Three AIG broker-dealers will pay more than $9.5 million to settle SEC charges that they steered investors into expensive mutual fund share classes to collect higher fees, among other allegations.
Royal Alliance Associates, SagePoint Financial and FSC Securities knew what they were doing when they "willfully violated" securities laws, the commission says in its order. The three "breached their fiduciary duties as investment advisers," the order says. "Respondents failed to disclose in their Forms ADV or otherwise that they had a conflict of interest due to a financial incentive to place non-qualified advisory clients in higher-fee mutual fund share classes."
AIG neither admitted nor denied the allegations in the case.
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“Advisor Group is pleased to have reached a settlement with the SEC," an AIG spokesman wrote in an email. "We cooperated with the SEC’s investigation while working to enhance the processes at issue. Advisor Group takes compliance with securities regulations seriously and remains focused on serving the best interests of our clients.”
Overall, the firms supervise 5,500 financial advisors in 2,548 offices nationwide.
None of the money will go to victims, according to the SEC order. Instead, it will be paid to the U.S. Treasury. The number of victims was not specified in the order.
The SEC's Asset Management unit, which has been "actively probing advisors' conflicts of interest and disclosure around mutual fund share class selection," handled the case.
“Investment advisers must be vigilant about conflicts of interest when selecting mutual fund share classes because the choice may improperly benefit them at the expense of their clients,” Marshall Sprung, the unit's co-chief said in a release.
REVERSE CHURNING CHARGES
The commission also charged the B-Ds with failing to monitor client accounts every quarter to prevent reverse churning, which refers to placing portfolios with little to no trading activity into fee-based accounts.
In the reverse churning charges, the firms refunded clients a total of $526,739 for lapses in supervision that date back to 2008 and 2009, according to the order. The firms refunded clients another $739,500 after the commission discovered similar lapses in 2013 and 2014. While they are cited in the order, those amounts are not part of the new $9.5 million settlement amount.
The AIG case comes three months after
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