The Securities and Exchange Commission on Thursday charged the corporate registered investment advisory of Cetera Advisors in a federal district court in Denver with breaching its fiduciary duty to clients and failing to adequately disclose conflicts of interest related to the sales of more expensive mutual fund share classes.
The regulator alleged that Cetera “continuously recommended and invested client assets in investments that cost clients more when less expensive, identical investments were available,” according to the complaint.
It also alleged that Cetera “failed to disclose that it had numerous, material conflicts of interest in providing investment advice to its clients,” and that those investment choices generated an additional $10 million in revenue for the RIA.
The SEC alleged that by putting investors in higher-cost share classes, for which it was compensated, Cetera received about $5 million more in 12b-1 fees than if it had put clients in lower-fee share classes.
It also said that Cetera breached its fiduciary duty to investors by taking about $2.1 million in revenue-sharing compensation for selling the higher-share-class mutual funds from a third-party broker.
In addition, the regulator charged Cetera with directing the clearing broker to mark up “non-transaction fees, which Cetera then received indirectly from its advisory clients” to the tune of about $2 million.
Cetera spokesman Sean Mogle declined to comment.
