SEC Fines Adviser for Breach of Fiduciary Duty
March 7, 2022
The SEC has settled charges against a registered investment adviser for breach of fiduciary duty to clients for failures regarding conflicts disclosure, best execution, and duty of care. The adviser, which was part of a dually-registered broker-dealer/adviser firm during the period covered by the SEC order, was found to have failed to provide full and fair disclosure regarding conflicts arising from revenue-sharing payments, markups, revenue from margin interest, and an annual credit for maintaining accounts, balances, and trading volumes, all received from an unaffiliated clearing broker.
As noted in the order, the fiduciary duty of care requires, among other things, an adviser to provide investment advice in the best interest of its client based on the client’s objectives and seek best execution for client transactions. The best execution violation in this case arose from the adviser’s investing clients in mutual fund and money market fund share classes “when share classes of the same funds were available to the clients that presented a more favorable value for these clients under the particular circumstances in place at the time of the transactions.” The SEC found that the adviser further breached the duty of care because, according to the order, the adviser failed to undertake an analysis to determine whether the particular share classes it selected were in the best interests of its advisory clients.
The SEC also found that the adviser failed to adopt and implement policies and procedures reasonably designed to prevent each of these violations. The adviser was ordered to pay a fine, disgorgement, and prejudgment interest totaling over $4.6 million.
See In the Matter of Ameritas Advisory Services, LLC, available on the SEC website.