The SEC fines three broker-dealers a total of $9.5 million to settle claims that they recommendeded more expensive mutual funds to customers that generated higher fees when less expensive funds were available.
As a result of the broker-dealers’ actions, American International Group Inc. (AIG) ended up collecting an additional $2 million in revenue for steering clients into mutual fund classes that charge 12b-1 fees for marketing and distribution of the securities.
It is generally accepted that it is in the customer’s best interest to be invested in a mutual fund that does not charge ongoing fees. The three AIG subsidiaries that collected these fees in this matter are: Royal Alliance Associates Inc., SagePoint Financial Inc., and FSC Securities Corp. According to the SEC, these firms collected the charges without advising investors of the higher fees.
In addition to disgorging the nearly $2 million in fees collected, the firms will pay an additional $7.5 million to the SEC. In addition to steering clients to these higher-expense funds, the firms failed to keep watch over certain accounts for “reverse churning,” when clients are placed in wrap-fee accounts that charge for services and costs even though they may rarely trade. The firms’ stated policies were to monitor for low activity accounts to make sure they remained in their clients’ best interests.
Did AIG’s SEC Fines Affect You?
If you invested with Royal Alliance Associates, SagePoint Financial, or FSC Securities Corp., you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities fraud attorney as soon as possible to discuss your rights.