SEC Hits Merrill Over 12b-1 Fees

The SEC found that Merrill Lynch and New York-based Eagle Strategies violated Section 206(2) of the Investment Advisers Act of 1940, and ordered that they be censured, that they cease and desist from future violations, that they pay disgorgement and prejudgment interest totaling over $425,000, and that they comply with certain undertakings, including returning the money to investors.

The $325,376 that the SEC ordered Merrill Lynch to return to investors included disgorgement of $297,394 and prejudgment interest of $27,982, the regulator said in its order. The $101,090 that the SEC ordered Eagle Strategies to return to its investors included disgorgement of $89,978 and prejudgment interest of $11,113, according to the separate SEC order.

The SEC also charged Cozad Asset Management, finding that the Champaign, Illinois, firm failed to fully disclose the conflicts that arose from its and its associated persons' selection of more expensive mutual fund share classes for clients when lower-cost share classes for the same fund were available, according to the third SEC order. Cozad was censured and ordered to pay disgorgement and prejudgment interest totaling $416,870 that included disgorgement of $369,424 and prejudgment interest of $37,446, as well as a civil penalty of $10,000. Cozad and Eagle Strategies did not immediately respond to requests for comment.

The SEC's orders against the three firms were the final cases the Division intended to recommend under the terms of the share class initiative, the regulator said Friday. Including the three actions, the SEC has ordered more than $139 million to be returned to investors as part of the initiative, it said.

As part of the same initiative, the SEC on March 11, 2019, ordered 79 investment advisors to reimburse more than $125 million to clients. Those firms included Wells Fargo Advisors Financial Network and Wells Fargo Clearing, Ameritas, Cambridge Investment Research, Commonwealth Equity Services, D.A. Davidson & Co., Deutsche Bank Securities, Janney Montgomery Scott, Kestra Advisory Services, LPL Financial, Next Financial, Oppenheimer & Co., Oppenheimer Asset Management, Raymond James Financial Services Advisors, RBC Capital Markets, Robert W. Baird & Co., Stifel & Nicolaus & Co. and Woodbury Financial Services.