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Commonwealth Financial urged the First Circuit on Friday to overturn a $93 million award, arguing that the Massachusetts federal court was too quick to conclude that its fee disclosure practices harmed investors. The SEC’s lawsuit, which resulted in a summary judgment ruling in April, found that Commonwealth had intentionally withheld material information about fees associated with certain investment funds.

The SEC claimed that, under an agreement with Fidelity affiliate National Financial Services, Commonwealth earned more on certain funds than customers were told. U.S. District Judge Indira Talwani ruled that Commonwealth must disgorge $65 million, pay a $6.5 million penalty, and another $22 million in interest. The SEC argued that the firm’s failure to disclose the cost structure of these funds violated investor rights, asserting that many clients were unaware of the higher fees tied to some of the investment products.

Thomas M. Byrne of Eversheds Sutherland LLP, representing Commonwealth, argued that the court failed to consider the different needs of investors. Some clients, he said, might prefer a per-transaction fee for long-term investments, while others, such as frequent traders, would be more concerned with management fees. Byrne emphasized that investor testimony was necessary to determine the significance of the omission.

Justice Stephen Breyer, sitting as a visiting judge, appeared to struggle with Byrne’s argument. He raised a hypothetical scenario about an investor choosing between paying a $42 transfer fee or selecting a higher-cost fund with an expense ratio. Breyer questioned why any investor would opt for the latter, to which Byrne responded that this kind of decision required the testimony of actual investors.

U.S. Circuit Judge Lara Montecalvo pointed out that frequent traders might be more likely to avoid funds with per-transaction fees, but she also expressed skepticism about the likelihood of such behavior. Judge Sandra Lynch echoed her concerns, questioning whether there was a material issue regarding how 100,000 investors would have perceived the missing disclosure.

The SEC, represented by Paul Alvarez, countered that there was no dispute over the material fact that Commonwealth had failed to disclose critical information about its fee structure. The SEC contended that Commonwealth’s conflict of interest—earning more from higher-cost funds—was never disclosed to clients.

The First Circuit panel, which included Justice Breyer, Judge Lynch, and Judge Montecalvo, reserved its decision after the arguments. The case is Securities and Exchange Commission v. Commonwealth Equity Services LLC, case number 24-1427, in the U.S. Court of Appeals for the First Circuit.