The Securities and Exchange Commission says it has reached another settlement over alleged violations related to 12b-1 fees, mutual fund share class selection and revenue-sharing arrangements.
The latest target is Rothschild Investment, which the regulator claims failed to disclose compensation it received from 12b-1 fee arrangements as well as revenue-sharing programs for certain money market mutual funds from an unaffiliated clearing broker.
The company allegedly put clients into mutual fund share classes that resulted in 12b1-fees being paid to the firm even though its clients were eligible for lower-cost share classes of the same mutual funds that didn’t incur 12b-1 fees or revenue-sharing payments, according to an administrative proceeding document the SEC published on Monday.
Rothschild allegedly also failed to properly disclose the fees and revenue-sharing and related conflicts of interest, as well as breached its duty to seek best execution by investing its clients’ money in products that were more favorable to the firm than to them, the regulator says.
Rothschild agreed to a cease-and-desist order and a censure as well as to pay close to $1.9 million in disgorgement, prejudgment interest of around $186,000 and a $400,000 civil penalty without admitting or denying the findings, according to the SEC.
The firm was eligible to participate in its Share Class Selection Disclosure Initiative — which offered some leniency to firms self-reporting share class selection violations — but did not, according the regulator.
That initiative, which concluded in April 2020, resulted in close to $140 million being returned to investors. Since then, the SEC has been steadily reaching settlements over 12b-1 fees and mutual fund share selection ranging from a few hundred thousand dollars to tens of millions of dollars.
Some of the larger settlements have included the $18.3 million settlement with Prudential subsidiary Pruco Securities, the $18.4 million settlement with U.S. Bancorp Investments and the $22.9 million settlement with Voya Financial Advisors, as reported.
Last week, meanwhile, the SEC ordered MassMutual’s broker-dealer MML Investors Services to pay around $2.1 million over alleged violations in its revenue-sharing arrangements, as reported.
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