Cambridge Investment Research Advisors (CIRA), a hybrid broker-dealer/RIA based in Fairfield, Iowa, has been charged by the Securities and Exchange Commission with failing to reveal conflicts of interest to clients, among other charges, the SEC announced Wednesday.

The firm, which has $68 billion in assets under management, failed in its fiduciary duty to disclose material conflicts of interest and breached its duty of care related to its selection of mutual funds and wrap accounts for clients, the SEC said.

The complaint is similar to one settled by Ameritas Advisory Services of Lincoln, Neb., a subsidiary of Ameritas Life Insurance. Ameritas Advisory Services agreed to pay $4.6 million to settle allegations that it failed to act in its clients’ best interests with regard to share class selection or disclose conflicts of interest around fee markups, margin interest and business credits, the SEC announced in February..

“Cambridge denies the allegations of the complaint and has engaged outside counsel to vigorously defend itself. Given that this matter is currently pending, Cambridge is not able to provide any further comment at this time,” the firm said in an email.

The SEC's complaint is yet another signal that the agency's increasingly aggressive stance on fees and disclosure is changing the game for broker-dealers and RIAs. “This is an industry wake-up call. The biggest takeaway is the SEC is ready to hold broker-dealers and RIAs to the obligation of care, and not just one of disclosure. This is a major milestone for clients and the industry alike,” said Simon Hoyle of Henschen Associates, a recruiting firm for broker-dealers and RIAs.

“The SEC is sending a very clear message in this case that simply disclosing client conflicts of interest is not addressing the bigger picture of working within those best interests,” he added.

According to the SEC's complaint, “Since at least 2014, CIRA invested client assets in mutual funds and money market sweep funds that generated millions of dollars in revenue sharing payments to an affiliated broker-dealer, Cambridge Investment Research, instead of lower-cost share classes and investment options that would have yielded less or no revenue sharing.”

These undisclosed investment practices allowed CIRA to avoid paying millions of dollars in transaction fees, the complaint said. In addition, according to the complaint, CIRA converted hundreds of accounts to its more expensive wrap account program without adequate disclosure and without analyzing whether doing so was in its clients' best interests.

The complaint said CIRA failed to disclose that its investment advisor representatives received compensation in the form of forgivable loans in exchange for meeting certain criteria, such as maintaining certain asset levels and tenure with CIRA.

The complaint argues that “CIRA breached its fiduciary duty and regularly and repeatedly put its financial interests ahead of its clients” and also “continuously failed to disclose to its clients material facts about its conflicts of interest, including that some investment choices generated additional revenue for its affiliate Cambridge Investment Research,” which also is based in Fairfield, Iowa.

The complaint was filed in U.S. District Court in the Southern District of Iowa. The SEC is seeking disgorgement of any ill-gotten gains, interest, and civil penalties.