The Securities and Exchange Commission has settled an administrative proceeding against two Portland, Oregon-based investment advisory firms regarding their failure to disclose a revenue-sharing agreement and other potential conflicts of interest to clients.
The SEC’s investigation found violations in three areas of the advisory business run by Christopher Keil Hicks, who owns Focus Point Solutions and The H Group. Most notably, Focus Point allegedly did not disclose to customers that it was receiving revenue-sharing payments from a brokerage firm that managed a particular category of mutual funds being recommended to Focus Point clients. Because Focus Point received a percentage of every dollar that its clients invested in these mutual funds, there was an incentive to recommend these funds over other investment opportunities in order to generate additional revenue for the firm, according to the SEC.
Without admitting or denying the SEC’s charges, Hicks, Focus Point, and The H Group agreed to pay a combined $1.1 million to settle the case.
“Payments to investment advisers for recommending certain types of investments may corrupt their ability to provide impartial advice to their clients,” stated Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. “Hicks and his firms kept their clients in the dark about this and other conflicts of interest that investors are entitled to know about and advisers must disclose.”