Ann Arbor, Mich.-based Sigma Financial Corp. and its corporate registered investment advisory have agreed to pay $2.5 million in disgorgement, prejudgment interest and civil penalties to settle Securities and Exchange Commission charges related to sales of higher-priced share classes.
From January 2013 to March 2018, Sigma’s corporate RIA, Sigma Planning, recommended that clients buy higher-priced mutual fund share classes that charged 12b-1 fees instead of lower-cost share classes, the SEC alleges. The firm failed to disclose that it not only received a portion of those fees from the clearing broker but also avoided paying an asset-based fee on those products.
In addition, the regulator alleged that Sigma failed to disclose to clients that its broker/dealer received revenue-sharing payments in connection with tiered sponsorship agreements with various alternative investment sponsors.
The SEC also alleged that the RIA engaged in brokerage activities, yet was not registered as a broker/dealer; Sigma Financial Corp., of course, was.
Sigma Financial chief compliance officer John A. McClelland declined to comment on the enforcement action.
