VFA had wrap fee arrangements with its clients, in which they paid the firm advisory fees that included the costs to execute securities transactions.
In its Order, the SEC found that VFA breached its fiduciary duty to clients by causing them to invest in more expensive mutual funds and share classes.
According to the SEC, VFA instructed its third-party investment advisers to select new mutual fund investments that were available in the no-transaction-fee program (NTF Program) offered by its Clearing Firm.
The mutual funds under the NTF Program are more expensive than other mutual funds available to VFA’s clients. The firm benefited from its participation in the NTF Program, It avoided paying any execution costs for clients’ purchases or sales of mutual funds in the NTF Program.
VFA did not disclose to clients its instruction to its third-party investment advisers or the conflict of interest related to the matter. Instead, the firm provided clients with misleading disclosure.
The SEC also found that VFA received more than $13.2 million in financial benefits as part of its Clearing Firm’s revenue sharing.
