The Securities and Exchange Commission has targeted another registered investment advisor firm over 12b-1 fees and mutual fund share class selection.
The SEC says Fort Lauderdale, Florida-based Aventura Capital Management didn’t properly disclose to its clients the conflicts of interest arising from its share class selection practices, according to an administrative proceeding document published Tuesday.
The SEC alleges that the company opted for share classes paying fees to its affiliated broker-dealer, Aventura Securities, rather than the lower-cost share classes available to the clients.
In addition, Aventura Capital didn’t disclose that it chose higher-cost share classes of money market funds used for cash sweeps, which also paid its broker-dealer commissions, according to the document.
The regulator further alleges that Aventura Capital didn’t provide appropriate written disclosure to clients, or obtain their consent, for engaging in securities transactions on a principal basis through its broker-dealer.
The company also didn’t adopt adequate policies and procedures to prevent such violations, according to the SEC.
Aventura Capital agreed to a cease-and-desist order and a censure, and it will pay $623,324 in disgorgement, plus $90,432 in prejudgment interest and a civil penalty of $225,000, without admitting or denying the findings.
The SEC has been aggressively pursuing violations of mutual fund share class selection for several years.
In 2018, the regulator offered a self-reporting amnesty program related to revenue-sharing and conflicts of interest disclosures. That resulted in around $140 million being returned to investors by the time the program ended in April 2020, according to the SEC.
The regulator says that Aventura Capital didn’t take part in the initiative, though it was eligible to do so.
The company isn’t alone: Since the self-reporting program ended, the SEC has reached several multimillion-dollar settlements over alleged revenue sharing and share class violations.
And in June, the regulator went after an individual investment advisor over allegations related to his firm’s 12b-1 fees and sales loads commissions.