The Securities and Exchange Commission is continuing to penalize broker-dealers and related registered investment advisers over a lack of full disclosure about conflicts related to fund sales. Last week it reached a settlement with MML Investors Services for $2.1 million and on Monday it settled with Rothschild Investment Corp. for $2.47 million.
Neither firm admitted to or denied the findings of the SEC, which has been cracking down on disclosures surrounding payments by funds to broker-dealers and RIAs. The SEC launched the initiative in February 2018 to target advisory firms that recommended high-fee mutual funds without telling clients that less expensive share classes were available in the same funds.
In an order from Friday, the SEC found that since March 2015, MML Investors Services and a related firm had invested clients in certain share classes of mutual funds that resulted in the firms receiving revenue-sharing payments tied to agreements with their clearing broker. In spite of these financial arrangements, the two firms "provided no disclosure or inadequate disclosure of the conflicts of interest arising from this compensation," according to the SEC's administrative order.
And in an order Monday, the SEC found that since January 2014, Rothschild Investment Corp. had not provided full and fair disclosure of fees and revenue-sharing payments and the related conflicts of interest, including 12b-1 fees and revenue sharing from a clearing broker.
A 12b-1 fee is an annual marketing fee paid to advisers that is supposed to be earmarked for ongoing service and education. Firms historically have run into trouble with regulators when they sell more expensive funds, including those with 12b-1 fees, over cheaper alternatives.
A spokesperson for Rothschild did not return a call Tuesday to comment. The firm agreed to pay disgorgement of $1.9 million, interest of almost $200,000 and a penalty of $400,000. The firm has $1.6 billion in assets under management, according to the SEC.
"MML Investors Services takes this matter very seriously and cooperated fully with the SEC," a spokesperson with the firm wrote in an email. "Similar to other industry participants, we have reimbursed impacted accounts and are pleased to have resolved this matter."
MML agreed to pay disgorgement of $1.15 million, interest of $260,000 and a penalty of $700,000.
MML, a subsidiary of MassMutual, has $49 billion in AUM.
The new regional leader brings nearly 25 years of experience as the firm seeks to tap a complex and evolving market.
The latest updates to its recordkeeping platform, including a solution originally developed for one large 20,000-advisor client, take aim at the small to medium-sized business space.
David Lau, founder and CEO of DPL Financial Partners, explains how the RIA boom and product innovation has fueled a slow-burn growth story in annuities.
Crypto investor argues the federal agency's probe, upheld by a federal appeals court, would "strip millions of Americans of meaningful privacy protections."
Meanwhile in Chicago, the wirehouse also lost another $454 million team as a group of defectors moved to Wells Fargo.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
