Regulator says more than 2,300 current, former clients affected; firm pays $1.1M in restitution, fine.
Transamerica Financial Advisors Inc. overcharged thousands of clients by failing to uniformly offer breakpoint discounts across the firm, even after regulators pointed out the problem at one branch office, the Securities and Exchange Commission said.
The St. Petersburg, Fla., firm agreed to refund or credit 2,304 current and former client accounts a total of $553,624 and to pay a fine of the same amount to settle the commission's allegations, which were announced in Washington on Thursday.
Breakpoint discounts are supposed to lower fees for clients who boost the amount of assets they invest in certain programs.
Transamerica, however, did not process every client's aggregation requests and had “conflicting policies” on whether firm representatives were required to pass on to clients the savings from breakpoint discounts, the SEC order said.
The violations began as early as January 2009 and continued even after SEC examiners told Transamerica about the issues in 2010 following a branch office examination, the commission said. The firm said the issue was a result of a “miscommunication,” and it provided refunds to branch clients who were affected.
However, Transamerica did not explore whether the problem existed at other branches — as commission examiners recommended, the SEC said.
A 2012 SEC examination of Transamerica's headquarters found the firm still wasn't following its stated policies of aggregating certain client accounts that were related and that the problem existed nationwide, the commission order said.
“The securities laws require investment advisers to charge advisory fees consistent with their own disclosures and stated policies so investors get what they bargained for,” said Eric Bustillo, director of the SEC's regional office in Miami. “Transamerica failed to take appropriate remedial steps even after SEC examiners had flagged the problem.”
“We are pleased to have concluded this matter and the company has taken action to ensure the accounts of [affected] clients … have been properly linked for purposes of obtaining advisory fee discounts,” Transamerica spokeswoman Kristy Huller said in a statement. “The failure to link accounts was unintentional. Current and former clients in these programs who were entitled to these discounts for the affected period have now received the discounts.”
