VALIC Financial Advisors Failed to Disclose Conflicts of Interests
VALIC Financial Advisors Inc. was charged with failing to disclose conflicts of interest regarding more expensive mutual fund investments.
According to the Securities and Exchange Commission, VALIC earned millions of dollars in revenues from placing clients in these more expensive mutual funds, which it never disclosed to clients.
The SEC’s Order found that VALIC routinely selected new mutual fund investments for clients that were part of the firm’s clearing broker’s no-transaction fee program (NTF Program). These mutual funds, which were more expensive than other mutual funds, would not incur a transaction fee that VALIC would be responsible for paying.
VALIC, according to the SEC, benefited financially from participating in the NTF Program, yet failed to disclose these conflicts to investors.
According to Steven Peikin, co-director of the SEC’s Division of Enforcement, investment advisers must disclose conflicts between their financial interests and those of their clients.
“Here, VALIC for years reaped million in benefits at its clients’ expenses while not only failing to disclose the conflicts, but while providing false and misleading information,” Peikin said in a statement.
Without admitting or denying the SEC’s findings, VALIC has consented to disgorgement and prejudgment interest of more than $15.4 million, and a $4.5 million civil penalty. These monies will be placed into a fund to distribute to investors affected by this conduct.
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