VFA’s disclosure failure related to the mutual funds is a violation of Sections 206(2) and 206(4) of the Investment Advisers Act and Rule 206(4)-7.
To resolve the case, VFA agreed to pay disgorgement and prejudgment interest of more than $15.4 million and a civil penalty of $4.5 million. The firm also agreed to a cease-and-desist order and a censure.
In a statement, SEC Division of Enforcement co-director Steven Peikin said, “Financial relationships and affiliations in the K-12 teachers’ retirement sector can impact teachers’ financial interests. It is critical that teachers get the information they need to make informed decisions about their retirement options.”
He added, “Investment advisers must disclose conflicts between their financial interests and those of their clients. Here, VFA for years reaped millions in benefits at its clients’ expense while not only failing to disclose the conflicts but while providing false and misleading information.”
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