The Securities and Exchange Commission says it has prevailed in a case against an investment advisor firm and its part owners accused by the regulator of breaching their fiduciary duty in relation to mutual fund share class selection and disclosure.
The SEC filed a civil complaint in 2020 alleging that from at least Aug.15, 2014, through December 2018, Lancaster, Pennsylvania-based Ambassador Advisors, along with Bernard Bostwick, Robert Kauffman and Adrian Young — part owners, executives and investment advisor representatives of the firm — unlawfully put their clients into mutual fund share classes charging 12b-1 fees when the customers were eligible for lower-cost share classes. As a result, the defendants violated their duty to seek best execution for their clients, the SEC said.
In addition, the defendants violated their fiduciary duty through failure to make proper disclosures about their conflicts of interest regarding their selection of the share classes, according to the regulator.
In December 2021, the U.S. District Court for the Eastern District of Pennsylvania entered a summary judgment in favor of the SEC against Ambassador Advisors, ruling that the company didn’t adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act, the regulator says.
And earlier this week, following an eight-day trial, a jury again ruled in favor of the SEC, concluding that the defendants breached their fiduciary duty in connection the share class selection, according to a statement from SEC Division of Enforcement director Gurbir Grewal.
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