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Securities and Exchange Commission (SEC) Settles Charges Against Investment Adviser for Improperly Calculating Advisory Fees and Overcharging Clients

On April 3, 2014, the SEC settled charges against Transamerica Financial Advisors, Inc. for improperly calculating advisory fees and overcharging clients. According to the SEC’s order, Transamerica offered breakpoint discounts designed to reduce the fees that clients owed to the firm when they increased their assets in certain investment programs and permitted clients to aggregate the values of related accounts in order to get the discounts. The SEC found that Transamerica failed to process aggregation requests by clients and also had conflicting policies on whether representatives were required to pass on to clients the savings from breakpoint discounts. The SEC’s order stated that SEC examiners alerted Transamerica about aggregation problems in 2010 after an examination of a branch office. The SEC found that, while Transamerica provided refunds to clients of that branch office, Transamerica failed to undertake a firm-wide review of all client accounts as SEC examiners recommended and, during a subsequent examination of the firm in 2012, SEC examiners found that Transamerica was still failing to aggregate certain related client accounts. As a result, the SEC found that Transamerica overcharged certain clients by failing to apply the discounts and failed to have adequate policies and procedures in place to ensure that the firm was properly calculating its fees.

The SEC’s order found that Transamerica willfully violated Sections 206(2), 206(4) and 207 of the Advisers Act and Rule 206(4)-7 thereunder. As a result of the SEC investigation, Transamerica reviewed client records and reimbursed 2,304 current and former client accounts with refunds and credits totaling $553,624 including interest. Transamerica also agreed to pay an additional $553,624 penalty. In addition to the monetary reimbursements and sanctions, Transamerica agreed to retain an independent consultant to review its policies and procedures pertaining to its account opening forms, fee schedules and fee computation methodologies, as well as the firm’s account aggregation process for breakpoints.

© 2019 Vedder Price


About this Author

Vedder Price P.C. attorneys provide a full range of services to a diverse financial services clientele. Attorneys practicing in the firm’s Investment Services Group are experienced in all aspects of investment company and investment adviser securities regulations, broker-dealer regulatory and compliance matters, derivatives and financial product matters, and ERISA and tax matters. Clients include mutual fund complexes, hedge and other private funds, money managers, broker-dealers, independent directors, and many other types of institutions such as banks, savings and loans,...