The Securities and Exchange Commission announced today that it had ordered another 17 self-reporting investment advisors and broker-dealers to pay $10 million to investors for failing to fully disclose conflicts created when they selected more expensive mutual fund share classes for clients when lower-cost share classes for the same fund were available.

The list include 16 firms that self-reported as part of the Division of Enforcement’s Share Class Selection Disclosure Initiative (SCSDI) launched February, 2018, and one that did not self-report and was ordered to pay a $300,000 civil penalty.

The new settlements represent round two of SCSDI and bring the total number of firms that have self-reported infractions and settled with the SEC to 95 that must pay over $135 million to investors, the SEC said.

“Today’s actions reaffirm the benefits to advisers and their clients for self-reporting as part of the Initiative,” said C. Dabney O’Riordan, Co-Chief of the SEC’s Asset Management Unit. “They also demonstrate the Commission’s commitment to holding advisers accountable for selecting more expensive investments that eat away at their clients’ investment returns without proper disclosure.”

The SEC’s orders find that the 16 self-reporting firms are censured, that they cease and desist from future violations, that they pay disgorgement and prejudgment interest totaling nearly $10 million and that they comply with certain undertakings, including returning the money to investors.

The Share Class Selection Disclosure Initiative is being led by the Division of Enforcement’s Asset Management Unit.

Firms that were charged and settled today as part of the SCSDI are:

  • Bill Few Associates Inc.
  • Cargile Investment Management Inc.
  • Comprehensive Capital Management Inc.
  • Equity Services Inc.
  • Essex Financial Services Inc.
  • Folger Nolan Fleming Douglas Capital Management Inc.
  • Henley & Company Wealth Management LLC
  • Hilltop Securities Inc. and Hilltop Securities Independent Network Inc.
  • IC Advisory Services Inc.
  • Independent Financial Group LLC
  • Investment Partners Ltd.
  • IPG Investment Advisors LLC
  • Michigan Advisors Inc.
  • Saxony Capital Management LLC
  • Wedbush Securities Inc.

As part of the initiative announced on Feb. 12, 2018, the Division of Enforcement agreed that for eligible firms that self-reported infractions by the deadline, the Division would recommend the SEC use standardized settlement terms and offered an additional carrot: the Commission promised not to impose a civil penalty on self-reporting firms.

On March 11, 2019, the Commission instituted actions against 79 advisory firms that participated in the initiative, ordering the payment of over $125 million in disgorgement and prejudgment interest to investors.

Today, the Commission issued orders against 16 additional firms that self-reported as part of the initiative, bringing the total amount ordered to be returned to investors to over $135 million.

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