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.
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.