SEC fines two U.S. investment firms for failure to seek best prices

07/31/2013

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.



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