Two Bank Of Montreal Units To Pay $38M To Settle SEC Charges
Zacks Investment Research | Oct 01, 2019 08:56AM ET
The U.S. Securities and Exchange Commission (“SEC”) recently said that two advisory units of Bank of Montreal (TSX:BMO) have agreed to pay a penalty of nearly $38 million for overcharging clients. The SEC’s claim states that the advisers failed to disclose conflicts of interest by not informing clients that their money was often being invested in proprietary funds and costlier share classes.
The Chicago-based units, BMO Harris Financial Advisors and BMO Asset Management will pay a civil fine of $8.25 million along with $29.73 million of disgorgement and interest.
Per the SEC, between July 2012 and March 2016, these units disproportionately invested nearly 50% of client’s assets in their retail Managed Asset Allocation Program in proprietary mutual funds without informing them. Using this strategy, BMO Asset Management was able to generate higher management fees at the cost of clients.
In addition to this, BMO Harris Financial Advisors often invested clients’ assets from the program in more expensive share classes, even when they could be invested in lower-cost share classes, resulting in lower returns for clients.
Co-chief of the SEC enforcement division's asset management unit, C. Dabney O'Riordan, said, “BMO advisers repeatedly put their own financial interests ahead of clients.”
A spokeswoman for Bank of Montreal stated, “We are pleased to have resolved this matter with the SEC. We have enhanced our conflict of interest disclosures and processes for identifying and addressing conflicts. We have a strong culture of compliance and a robust control framework that fully meets legal and regulatory requirements.”
Shares of Bank of Montreal have gained 12.9% so far this year, outperforming 2.8% growth recorded by the Original post
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