In a recent enforcement case, the Securities and Exchange Commission (SEC) claimed that a Nebraska-based investment advisory firm, Manarin Investment Counsel Ltd., and its owner, Roland R. Manarin, breached a core fiduciary responsibility. The SEC investigation of Manarin found that the firm had “violated their obligation” to seek best execution when selecting mutual fund shares for three fund clients.
More specifically, Mr. Manarin and his firm “consistently selected higher-cost mutual fund shares” while ignoring “cheaper shares in the same mutual funds [that] were available,” forcing these fund clients to pay “avoidable fees” for these investments. The SEC determined that the “hidden” fees had been distributed by Manarin to a brokerage firm owned by him, a “practice inconsistent with the disclosures” that Manarin made to clients. These violations, amongst others outlined in the October 2, 2013 order, took place between 2000 and 2010 and extended into various realms, including non-disclosure, misrepresentation to the fund boards, and the overcharging of brokerage commissions for “shares of exchange-traded funds”. Ultimately, Manarin paid a disgorgement fee of around $685,000, with the pre-judgment interest of around $268,000 and a $100,000 penalty fee. These sanctions by the SEC emphasize the continued importance of investment advisory firms having strong compliance programs to help ensure that appropriate policies, procedures, and internal controls are in place, in accordance with state and federal requirements and their fiduciary duty.
For more information, or for assistance on other compliance topics, please contact us at (619) 278-0020 to schedule a consultation.