Nebraska advisory firm, owner, to pay $1 mln to settle fund pricing charges -SEC
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 Commission.
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 Pyramid II.
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 funds.
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 penalty. (Reporting by Suzanne Barlyn; editing by Carol Bishopric)
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