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SEC Sanctions Voya over Arrangements with Clearing Broker

An investment adviser recently agreed to settle SEC charges that it failed to disclose to its advisory clients revenue received from a third-party broker-dealer and the resulting conflicts of interest. Without admitting or denying the SEC’s findings, Voya Financial Advisors consented to penalties and other payments totaling approximately $3 million.  According to the SEC’s order, since at least 2006, Voya participated in a no-transaction-fee mutual fund program with a clearing broker which agreed to share with Voya a percentage of revenues the clearing broker received from mutual funds in the program. Voya also had a separate arrangement with the clearing broker in which Voya agreed to provide certain administrative services in exchange for a percentage of the service fees the clearing broker received from mutual funds on the platform. The SEC found that the payments under both arrangements created conflicts of interest because they provided a financial incentive for Voya to favor the mutual funds in the program over other investments when advising its clients. In its disclosures to its advisory clients, however, Voya did not disclose these arrangements or the resulting conflicts of interest.