“While the enforcement action proposed by the Securities and Exchange Commission is a pending legal matter, Commonwealth Financial Network vehemently denies the allegations and believes they are categorically without merit. We are confident we have operated both appropriately and justly and will vigorously defend our actions in this matter,” Marchand said.
NFS and Fidelity did not immediately respond to a request for comment.
“I think these are important cases to be brought because there are a lot of revenue-sharing and side deals that various firms have with fund companies that investors have no idea about,” said Samuel B. Edwards, a securities attorney and partner with the law firm of Shepherd, Smith, Edwards & Kantas, Houston, Texas.
“There is a reason the advisor is pushing investors toward a particular product, but in reading the complaint, the SEC’s suggestion seems to be that if Commonwealth had just done a better job disclosing this, the practice would be acceptable. That’s been my concern all along with Regulation Best Interest—that broker-dealers now have the license to disclose away all their conflicts,” Edwards said.
“This is one of the issues the SEC has been cracking down on for years,” said Andrew Stoltmann, director of Stoltmann Law Offices, Barrington, Ill. “Most brokerage firms have gotten the message. Some of the more ethically suspect firms continue to engage in this practice. I think the SEC is trying to remind brokerage firms that this sort of chicanery will not be allowed.”