For failing to disclose conflicts of interest involving its mutual fund share class selection process, a Florida-based investment business agreed to pay a $225,000 fine, restore more than $700,000 to injured investors, and make other concessions.
When choosing mutual funds for clients that generated fees for its broker-dealer affiliate, Aventura Securities, Aventura Capital Management was accused of violating the antifraud, principal trading, and compliance provisions of federal securities laws. Other mutual funds with comparable prices did not generate fees for the company in a comparable manner.
According to the SEC, Aventura Securities earned mark-ups and mark-downs on several deals when Aventura Capital failed to acquire written notice from customers or their approval prior to the transactions.
The firm "failed to disclose that it selected higher-cost share classes of money market funds used as cash sweep vehicles for advisory clients, which also paid compensation to Aventura Securities, instead of available lower-cost share classes of the same funds that did not," according to the agency's order.
The order said that all of these actions took place between 2015 and 2022 at various points. In an administrative case, the SEC said that Aventura "failed to adopt and implement written compliance policies and procedures reasonably designed to prevent these violations."
The company accepted the compensation without disputing or acknowledging the conclusions of the agency.
Aventura consented to put corrective measures in place to stop such breaches within 30 days, including:
Reviewing and amending all pertinent disclosure documents;
Deciding whether to transfer clients to a less expensive mutual fund share class or cash sweep vehicle; and, if necessary, doing so;
Evaluating and updating policies and procedures with regard to "making recommendations and selection of mutual fund share classes and cash sweep vehicles in the best interests of advisory clients;" and
Notifying current and former investors who were harmed by the disclosures.
The company has 40 days to certify in writing to the SEC that all corrective actions have been taken.
A request for comment from Aventura was not immediately complied with.
By fLEXI tEAM