HighPoint Advisor Group has agreed to pay $764,737 to settle SEC charges that it unnecessarily put clients into high-fee mutual funds, the agency announced.

Highpoint, an investment advisor in Downders Grove, Ill. with $3.6 billion in assets under management, was cited by the SEC for transactions conducted between 2014 and 2019. The SEC accused the firm of placing wrap-free program clients into higher-cost, no-transaction-fee mutual fund share classes in order to avoid having to pay transaction fees on lower-cost shares.

“Under its arrangement with clients in wrap accounts, HighPoint was responsible for paying client trading costs—including transaction fees on mutual fund investments—as part of the overall management fee clients paid HighPoint,” the SEC stated. “HighPoint and its investment adviser representatives avoided incurring transaction fees for some client transactions by recommending mutual fund share classes from a no-transaction-fee program offered by its clearing firm, including those that charged fees pursuant to Rule 12b-1 of the Investment Company Act of 1940, often instead of lower-cost share classes of the same fund that were available to clients for a transaction fee."

HighPoint had undertaken its own internal review in March 2018 and took steps to rectify the situation prior to being contacted by the SEC about the wrap-fee issue.

Those steps included converting all client mutual fund holdings to the lower-cost share class available, training its investment advisor representatives on its new policy, and performing quarterly reviews of client mutual fund holdings, according to the SEC.

HighPoint could not be reached for comment by press time.

HighPoint has roughly 100 advisors who provide financial planning and investment management services primarily to individual and high-net-worth clients, and some pension, charitable organizations and businesses. The firm manages $2.57 billion in its wrap-fee program, according to the firm’s latest ADV filing.

According to the SEC, the firm’s self-initiated corrective measures played a role in the commission’s willingness to accept HighPoint’s settlement offer. That offer included disgorgement of $508,995, prejudgment interest of $130,742 and a $125,000 civil penalty.

Also as part of the settlement, HighPoint has 30 days to identify investors who were financially harmed by the firm’s attempt to avoid paying the fees it had agreed to pay when signing clients into the wrap-fee program, the SEC said.