SEC Secures Sizable Settlement From Equitable Financial

According to an SEC announcement, Equitable gave investors the false impression that their quarterly account statements listed all fees paid during the period.

The Securities and Exchange Commission announced on Tuesday that it has secured a settlement from Equitable Financial Life Insurance Company related to fraud charges it brought against the firm earlier this year.

The basis of the charges, according to an SEC statement, is that Equitable allegedly provided account statements to about 1.4 million variable annuity investors that included “materially misleading statements and omissions” concerning investor fees.

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Equitable has agreed to pay $50 million to the harmed investors to settle the charges. Most of the clients affected are public school teachers and staff members.

As described in the SEC’s order, since at least 2016, Equitable gave investors the false impression that their quarterly account statements listed all fees paid during the period. The SEC’s investigation found that, in reality, the statements listed only certain types of fees that investors infrequently incurred and that the statements often had $0.00 listed in fees.

Gurbir Grewal, director of the SEC’s Division of Enforcement, noted in the SEC statement that it is “essential” that investors are not misled about the fees they are paying.

“This case should serve as an important reminder to investment firms to carefully review their statements to ensure fee information is disclosed properly,” he said.

Specifically, the SEC’s order finds that Equitable violated the antifraud provisions of the Securities Act of 1933. In agreeing to pay the settlement, the firm neither admits nor denies the SEC’s findings. The firm has also agreed to “cease and desist from committing or causing any future violations of these provisions and to pay a $50 million civil penalty that it will distribute to affected investors.”

Equitable also agreed to revise how it presents fee information in its variable annuity account statements.

Can the Cost of an RFP for Selecting a New Recordkeeper Be Paid From Plan Assets?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

“We are a museum who recently selected a new recordkeeper as a result of a request for proposals process. Can this expense be paid from plan assets, assuming such expenses are reasonable, and the plan permits?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

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The answer from the Experts is an unequivocal “maybe”! As you may be aware from our prior Ask the Experts column on the subject, plan expenses are classified into two categories: settlor expenses, which confer a benefit on the plan sponsor, and expenses that benefit plan participants. The latter can be paid from plan assets; the former cannot.

 

RFPs generally relate to plan administration but not all RFPs are the same.  The Department of Labor has some excellent published guidance on the subject, with real-world examples, but unfortunately recordkeeper RFPs are not addressed.

Thus, you should seek guidance from an ERISA attorney well-versed in such matters on this issue.

 

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

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