SEC: Florida Firm to Pay Nearly $1M to Settle Share Class Overcharges

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Another advisory firm has reached a settlement with the Securities and Exchange Commission for allegedly placing clients in classes of mutual funds that carried heavy fees when lower-cost shares of the same funds were available.

The Aventura settlement comes as the latest reminder that the fees associated with mutual fund share classes remain a top issue at the SEC.

Photo Illustration by Barron’s Advisor; Dreamstime (2)

Aventura Capital Management, a registered investment advisor based in Boca Raton, Fla., has agreed to pay nearly $1 million in disgorgement, interest, and penalties, and accepted a censure under the settlement.

In its order instituting cease-and-desist proceedings, the SEC contended that Aventura Capital generated excessive 12b-1 fees for its affiliated broker-dealer, Aventura Securities, from December 2015 to June 2022 instead of lower-cost share classes of the same funds.

Similarly, Aventura moved clients’ uninvested cash into money-market mutual funds that also carried high fees, again opting not to invest in fee-free share classes, according to the commission’s order.

Aventura did not immediately respond to a request for comment.

The settlement comes as the latest reminder that the fees associated with mutual fund share classes remain a top issue at the SEC, which has been warning the industry for years against overcharging clients.

The SEC brought the issue to prominence in the months leading up to the self-reporting initiative the agency launched in February 2018, inviting advisors to come forward and acknowledge that they had been charging clients excessive fees for select share classes in exchange for lenient settlement terms. The SEC said it generally wouldn’t pursue civil penalties against firms that came forward under that program, limiting their financial liability to repaying the clients who were charged excessive fees.

But that initiative ended June 2018, and the SEC continues to punish firms that persist in placing clients in costly share classes, as Aventura is alleged to have done before, during, and after the SEC’s self-reporting program.

In addition to the issue of overcharging clients, Aventura failed to disclose on its Form ADV regulatory filing its practice of collecting 12b-1 fees and the conflict of interest that created, according to the SEC.

“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,” the SEC said in its order.

Write to advisor.editors@barrons.com

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