Advisers to return US$125m in fees

Financial advisers in the US are set to return about US$125m million to retail customers after a regulatory clampdown on inadequate fee disclosures last year.

The Securities and Exchange Commission charged 79 people, including well-known names such as AXA Advisors, Deutsche Bank Securities, LaSalle St. Investment Advisors and Woodbury Financial Services.

One year ago, the American corporate regulator found that investment advisers selling mutual fund shares were placing their clients in a share class that deducted recurring fees from the fund's assets, when a lower-cost share class was available.

These recurring fees were not adequately disclosed to clients.

They went to investment advisers in their capacity as brokers, to their broker-dealer affiliates, or to their personnel who were also registered representatives, creating a conflict between advisers' gains and the clients' best interest.

The SEC came up with a three step plan to address this. It incentivised advisors for self-reporting they had violated American legislation on conflict of interest, asked them to promptly compensate investors and lastly to review and correct fee disclosures.

SEC chair Jay Clayton said: "Investment advisers play a vital and trusted role in our markets.  They offer a wide array of products and services to our retail investors, ranging from one-time advice on a model investment portfolio to comprehensive planning combined with continuous investment advice and other services."

"Regardless of the scope and duration of the investment advisory services, investment advisers are fiduciaries and, as such, their duties of care and loyalty require them to disclose their conflicts of interest, including financial incentives."

Clayton added he is pleased so many investment advisers chose to participate in the initiative and, more importantly, that their clients will be reimbursed.

"This initiative will have immediate and lasting benefits for Main Street investors, including through improved disclosure.  Also, I am once again proud of our Division of Enforcement for their vigorous and effective pursuit of matters that substantially benefit our long-term, retail investors," he said.

The total returned amount of US$125 million will go back to retail investors in "substantial majority, SEC said.

Read more: SECAXA AdvisorsDeutsche Bank SecuritiesJay ClaytonLaSalle St. Investment AdvisorsWoodbury Financial Services
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