Merrill Lynch’s corporate registered investment advisor and Eagle Strategies, an RIA subsidiary of New York Life, self-reported undisclosed conflicts of interest about the kinds of mutual funds they sold to the Securities and Exchange Commission in order to avoid additional civil penalties, the agency announced. The SEC also charged RIA Cozad Asset Management for similar violations, although that firm self-reported after the initiative’s deadline and faces a civil penalty.
The three orders will be the last in the commission’s Share Class Selection Disclosure Initiative, which returned more than $139 million in total to investors. That initiative was announced in 2018 and offered firms with undisclosed conflicts of interest pertaining to their selection of mutual fund share classes a chance to self-report these discrepancies to the SEC to avoid additional penalties. Firms needed to self-report by June 12, 2018. In September 2019, the SEC announced that 16 additional firms had self-reported.
Merrill Lynch and Eagle Strategies were ordered to pay a combined $425,000 to investors. Cozad will pay a total $400,000 to investors as well as a $10,000 civil penalty.
“This incredibly successful initiative led to the return of almost $140 million to harmed investors, stopped wrongful conduct, and highlighted the importance of an adviser’s obligations to provide full and fair disclosures to clients,” said C. Dabney O’Riordan, co-chief of the Asset Management Unit. “We continue to actively pursue disclosure failures that financially benefit the adviser to the detriment of the client.”