The New York Times reports that on Wednesday, the SEC issued a cease-and-desist order regarding a brokerage firm that Callan sold to the Bank of New York (BoNY) in 1998. The sales agreement called for BoNY to pay Callan over eight years, increasing the payment each year if Callan sent enough of its clients’ brokerage business to the bank to meet certain benchmarks.
The SEC said pension officials occasionally asked Callan whether it was being rewarded for sending them to BoNY, and Callan said no, according to the New York Times. The SEC said these responses were “inaccurate and misleading.”
In 2005, Callan changed its disclosure form to provide the required information about the payments. However, by that time the SEC had replaced its paper recordkeeping system with an online system to give the public access to the disclosures of registered investment advisers, but the part of the disclosure form dealing with conflicts-of-interest has not yet been put into the online system, and the paper records are no longer accessible.
A Callan spokeswoman said the firm’s eight-year agreement with the BoNY had expired on January 9, and the payments at issue had ended.
Callan neither admitted nor denied the finding, and was not fined by the SEC.
The SEC began a probe of the industry in 2003. An investigation into the operations of 24 pension consultants who are also registered investment advisers (RIAs), prompted the SEC to recommend sweeping changes in consultants’ policies and procedures to make sure they are fulfilling their fiduciary obligations to advisory clients – including the proper disclosure of potential conflicts-of-interest (See SEC Calls for Pension Consultant Disclosure Reforms ).
On September 5, the SEC fined Yanni Partners, a pension consulting firm in Pittsburgh, $175,000 and ordered it to stop violating the federal disclosure law rules, the New York Times reported. The Commission also imposed a $40,000 fine on Yanni’s compliance officer, Theresa A. Scotti.
The SEC issued a finding that Yanni had sold money managers periodic reports based on information in its database and offered to meet with those who subscribed and help them gain access to pension officials, the news report said. The Commission also accused Yanni of misleading clients about “the potential conflicts-of-interest inherent in such sales.”
Yanni has discontinued the sale of these subscriptions.
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