In a year filled with securities industry scandals and settlements, the
The SEC said it hoped the settlement would serve as a warning to the rest of the industry. "Were hoping that by fining TD Waterhouse a large amount, the Commission sends a message that brokerage firms who seek to attract investment adviser business have to be very careful in how they do it," said Sahil Desai, staff attorney for enforcement at the SEC. "These are independent investment advisers, and they have fiduciary responsibilities to their clients, so they have to decide independently what custodian is best for their clients. If the adviser doesnt disclose this [kind of arrangement] to his client, its money under the table," he said.
Recognizing the potential conflict of interest inherent in the cash payment arrangements, TD Waterhouse had adopted written procedures to ensure that advisers made the proper disclosures. But, according to the SEC, it failed to follow through. "Although independent advisers are required by law to make the necessary disclosures, we regret that our oversight of those disclosures was not consistent with our own written procedure in these cases," said a TD Waterhouse spokeswoman. "We have enhanced our internal controls, and continue to offer education resources to help advisers understand their disclosure obligations," she said.
Analysts said these kinds of cash payments to RIAs are very common, particularly because competition for adviser business between the three biggest custodians
