TIAA Hit With Reg BI Fine Related to IRAs
The Securities and Exchange Commission said Friday that TIAA-CREF Individual & Institutional Services LLC, a subsidiary of Teachers Insurance and Annuity Association of America (TIAA), will pay more than $2.2 million to settle charges that it failed to comply with Regulation Best Interest.
The SEC charges relate to TIAA’s failure in connection with recommendations to retail customers to open a TIAA Individual Retirement Account.
According to the SEC order, the TIAA IRA allowed retail customers to invest in both a pre-selected “core menu” of affiliated investments, including affiliated mutual funds, and, through the TIAA IRA’s optional “brokerage window,” a broader array of securities, including a variety of mutual funds, ETFs, stocks and bonds.
During the relevant period, the order states, “the brokerage window included the lowest-cost share classes of certain affiliated mutual funds offered in the core menu, but with the investment minimums waived.”
Due to the waivers, “customers could have purchased substantially equivalent, lower-cost share classes of these mutual funds in the brokerage window,” according to the SEC.
The SEC’s order finds that TC Services violated Reg BI by, among other things, failing to disclose both that substantially equivalent, lower-cost share classes of affiliated funds were available in the brokerage window and the conflicts that created.
