March 14, 2016

Three AIG affiliates, Royal Alliance Associates, SagePoint Financial, and FSC Securities Corporation, will pay $9.5 million to settle SEC charges of steering mutual fund clients toward more expensive share classes so the firms could collect more fees.  An SEC investigation found that the firms placed clients in share classes that charged fees for marketing and distribution despite the clients being eligible to buy shares in fund classes without those additional charges.  As a result, the firms collected approximately $2 million in extra fees.  The firms failed to disclose this conflict of interest.  The SEC’s order also alleged that the firms failed to monitor advisory accounts on a quarterly basis to prevent reverse churning.  The firms had compliance policies and procedures to ensure that fee-based advisory accounts that charged an inclusive fee for both advisory services and trading costs remained in the best interest of clients that traded infrequently, but failed to implement those policies and procedures.  SEC

Tagged in: Regulatory Violations, Securities Fraud,