By Elvina Nawaguna and Suzanne Barlyn
WASHINGTON, July 31 (Reuters) - The Securities and Exchange
Commission on Wednesday fined two investment advising firms for
failing to seek the best prices for their clients and profiting
from those violations.
The firms, New York-based A.R. Schmeidler & Co and
Indianapolis-based Goelzer Investment Management will pay a
total of nearly $1.5 million to settle charges they violated the
SEC's best execution rules, the Commission said.
SEC rules require investment advisers to provide the most
beneficial terms available for their clients, including keeping
commissions and total costs low for the client. Processing
trades through brokerages affiliated with the advising firm
presents a conflict of interest that can benefit the company.
A.R. Schmeidler agreed to pay $1 million to settle charges
after the SEC found it had negotiated more favorable terms with
its own clearing firm and as a result retained a greater share
of the commissions it received from clients.
Goelzer will pay about $500,000 for misrepresentations
about the process of selecting and recommending itself as broker
for its clients without evaluating other broker-options, as it
said it would.
"These cases send a clear message to dually registered
investment advisers and broker-dealers about our expectations in
connection with their best execution analysis," said Andrew
Ceresney, co-director of the SEC's Division of Enforcement.
Neither firm admitted to or denied the SEC's findings, but
agreed to stop the practice, the SEC said.
Greg Goelzer, CEO of Goelzer Investment Management, Inc.,
said in a statement that his firm has fully cooperated with the
SEC and takes its responsibility regarding compliance policies
and procedures very seriously.
"After conducting a comprehensive review of our firm's
compliance program, we have implemented internal controls and
enhanced our supervisory framework, which now is overseen by a
full-time, independent chief compliance officer," Goelzer said.
Services at both firms include advising wealthy and
institutional investors. Each has an advisory unit that is
registered with the SEC and also has an affiliated brokerage
registered with the Financial Industry Regulatory Authority,
Wall Street's industry-funded watchdog.