The SEC continues its pursuit of fee disclosure violations in relation to 12b-1 fees, most recently going after a Massachusetts investment advisory firm, according to news reports.
From at least August 2014 through the end of March 2018, Bolton, Mass.-based Bolton Securities allegedly failed to implement adequate procedures to disclose conflicts of interest, Telegram.com writes citing a complaint filed in U.S. District Court for the District of Massachusetts.
Bolton Securities, which manages around $2 billion, allegedly continued funneling 12b-1 fees to its affiliate and investment advisor representatives without informing its clients about the potential conflicts of interest, according to the complaint cited by the web publication. The regulator also says that Bolton Securities was involved in self-dealing on $325 million worth of fixed income securities, Telegram.com writes.
The SEC is seeking a permanent injunction against Bolton Securities and its agents, employees and lawyers, as well as disgorgement of allegedly ill-gotten gains and prejudgement interest and a penalty, according to the web publication.
Steve Preskenis, president and general counsel of Bolton Securities, says the firm made adequate disclosures and that the bulk of the mutual fund positions in question were acquired not at Bolton but at the client’s previous firm, according to Telegram.com.
Preskenis also calls the self-dealing charges “unfounded” and says the company will defend itself, the web publication writes. The company amended 12b-1 fee disclosures in March 2017, stating that they were “in addition to commissions, and other fees and expenses disclosed in a fund’s prospectus fee table,” according to Telegram.com.
The company also denied it had a duty to disclose that clients had access to non-12b-1 shares if they transferred their mutual funds from other firms, according to Telegram.com.
The SEC has been going after investment advice firms over alleged failures in disclosing conflicts of interest related to mutual fund fees this year.
The regulator offered an amnesty to firms who self-reported 12b-1 fee disclosure violations by June 12, 2018, allowing them the ability to avoid financial penalties.
In March this year, the SEC settled with 79 firms who self-reported violations and ordered them to pay back $125 million to harmed investors. In September, the regulator settled with 17 more firms and ordered them to pay $10 million in total to clients who were allegedly harmed by the sale of higher-priced mutual fund share classes than what was available to them, as reported.
The following day, the SEC went after yet another firm over alleged 12b-1 violations, ordering it pay $1.5 million.