Giant broker hit with $9.5 million fine

Giant broker hit with $9.5 million fine

Giant broker hit with $9.5 million fine AIG might be planning to get out of the broker-dealer arena, but that hasn’t stopped the SEC clamping down on the company for an alleged conflict-of-interest.

According to a report at Law360, the regulator has reached a $9.5 million settlement with the insurance giant relating to sales that carried 12b-1 fees even though cheaper deals were available. The report at the law news website suggests that Sagepoint Financial, FSC Securities Corp and Alliance Associates picked up $2 million in the form of extra fees without disclosing the conflict of interest to clients.

A Reuters report states that the regulator was displeased with the units of the insurance company for not accurately monitoring accounts over reverse churning. Reverse churning is a practice of lower trading frequency within fixed fee accounts.

The clampdown from the SEC comes after AIG announced that it will dispose of its broker-dealer segment. Its decision was made after the Department of Labor chose to introduce tight new regulations over retirement products – these regulations will be implemented in the near future.

According to Bloomberg, AIG’s three units managed a total of $13.2 billion across 67,000 accounts – overall its retirement business brought in a $2.84 billion pre-tax operating income last year.

It is not the first time that the SEC has looked at conflict-of-interest issues. It settled with JPMorgan last year to the total of $267 million for not disclosing to its clients that they were placed in more expensive proprietary mutual funds.
1 Comments
  • Jim 2016-03-19 2:48:07 PM
    Fees and commissions will always create a conflict of interest for Brokers and Mutual Fund Advisers. It is time consuming to search out Funds with good returns and lower fees. Who wants to make less money anyway?>
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