SEC Action on 12b-1, Sweeps
ThinkAdvisor writes "SEC Hits Madison Avenue Securities Over Revenue Sharing, 12b-1 Fees," which says, "The Securities and Exchange Commission on Tuesday charged Madison Avenue Securities with breaching its fiduciary duties in connection with its receipt of third-party compensation, including 12b-1 fees. According to the SEC order, Madison, a dually registered investment advisor and broker-dealer, failed to provide full and fair disclosure regarding conflicts of interest associated with its receipt of: revenue sharing payments from its unaffiliated clearing broker as a result of sweeping cash into certain money market mutual funds since at least February 2016; fees pursuant to Rule 12b-1 under the Investment Company Act of 1940 from at least February 2016 to April 2018; and revenue sharing payments from its clearing broker for no-transaction-fee mutual fund investments since at least February 2016. With respect to the 12b-1 fees, Madison, although eligible to do so, 'did not self-report to the Commission pursuant to the Division of Enforcement's Share Class Selection Disclosure Initiative,' the order states." The piece adds, "The San Diego-based firm also failed to adopt and implement 'written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its practices concerning cash sweep revenue sharing, mutual fund and money market fund share class selection, and NTF revenue sharing,' the SEC said. The firm was ordered to pay disgorgement, prejudgment interest and a civil penalty totaling $803,174 as follows: disgorgement of $579,524, prejudgment interest of $73,650 and a civil money penalty of $150,000."
