Securities America, PNC, Geneos to Pay $15 Million for Mutual Fund Violations (Advisorhub.com)

The Securities and Exchange Commission on Thursday said PNC Investments, Securities America Advisors, and Geneos Wealth Management agreed to settle fiduciary duty breach charges related to mutual fund sales by paying $15 million in penalties and restitution to customers.

The three firms each settled charges of putting customers who were paying fees in advisory programs into A-share funds that charged ‘12b-1’ marketing and distribution fees when cheaper institutional share classes were available.

PNC Investments agreed to the largest penalty—$6.4 million in disgorgement and a $900,000 fine. In addition to failing to disclose conflicts of interest in selling the higher-priced shares, the Pittsburgh-based advisory unit of PNC Bank was also accused of charging advisory fees when no advisors were assigned to accounts.

It and Centennial, Colorado-based Geneos also failed to disclose to customers that they were receiving compensation from unidentified clearing firms for using their mutual fund programs. Geneos agreed to pay $1.6 million in disgorgement and a $250,000 penalty.

Securities America, a Nebraska-based independent broker-dealer owned by Ladenburg Thalmann, will disgorge $5.1 million and pay a $775,000 penalty for the over-riding charge against all three firms of violating best-execution and disclosure obligations by selling higher-cost shares than were available.

The firms accepted the settlement without admitting or denying the charges, but the SEC used the occasion to publicize its limited-life amnesty program for firms that self-report fund share-class sales violations.

“We strongly encourage eligible firms to participate in the recently announced Share Class Selection Disclosure Initiative as part of an effort to stop these violations and return money to harmed investors as quickly as possible,” C. Dabney O’Riordan, Co-chief of the SEC’s Asset Management Unit, said in a prepared statement.

The program that was rolled out in February and ends on June 12 aims to offer “more favorable settlement terms” and no civil penalties to qualifying firms. An SEC spokeswoman declined to comment on responses in the securities industry to the program.

LPL Financial and some other firms have banned sales of class-A shares in advisory programs and Morgan Stanley last week said it will restrict the time period in which its brokers can receive 12b-1 trail commissions for selling class-C shares of mutual funds.

Article Source: https://advisorhub.com/securities-america-pnc-geneos-pay-15-million-mutual-fund-violations/

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