Three affiliates of AIG were charged by the Securities and Exchange Commission for allegedly recommending mutual fund clients to invest in more expensive share classes. This allowed the firms to allegedly collect more fees. As a result of the SEC charges, the firms agreed to pay a settlement of over $9.5 million.
SEC conducted an investigation of Royal Alliance Associates, FSC Securities Corporation, and SagePoint Financial and found that they allegedly placed clients in various share classes in order to charge marketing and distribution fees. They allegedly did this despite the eligibility of the clients to buy shares in classes that didn’t require additional costs. This allowed the firms to allegedly collect roughly $2 million because of the extra charges.
Additionally, the firms were accused of failing to disclose the conflict of interest and that the changes would profit the firms.
Marshall S. Sprung, the SEC Enforcement Division’s Asset Management Unit Co-Chief, made the following statement:
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.
The SEC’s investigation also found the firms allegedly failed to regularly monitor the advisory accounts to prevent acts of misconduct such as reverse churning. They are accused of failing to implement the compliance policies and procedures. As a result of their alleged actions, the SEC found the firms to be in violation of Sections 206(2), 206(4), and 207 of the Investment Advisers Act of 1940, as well as Rule 206(4)-7.
Royal Alliance Associates, FSC Securities Corporation, and SagePoint Financial agreed t o a $7.5 million penalty, and disgorgement of over $2 million in improper fees and the additional prejudgment interest.
If you lost money while investing with any of these firms, schedule a free consultation with our securities fraud lawyers at Meyer Wilson today.