates

Mar 8, 2018 @ 5:54 pm

By Mark Schoeff Jr.

The Securities and Exchange Commission on Thursday announced a $3.6 million settlement with investment adviser subsidiaries of Voya Holdings Inc. for a securities lending practice that harmed mutual fund investors.

In its order, the SEC alleged that between August 2003 and March 2017, Voya Advisers recalled, in advance of the dividend record date, portfolio securities it had loaned out to mutual funds.

Recalling the securities early allowed Voya's insurance affiliates, who were the record shareholders of the fund shares, to take a tax benefit. But the mutual funds and those invested in them through variable life annuity contracts and variable life insurance policies "lost securities lending income during the period when the securities were recalled," the order states.

The SEC said that Voya failed to disclose the conflict of interest created by the recall. More than $2 million of the settlement will go to the harmed mutual funds .

"These funds and those investing in them weren't told that they were losing income so that the Voya advisers could provide a tax benefit to their affiliates," Anthony S. Kelly, co-chief of the SEC Enforcement Division's Asset Management Unit, said in a statement. "Now money will be heading back to the funds to help investors. Investment advisers must not place the interests of their affiliates over those of clients, depriving them of information necessary to make informed investment decisions."

In a statement, Voya said, "We are pleased to have reached this settlement. This announcement means we avoid a lengthy and costly litigation process and can focus our resources on delivering high-quality investment service to our clients."


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