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July 28, 2020

Posted  July 28, 2020

Houston-based VALIC Financial Advisors will pay $40 million to resolve charges that it failed to disclose payments made as a result of referrals and failed to disclose fees it received for steering clients to certain mutual funds. With respect to its mutual fund fee disclosure practices, VFA was alleged to steer individual clients to more expensive funds that VFA was able to purchase through its clearing broker’s no-transaction fee program and with respect to which VFA received both 12b-1 fees and revenue sharing from the clearing broker, while VFA was also receiving advisory fees from the individual clients, telling clients those fees would cover execution costs.  With respect to the referral payments, VFA failed to disclose that its parent company paid an entity associated with Florida teachers’ unions in exchange for the entity’s exclusive endorsement of VFA as its preferred financial services partner and the entity’s agreement to not promote or endorse VFA’s competitors.  In addition to the penalty, VFA has agreed to provide Florida K-12 teachers who participate in its advisory product in Florida’s 403(b) and 457(b) retirement programs with its most favorable rates in the Florida K-12 market.  SEC

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Regulatory Violations,