By Suzanne Barlyn
Oct 2 (Reuters) - A Nebraska investment advisory firm and
its owner agreed to pay more than $1 million to settle civil
charges that it failed to seek the most beneficial terms
available when investing in mutual fund shares for three funds
that they managed, according to the U.S. Securities and Exchange
Manarin Investment Counsel Ltd and its owner, Roland
Manarin, violated the SEC's so-called "best execution" rules by
"consistently" choosing higher cost mutual fund shares, even
though cheaper shares in the same funds were available, the SEC
said on Wednesday.
As a result, the clients paid avoidable fees on their mutual
fund holdings, which were passed through to a brokerage firm
owned by Manarin, the SEC said.
The agency charged the brokerage firm, Manarin Securities
Corp, with not properly disclosing the fees to the three funds
managed by its investment advisory arm.
Manarin and his firms, all in Omaha, Nebraska, neither
admitted nor denied the charges. "We are pleased to have
resolved this matter," said Roland Manarin in a statement. "This
settlement will enable Manarin to continue to serve its clients'
best interests going forward."
Investment advisers who register with the SEC, or with
states, must act as fiduciaries, or in their clients' best
interests at all times. That includes getting the best pricing
for clients at all times, the SEC said.
The conduct at Manarin's firms spanned from 2000 to 2010.
The three funds his investment advisory firm managed were
"funds-of-funds," a type of investment vehicle that invests
mostly in shares of different mutual funds. They include the
Lifetime Achievement Fund, and two other funds, Pyramid I and
The three funds, because of the pricing lapses, had to pay
fees on their mutual fund holdings that were otherwise
avoidable, according to the SEC. The fees were passed along to
them through Manarin's brokerage firm in a practice that was not
properly disclosed, the SEC said.
The three funds managed by the Manarin investment advisory
firm were eligible to own lower-cost "institutional" shares in
the mutual funds, but instead, owned more costly "class A"
shares, typically intended for retail investors. As a result,
they racked up ongoing 12b-1 fees, or charges for mutual fund
marketing expenses. The firm refunded the fees to the Lifetime
Achievement Fund but not the $685,000 incurred by the other two
The SEC's sanction against the Manarin investment advisory
firm includes $685,000 to cover the return of those fees and
$267,700 in interest. Roland Manarin agreed to a $100,000
(Reporting by Suzanne Barlyn; editing by Carol Bishopric)