Bank of America-owned Merrill Lynch and two smaller advisory firms have agree to pay nearly $1 million for selling mutual fund shares that paid brokers high-cost annual commissions when cheaper share classes were available, the SEC announced.

These will be the last settlements the SEC accepts as it concludes an initiative that required firms to pay civil monetary penalties if they self-reported violations of mutual fund share-class sales and disclosure violations, the agency said in a statement.

Eighty-seven advisory firms returned more than $139 million to investors under the SEC’s fund share self-reporting initiative, which ended September 30.

Merrill Lynch agreed to pay $425,00 in penalties and investor reimbursements as part of the deal, the SEC said. The other firms cited in today's announcement were Eagle Strategies LLC of New York and Cozad Asset Management of Champaign, Ill.

“This incredibly successful initiative led to the return of almost $140 million to harmed investors, stopped wrongful conduct, and highlighted the importance of an advisor’s obligations to provide full and fair disclosures to clients,” C. Dabney O’Riordan, co-chief of the SEC’s Asset Management Unit, said in a statement. 

“We continue to actively pursue disclosure failures that financially benefit the advisor to the detriment of the client,” O’Riordan added.

Merrill’s settlement stems from the firm’s sales of mutual fund shares with 12b-1 fees between January 1, 2014, and May 31, 2018. The sales, and Merrill’s failure to adequately disclose advisors’ conflict-of-interest in recommending funds that paid them more, violated the Investment Advisers Act fiduciary and disclosure requirements, the SEC said.

Merrill Lynch “purchased, recommended, or held for advisory clients mutual fund share classes that charged 12b-1 fees instead of lower-cost share classes of the same funds for which the clients were eligible,” the SEC said in the settlement.

Merrill settled without admitting or denying the findings.

The SEC also settled with Eagle Strategies LLC, a New York firm that self-reported fund-share sales and disclosure violations from January 2014 through March 2016. Eagle, which was managing about $8.5 billion as of its July 2019 regulatory report, agreed to repay $101,090 to affected investors, the SEC said.

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