Barron's: SEC Hits Sweeps Again
Barron's writes that the, "SEC Punishes RIA for Undisclosed Revenue From Money-Market Funds." Their piece explains, "The SEC has settled charges with another financial advice firm regarding undisclosed revenue collected through the sale of money-market funds, an emerging area of interest as regulators continue to focus on conflicts and disclosures. Cowen Prime Advisors, a New York-based registered investment advisor that manages $336 million in assets, agreed to pay more than $750,000 to settle allegations that it breached its fiduciary duty by steering clients into certain funds that netted revenue for the firm when lower-cost funds were also available through its clearing broker." (See the SEC Order here.) Barron's adds, "The commission alleges that Cowen collected revenue from money-market funds from 2015 through July 2021, but did not disclose the revenue-sharing arrangement with its broker until June 2020.... The funds that advisors use to invest clients' cash, known as sweep accounts, appear to be an area of growing concern for regulators. The SEC previously put the industry on notice that it was on the lookout for advisors who placed clients in share classes of mutual funds that netted them 12b-1 fees when lower cost shares were available. Commission officials talked often about the conflicts of interest associated with those arrangements, and the agency set up a self-reporting program where firms could come forward and acknowledge that they overcharged clients in exchange for favorable settlement terms. But enforcement actions involving the revenue-sharing arrangements that come with money-market funds that got Cowen in trouble are a comparatively novel and less-heralded development."
