The SEC Cracks Down on Mutual Fund Overcharges

The SEC explained in February in its 2018 National Exam Program examination priorities letter,  that they would be scrutinizing financial advisers in 2018 to make sure they were not overcharging investors, when less expensive options are available.

According to a press announcement on Thursday, the SEC announced that three investment advisers have settled charges for allegedly breaching fiduciary duties to clients and generating millions of dollars of improper fees in the process.

PNC Investments LLC, Securities America Advisors Inc., and Geneos Wealth Management Inc. reportedly failed to disclose conflicts of interest, according to the SEC’s orders. The three firms allegedly 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.

The SEC also charged Geneos for failing to identify its revised mutual fund selection disclosures as a “material change” in its 2017 disclosure brochure.  Collectively, the firms will pay almost $15 million, with more than $12 million going to investors.

The SEC’s orders also found that PNCI and Geneos failed to disclose the conflict of interest associated with compensation they received from third parties for investing clients in particular mutual funds. Additionally, they found  that PNCI improperly charged advisory fees to client accounts for periods when there was no assigned investment advisory representative.

The regulator has reportedly increased the numbers examined about 15 percent of all investment advisors, in 2017, up from 8 percent five years ago.

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The foregoing information, which is all publicly available on the SEC’s website, is being provided by The White Law Group.  The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

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