The Securities and Exchange Commission (SEC) has fined WBI Investments and Millington Securities for making material misrepresentations to the clients.
07 August 2020 | AtoZ Markets – WBI Investments and Millington Securities are registered investment advisory firms. Millington has also partnered with WBI to act as a referral broker for orders placed by the company on behalf of its advisory clients. Moreover, WBI and Millington provided advisory services to ETFs (Exchange Traded Funds) and mutual funds.
SEC Charges WBI Investments and Millington Securities
SEC alleged that WBI Investments and Millington Securities were misleading their customers about the payments they received to arrange the order flow. Defendants have agreed to cease and desist for settling the allegation. WBI Investments and Millington Securities have also agreed to pay a total of $1 million fine to SEC without admitting or denying the findings. Joseph G. Sansone, Chief of the Enforcement Division’s Market Abuse Unit, said:
“WBI and Millington made misleading statements to their institutional clients about a conflict of interest. Investment advisers must exercise diligence in their correspondence and avoid providing clients with false comfort about payment for order flow arrangements.”
The SEC found that both companies failed to establish and maintain sufficient supervision procedures. It resulted in the Investment Adviser Act violation. According to the SEC, Millington did not act as an executing broker for WBI’s customers and did not charge WBI or its customers any fees for its brokerage services. Instead, Millington forwarded WBI’s customers’ orders to a group of execution brokers. It also collected compensation from those execution brokers in the form of payments for the order flow.
However, Millington held these payments and did not pass them on to WBI customers. Between 2014 and 2017, Millington received an order flow payment of approximately $7.6 million associated with orders placed on behalf of the fund.
WBI and Millington have also neglected to adopt and implement written policies and procedures. It designed to ensure that the information they provide to clients regarding brokerage activities is accurate and complete. Millington has to pay a penalty of $250,000 within 14 days, and WBI has to pay $750,000 within 365 days.
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