Firms's advisory arms settle with SEC over breaching fiduciary duty and failing to disclose conflicts.
The Securities and Exchange Commission has settled with PNC Investments, Securities America Advisors Inc., and Geneos Wealth Management Inc., over charges that the three breached their fiduciary duties to clients and generated millions of dollars of improper fees in the process.
Collectively, the firms will pay almost $15 million, with more than $12 million going to harmed clients, the SEC said in a release.
According to the SEC's orders, the firms failed to disclose conflicts of interest and violated their duty to seek best execution by investing advisory clients in higher-cost mutual fund shares when lower-cost shares of the same funds were available. The SEC also charged Geneos for failing to identify its revised mutual fund selection disclosures as a "material change" in its 2017 disclosure brochure.
The orders require PNCI to pay $6,407,770 in disgorgement and prejudgment interest along with a $900,000 penalty; SAA must pay $5,053,448 in disgorgement and prejudgment interest along with a $775,000 penalty; and Geneos must pay $1,558,121 in disgorgement and prejudgment interest along with a $250,000 penalty.
"We strongly encourage eligible firms to participate in the recently announced Share Class Selection Disclosure Initiative as part of an effort to stop these violations and return money to harmed investors as quickly as possible," said C. Dabney O'Riordan, co-head of the SEC's asset management unit.
The SEC's initiative gives eligible advisers until June 12, 2018, to self-report similar misconduct and take advantage of the enforcement division's willingness to recommend more favorable settlement terms, including no civil penalties against the adviser.
