The Securities and Exchange Commission has fined Thrivent Investment Management $25,000 for violating Regulation Best Interest by recommending that certain retail brokerage customers invest in higher-cost mutual fund share classes within two 529 plans.
The agency's order said the proceedings concern Thrivent's failure to comply with Reg BI between June 30, 2020, and July 2022.
Reps recommended Class A mutual fund shares instead of Class C mutual fund shares offered by the Nebraska NEST Advisor College Savings Plan and the Illinois Bright Directions Advisor-Guided 529 College Savings Program, the SEC said.
The Class A shares of the plans imposed upfront sales charges as well as annual fees, while the Class C mutual fund shares did not impose upfront sales charges but charged higher annual fees than Class A shares for the first 10 years of the investment, after which they converted to Class A shares, the SEC said.
During the relevant period, Thrivent and its registered representatives used a 529 College Savings Plans share class calculator to determine which mutual fund share class to recommend to retail customers.
"While historically, it may have been in the best interest of many of Thrivent's customers to invest in Class A shares of the Nebraska and Illinois 529 Savings Plans, the Illinois 529 Savings Plan and the Nebraska 529 Savings Plan made changes to their expense structures in March 2020 and December 2020, respectively, that significantly reduced the annual fees charged on the Class C shares," the order states.
