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Written by 3:45 pm FINRA SEC Sanctions

TIAA-CREF to Pay $2.2 Million for Reg BI Failures 

TIAA-CREF to Pay $2.2 Million for Reg BI Failures featured by top securities fraud attorneys, the White Law Group

 TIAA-CREF Failed to Comply with Regulation Best Interest in connection with IRAs 

The Securities and Exchange Commission (SEC) has reportedly imposed a hefty fine exceeding $2.2 million on TIAA-CREF for its alleged failure to comply with Regulation Best Interest in its recommendations regarding individual retirement accounts (IRAs). 

During the investigation, the SEC discovered that TIAA’s broker-dealer subsidiary, TIAA-CREF Individual & Institutional Services, neglected to provide critical disclosures to retail customers whose finances it managed. 

According to the SEC’s findings, the broker-dealer neglected to inform customers that more cost-effective investment alternatives were accessible through an optional brokerage window within the TIAA IRA. 

This window, featuring a wider array of securities including mutual funds, ETFs, stocks, and bonds, provided the same mutual funds available in the broker-dealer’s core menu of investments but at a reduced cost due to waived investment minimums. 

The SEC’s ruling revealed that over 94 percent of TIAA’s IRA customers solely opted for the core menu, resulting in nearly 6,000 retail customers incurring over $900,000 in expenses they could have avoided by utilizing the brokerage window alternative. 

TIAA-CREF Individual & Institutional Services agreed to a settlement, which includes a cease-and-desist order against further violations, a censure, and payment of disgorgement totaling $936,714. Additionally, the firm is required to pay prejudgment interest of $103,424.91 and a civil penalty of $1.250 million. 

The firm accepted these terms without admitting or denying the SEC’s findings. 

Regulation Best Interest 

According to the press release, Thomas P. Smith, Jr. of the SEC’s New York regional office, emphasized, “Reg BI protects retail investors by requiring broker-dealers to act in the best interest of their customers when making recommendations, and today’s action demonstrates our commitment to ensuring compliance.” 

The key aspects of Regulation Best Interest include: 

  • Best Interest Standard: Brokers must act in the best interest of their clients when recommending securities transactions or investment strategies. This standard is higher than the previous suitability standard, requiring brokers to prioritize their clients’ interests over their own. 
  • Disclosure Obligations: Brokers are required to provide clear and comprehensive disclosure of all material facts relating to the broker-client relationship, including fees, conflicts of interest, and the scope of services provided. 
  • Care Obligation: Brokers must exercise reasonable diligence, care, and skill in making recommendations to clients. This includes understanding the client’s investment objectives, financial situation, and risk tolerance, as well as conducting due diligence on recommended investments. 
  • Conflicts of Interest Mitigation: Brokers must establish, maintain, and enforce policies and procedures designed to identify and mitigate conflicts of interest. They must also disclose any conflicts that cannot be reasonably avoided.

Regulation Best Interest is important to investors because it enhances investor protection and promotes greater transparency and accountability in the financial industry.  

By requiring brokers to act in their clients’ best interests and disclose any conflicts of interest, the rule aims to prevent practices that may harm investors or undermine their financial goals. This helps to build trust and confidence in the investment advisory process, ultimately benefiting investors by promoting fair and ethical practices within the securities industry. 

Securities Fraud Attorneys       

If you are concerned about your investments, please call the securities attorneys at The White Law Group at 1-888-637-5510.       

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases. 

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.            

With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment, and financial business transactions attempt to recover their investment losses.    For more information, please visit our website, www.whitesecuritieslaw.com.          



Tags: , , , Last modified: February 21, 2024