Massachusetts BD to Pay $450K Over 12b-1 Fees

Bolton Securities, which declined to comment Monday, is just one of many firms that the SEC has targeted over 12b-1 fees. Other companies that have been targeted by the SEC in recent months included Commonwealth Financial Network and Merrill Lynch.

According to the SEC's complaint, from August 2014 through at least March 2018, Bolton Securities invested advisory clients in mutual fund share classes that charged 12b-1 fees, and which had an available share class without 12b-1 fees. Those 12b-1 fees were paid to an affiliated BD under common ownership and control with Bolton Securities, which in turn paid some of the fees to Bolton Securities' investment adviser representatives, the SEC alleged.

Bolton Securities, however, did not disclose to clients that it purchased or held share classes for its clients that generated 12b-1 fees for its affiliate when different share classes of the same mutual fund were available that did not carry those fees, the SEC alleged.

The SEC also alleged that from November 2014 through at least March 2019, Bolton Securities used the principal trading account of the BD under common ownership and control to engage in self-dealing transactions with its advisory clients that generated principal trading compensation for the BD, without providing disclosure sufficient for clients to provide informed consent to the conflicted transactions, and without obtaining required client consent.