Cetera to Pay $9M Over 12b-1 Fee Violations

A Colorado federal judge has ordered Cetera to pay close to $9 million to settle allegations brought by the Securities and Exchange Commission in 2019 against the firm over share class selection and revenue sharing infractions.

Cetera must pay close to $6 million in disgorgement, with Cetera Advisors and Cetera Advisor Network paying fines of $1 million each, as well as $990,961 in prejudgment interest, according to the order.

In 2019, the SEC charged Cetera Advisors with breaching its fiduciary duty and defrauding investor clients by failing to disclose conflicts of interest related to over $10 million in undisclosed compensation.

According to the SEC’s complaint, from at least September 2012 through December 2016, Cetera invested and held clients in mutual fund share classes that charged recurring 12b-1 fees, even when the RIA — which is part of Cetera Financial Group — knew these clients were eligible to invest in lower-cost shares of the same funds without 12b-1 fees.

The SEC filed its complaint against Cetera Advisors in the U.S. District Court for the District of Colorado. The agency said that the RIA allegedly participated in a program offered by its clearing broker in which it shared revenues and service fees received from certain mutual funds.

In a statement shared with ThinkAdvisor Wednesday, Cetera said that the firm “revised its disclosures several years ago, and fully cooperated with the SEC throughout the course of this matter. We are pleased to have resolved this matter with the SEC and will continue to focus on providing exceptional service for Cetera financial professionals and their clients.”