Cambridge in hot water over revenue splitting, Wrap account disputes
What do you want to know
- Cambridge favored investment choices that generated additional revenue for its BD subsidiary, according to the SEC.
- According to the regulator, it also converted hundreds of accounts to its onboarding fee program without analyzing whether the move was in the best interests of customers.
- Cambridge denies the allegations in the SEC complaint.
The Securities and Exchange Commission on Wednesday accused Cambridge Investment Research Advisors Inc. (CIRA) of failing to disclose material conflicts of interest and breaching its duty of care related to its selection of mutual funds and accounts. integrated for its customers.
According to to the SEC Complaintfiled in the U.S. District Court for the Southern District of Iowa, since at least 2014, CIRA has invested client assets in mutual funds and money market sweep funds that have generated millions of dollars in revenue-sharing payments to an affiliated broker, Cambridge Investment Research Inc., instead of lower-cost share classes and investment options that would have given less or no revenue sharing.
These undisclosed investment practices, the complaint alleges, also saved CIRA from paying millions of dollars in transaction fees.
Additionally, according to the complaint, CIRA converted hundreds of accounts to its more expensive wrap account program without adequate disclosure and without analyzing whether it was in the best interests of its customers.
According to the Complainant, “CIRA breached its fiduciary duty and consistently and repeatedly put its financial interests ahead of its clients” and also “continuously failed to disclose to its clients material facts about its conflicts of interest.” , in particular that certain investment choices have generated additional income. for its affiliate CIRI, and/or allowed CIRA to avoid paying fees, when other investment choices would have generated much less or no income, and/or the payment of fees.
In many cases, the complaint states, “these other investment choices were less costly, and therefore more beneficial, to CIRA’s customers.”
