The Securities and Exchange Commission (SEC) has announced that Voya Financial Advisors has agreed to settle charges related to its alleged disclosure failures and misleading statements it reportedly gave to clients regarding investment advice about mutual funds, illiquid alternative investments and cash sweep vehicles.
The settlement includes a distribution of money to harmed clients and the retention of an independent compliance consultant.
According to the SEC, between January 2013 and December 2018, Voya engaged in practices that violated its fiduciary duty to its advisory clients. The SEC says Voya made misleading statements and provided inadequate disclosures regarding its receipt of 12b-1 fees from client investments.
Further, the SEC says Voya purchased or recommended certain cash sweep money market funds for advisory clients, for which it received undisclosed revenue-sharing payments. As a result, Voya’s advisory clients received lower performance and paid higher fees than they otherwise would have.
The SEC says Voya caused some advisory clients to pay higher fees in the form of upfront commissions when purchasing illiquid alternative investment products, when those same investments were available with the upfront commissions waived.
The SEC also says Voya provided misleading comparisons to clients when it recommended that clients move from money market funds to a bank sweep product.
The SEC’s order alleges that Voya violated antifraud provisions and the compliance rule of the Investment Advisers Act of 1940.
Without admitting or denying the findings, Voya will disgorge $11,547,820 plus $2,371,335 in prejudgment interest. In addition, Voya will pay a civil penalty of $9 million. Voya has agreed to a cease-and-desist order, to be censured and to comply with certain undertakings, including that it retain an independent compliance consultant and return funds to affected investors.