Three affiliates of AIG were charged by the Securities and Exchange Commission
for allegedly recommending mutual fund clients to invest in more expensive
share classes. This allowed the firms to allegedly collect more fees.
As a result of the SEC charges, the firms agreed to pay a settlement of
over $9.5 million.
SEC conducted an investigation of Royal Alliance Associates, FSC Securities
Corporation, and SagePoint Financial and found that they allegedly placed
clients in various share classes in order to charge marketing and distribution
fees. They allegedly did this despite the eligibility of the clients to
buy shares in classes that didn’t require additional costs. This
allowed the firms to allegedly collect roughly $2 million because of the
Additionally, the firms were accused of failing to disclose the conflict
of interest and that the changes would profit the firms.
Marshall S. Sprung, the SEC Enforcement Division’s Asset Management
Unit Co-Chief, made the following statement:
Investment advisers must be vigilant about conflicts of interest when selecting
mutual fund share classes because the choice may improperly benefit them
at the expense of their clients.
The SEC’s investigation also found the firms allegedly failed to
regularly monitor the advisory accounts to prevent acts of misconduct
such as reverse churning. They are accused of failing to implement the
compliance policies and procedures. As a result of their alleged actions,
the SEC found the firms to be in violation of Sections 206(2), 206(4),
and 207 of the Investment Advisers Act of 1940, as well as Rule 206(4)-7.
Royal Alliance Associates, FSC Securities Corporation, and SagePoint Financial
agreed t o a $7.5 million penalty, and disgorgement of over $2 million
in improper fees and the additional prejudgment interest.
If you lost money while investing with any of these firms, schedule a
free consultation with our securities fraud lawyers at Meyer Wilson today.