from the Securities Exchange Commission (SEC)
The Securities and Exchange Commission today announced charges against a St. Petersburg, Fla.-based financial services firm for improperly calculating advisory fees and overcharging clients.
SEC examinations and a subsequent investigation found that Transamerica Financial Advisors offered breakpoint discounts designed to reduce the fees that clients owed to the firm when they increased their assets in certain investment programs. The firm permitted clients to aggregate the values of related accounts in order to get the discounts. However, Transamerica failed to process every aggregation request by clients and also had conflicting policies on whether representatives were required to pass on to clients the savings from breakpoint discounts. As a result, the firm overcharged certain clients by failing to apply the discounts and failed to have adequate policies and procedures to ensure that the firm was properly calculating its fees.
Transamerica has agreed to settle the SEC’s charges. As a result of the SEC investigation, the firm reviewed client records and has reimbursed 2,304 current and former client accounts with refunds and credits totaling $553,624 including interest. In the settlement, Transamerica has agreed to pay an additional $553,624 penalty. Said Julie M. Riewe, co-chief of the SEC Enforcement Division’s Asset Management Unit:
Transamerica failed to properly aggregate client accounts so that they could receive a fee discount, and this systemic breakdown caused retail investors to overpay for advisory services in thousands of client accounts.
According to the SEC’s order instituting settled administrative proceedings, Transamerica’s failure to properly process aggregation requests occurred since 2009. SEC examiners first alerted Transamerica about aggregation problems in 2010 after an examination of a branch office. While the firm went on to provide refunds to clients of that branch office, Transamerica failed to undertake a firm-wide review of all client accounts as SEC examiners recommended. Hence during a subsequent examination of the firm’s headquarters in 2012, SEC examiners found that Transamerica was still failing to aggregate certain related client accounts. The problem persisted beyond any one branch office. In fact, Transamerica had conflicting policies throughout its branch offices on whether the firm required its representatives to provide breakpoint discounts to advisory clients. Said Eric I. Bustillo, director of the SEC’s Miami Regional Office:
