AssetMark to pay $18M to resolve alleged 'cash sweeps' conflicts

The investment technology and support firm AssetMark has reached an $18 million settlement with the SEC over allegations that it didn't disclose conflicts with "cash sweep" practices to clients.

The Securities and Exchange Commission announced Tuesday that Concord, California-based AssetMark had agreed to pay $18.3 million to settle charges that it wasn't fully forthcoming about its handling of uninvested cash that clients had entrusted to it. Like many financial firms, AssetMark will often sweep such money into interest-bearing bank accounts.

The SEC alleged that AssetMark, between September 2016 and January 2021, did not tell clients that it was helping to set the fees that a third-party custodian was receiving for help with the sweeps. Those fees, according to the SEC, reduced the amount of interest AssetMark's clients received.

The SEC also raised questions about payments AssetMark received in return for holding client assets in mutual funds with third-party custodians. The firm, according to the SEC, failed to disclose to investors that their money could have instead been placed in lower-cost funds that would not have paid AssetMark anything.

"Here, AssetMark failed to disclose multiple financial conflicts of interest where AssetMark and its affiliated custodian reaped significant financial benefit from decisions it made," Andrew Dean, co-chief of the SEC enforcement division's asset management unit, said in a statement.

AssetMark, which provides outsourced investment services and technology to independent broker-dealers and registered investment advisors, neither admitted nor denied the charges. A representative of the firm couldn't be reached immediately for comment.

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The firm's penalty consists of a $9.5 million civil penalty and $8.5 million of disgorgement, plus interest. The money is to be paid back to investors.

In its latest Form ADV filed on Sept. 14, the firm reported having $55.2 million in assets under management. AssetMark listed 257 employees with advisory functions.