Voya to pay $3.1 million for disclosure violations
SEC says firm didn't report to customers conflicts or income it received from clearing broker.
Voya Financial Advisors has agreed to pay almost $3.1 million as a result of payments it received from its clearing broker in connection with the sales of mutual funds.
In settling a cease-and-desist order from the Securities and Exchange Commission, Voya will pay disgorgement of $2.6 million, prejudgment interest of $175,000 and a civil penalty of $300,000.
The firm neither admitted nor denied that since 2014 it had failed to disclose to its clients the compensation it received through an arrangement with its clearing firm in connection with mutual fund sales. On its website, Voya Financial Advisors identifies Pershing LLC as its clearing firm.
Essentially, the SEC said that in its agreement with Pershing, Voya would receive a share of the platform fee paid by mutual fund companies to the clearing firm in exchange for certain administrative functions Voya would perform.
“These payments created a conflict of interest in that they provided a financial incentive for Voya Financial Advisors to favor the mutual funds in the clearing firm’s no-transaction-fee mutual fund program over other investments when giving investment advice to its advisory clients,” the SEC said.
The agency also said that Voya did not disclose this arrangement or the resulting conflict in its disclosures to its advisory clients.
” We are pleased to have reached an agreement on this matter,” said a spokesman for the firm. ” Voya is committed to providing clear and comprehensive information to our clients, including transparent and candid disclosures. Effective July 2016, our broker-dealer (VFA) ceased receiving the payments that are the subject matter of this action.”
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