FOLLOW US

Investment Adviser Firms Fined

Geneos Wealth Management Inc., Securities America Advisors Inc., and PNC Investments LLC, are three investment adviser firms fined by the Securities and Exchange Commission (SEC). The fines are the result of each firms failure to disclose conflicts of interest in relation to costs associated with mutual fund shares. Specifically, the firms violated their fiduciary responsibility to clients by offering higher-cost mutual fund shares when lower-cost share alternatives of the same funds are available, and equally suitable.

The actions by the investment adviser firms represent a material breach of special trust and confidence. The respective investment adviser firm decision to consistently offer a higher-cost mutual fund share is exploitative in nature. In light of the fact investment adviser remuneration is directly tied to sales commissions from the underlying securities, the fines are particularly relevant.

Geneos Wealth Management is also charged for failing to identify its revised mutual fund selection disclosures. Further, the SEC discovered Geneos failed to disclose conflicts of interest associated with compensation received from third parties.

“These disclosure failures cause real harm to clients,” said C. Dabney O’Riordan, Co-Chief of the Asset Management Unit.

Collectively, the firms will pay approximately $15 million in fines. Harmed clients will receive more than $12 million of the aggregate fine amount.

Share Class Selection Disclosure Initiative

Investment advisers firms are acutely aware of regulatory requirements in their chosen profession. Knowing this, the SEC has initiated the Share Class Selection Disclosure Initiative. Firms are strongly encouraged to participate in the program. By participating, violations are stopped and eligible investor money is returned as quickly as possible.

“The initiative provides eligible advisers until June 12, 2018, to self-report similar misconduct and take advantage of the Enforcement Division’s willingness to recommend more favorable settlement terms, including no civil penalties against the adviser.” – Securities and Exchange Commission

The SEC states that said firms violated provisions of the Investment Advisers Act of 1940, including an antifraud provision.