Bank of Montreal advisory units pay $38 million for overcharging clients
SEC says BMO failed to disclose conflicts of interest when it put customers into proprietary funds.
Two Chicago-based units of the Bank of Montreal agreed to pay nearly $38 million to settle charges that advisers failed to disclose conflicts of interest that resulted in clients incurring higher fees through propriety funds.
According to the Securities and Exchange Commission, BMO Harris Financial and BMO Asset Management used propriety funds approximately 50% of the time when allocating client accounts on a retail managed account platform.
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The SEC claim states that BMO failed to disclose the conflicts during the period from July 2012 through March 2016, and in March 2016, $1.4 billion of the $2.7 billion on BMO’s managed account platform was allocated to propriety funds.
In addition to disproportionately allocating to proprietary funds, BMO is also charged with using more expensive fund shares when lower-cost shares were available.
According to the latest Form ADV filing, BMO Harris Financial has approximately $4 billion in client assets under management.
In a statement, BMO said: “We are pleased to have resolved this matter with the SEC. We have enhanced our conflict of interest disclosures and processes for identifying and addressing conflicts. We have a strong culture of compliance and a robust control framework that fully meets legal and regulatory requirements.”
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