The SEC fined Sigma Planning, a Michigan-based RIA, over alleged failures to disclose 12b-1 mutual fund fees.
The Sonn Law Group is investigating claims that Sigma Planning committed 12b-1 fee disclosure violations. Under FINRA Rules, brokerage firms are liable for their brokers’ misconduct or negligence and investors may be able to their investment through FINRA arbitration. Contact Sonn Law Group today or call us at 866–827–3202 for a free consultation.
According to administrative proceedings published by the SEC, Sigma Planning Corp. (Sigma) agreed to settle charges that it selected mutual fund investments for clients that provided the firm with significant financial benefits and failed to disclose these benefits to the clients.
The SEC found that Sigma had two undisclosed financial conflicts with respect to the selection of mutual fund share classes. First, Sigma failed to fully disclose its conflicts relating to select mutual fund share classes for which Sigma was paid a portion of the 12b-1 fees when the lower cost share classes for the same mutual fund were available to Sigma’s clients. Additionally, Sigma did not disclose that by selecting those share classes, the firm also avoided paying its clearing broker an asset-based fee that it would have otherwise been obligated to pay.
Further, Sigma purportedly failed to disclose conflicts of interest arising from its broker-dealer affiliates being part of a revenue-sharing arrangement on certain alternative investments Sigma bought for its advisory clients.
Lastly, the SEC alleged that Sigma acted as an unregistered broker-dealer.
Without admitting or denying guilt, Sigma agreed to pay $1,920,809 in disgorgement, $225,909 in prejudgment interest, and a $400,000 civil penalty. Sigma also consented to censure and the entry of a cease-and-desist order from committing or causing further violations of federal securities laws.
In early 2018, the SEC launched a self-reporting initiative allowing firms to avoid certain sanctions if they came clean about prior 12b-1 disclosure violations. Sigma had previously not been sanctioned by the SEC for such violations.
Jeffrey R. Sonn is an experienced investor losses attorney. If you suffered losses because a financial professional recommended that you invest in unsuitable products, Mr. Sonn will protect your rights and interests. Please do not hesitate to contact the Sonn Law Group today for a free review of your claim.