SEC Strikes Again on 12b-1 Fees, Fining Another RIA

Aventura Capital, although eligible to do so, did not self-report this 12b-1 fee related conflict of interest to the Commission pursuant to the Division of Enforcement’s Share Class Selection Disclosure Initiative.

Aventura Securities received revenue sharing payments from its clearing broker based on the amount of Aventura Capital’s advisory client assets invested in certain share classes of money market funds used as cash sweep vehicles. Aventura Capital did not disclose this conflict of interest in its Forms ADV or otherwise, the complaint states.

From at least December 2015, Aventura Capital, by causing certain of its advisory clients to invest in higher-cost share classes of mutual funds that paid 12b-1 fees and money market funds that resulted in revenue sharing payments, breached its duty to seek best execution for those transactions, the SEC said.

The SEC complaint further states that at times since at least December 2015, Aventura Securities “received mark-ups and mark-downs when Aventura Capital engaged in securities transactions with its clients on a principal basis through its affiliated broker-dealer, without providing prior written disclosure to, or obtaining consent from, its clients in advance of each transaction.”

During each of the relevant periods, the SEC states, Aventura Capital also failed to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with mutual fund and money market fund share class selection and principal transaction practices, or disclosure of these practices to advisory clients.

A request for comment from Aventura was not received by press time.