Three corporate registered investment advisory firms of broker/dealers have settled charges with the Securities and Exchange Commission for failing to disclose conflicts of interest and violating best execution duties. The SEC alleges PNC Investments, Securities America Advisors and Geneos Wealth Management put clients into higher-cost mutual fund share classes when lower-cost share classes were available, an issue the regulator has been cracking down on. The three firms have agreed to pay a total $15 million, $12 million of which will go to harmed clients. The SEC has made fee transparency a priority this year. In fact, the enforcement division just recently launched its Share Class Selection Disclosure Initiative, where it will not recommend penalties against RIAs who self-report violations related to share class selection and return money to affected clients. Ameriprise was recently charged for similar violations.
Many Americans lack the knowledge needed to make financial decisions, according to a new survey by the TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business. On average, U.S. adults correctly answered just half of the 28 questions on the survey. Americans had the most trouble understanding risk, correctly answering an average of 35 percent of questions in that category. Less than one in five respondents had a high level of personal finance knowledge, measured by an ability to correctly answer 75 percent of the questions. “Low levels of financial literacy, among not only the young but also people close to retirement, show we need to step up the effort to promote financial knowledge across the entire population,” said Annamaria Lusardi, academic director of GFLEC.
An Oregon financial advisor has been charged with defrauding his senior citizen clients in what amounts to an alleged Ponzi scheme. The U.S. Attorney’s Office for the District of Oregon claims that Shayne Kniss ran a Ponzi scheme through his investment firm, Iris Capital Management. The U.S. Attorney alleges that Kniss offered his clients—many of whom were aged 65 or older—access to four investment funds backed by houses in the Portland area, according to a report on HousingWire. The properties were supposed to be rehabilitated, upgraded and resold at a profit, promising 8 to 12 percent returns. Instead, the U.S. Attorney says that Kniss mixed investor money among the funds, used new investor money to pay back earlier investors and used more than $500,000 for personal use, including investing in a retail marijuana business. Overall, 47 people invested over $4.3 million in the funds.