Investment Adviser Settles SEC Charges for Failing to Disclose Revenue Sharing Payments

An investment adviser settled SEC charges for failing to disclose conflicts of interest related to revenue sharing payments.

In the Order, the SEC stated that the adviser invested clients in certain mutual funds and cash sweep products that resulted in the adviser's affiliated broker receiving revenue sharing payments. The SEC found that the adviser did not adequately disclose the conflicts of interest arising from this compensation. In addition, the SEC found that the adviser did not fulfill its obligation to seek best execution when it recommended that certain clients invest in share classes of mutual funds that paid revenue sharing when other share classes were also available to such clients at a more favorable price.

As a result, the adviser was found to be in violation of Advisers Act Sections 206(2) and (4) ("Prohibited transactions by investment advisers") and Rule 206(4)-7 ("Compliance procedures and practices").

To settle the charges, the adviser agreed to (i) a cease-and-desist order prohibiting any future violations, (ii) a censure and (iii) disgorgement, prejudgment interest and a civil penalty totaling $1,825,953.