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Voya Pays $3.6 Million Over Alleged Conflicts of Interest

March 13, 2018

The SEC has settled with Voya Financial for $3.6 million over alleged failures to disclose conflicts of interest at two of the company’s subsidiaries, Financial Advisor magazine writes.

Voya Investments LLC and Directed Services LLC acted as investment advisors to mutual funds offered by insurers affiliated with them, the regulator says, according to the publication.

The two firms allegedly lent securities that were held by the funds to the insurers and recalled them prior to their dividend record dates, which allowed the affiliates, as record shareholders, to get a tax benefit, the SEC alleges, according to FA magazine.

The arrangement led investors to lose out on income from securities lending while not getting any of the offsetting tax benefits, according to the regulator’s order cited by the publication. Voya Investments and Directed Services also failed to disclose their conflicts of interest in the funds’ prospectuses or to the funds’ board, the SEC says, according to FA magazine.

As part of the settlement, more than $2 million is headed to affected mutual fund shareholders, according to the regulator, the publication writes.

Voya neither admitted nor denied the allegations, and a spokesman tells FA magazine that the company is pleased to have reached a settlement, which will allow them to avoid costly litigation.

By Alex Padalka
  • To read the Financial Advisor Magazine article cited in this story, click here.