TIAA-CREF Settles SEC Charges Over Reg BI Violations for $2.2M

sec-building-new.jpg Chip Somodevilla/Getty Images News/Getty Images Practice Management>Regulation & Compliance TIAA-CREF Settles SEC Charges Over Reg BI Violations for $2.2M TIAA IRA customers paid more than $900,000 in combined expenses that could have been avoided by investing through a “brokerage window” with lower-cost share classes, according to the regulator.

TIAA-CREF Individual & Institutional Services (TC Services) will pay more than $2.2 million to settle Securities and Exchange Commission charges that it violated Regulation Best Interest when recommending clients open a TIAA Individual Retirement Account.

Within the IRA, clients could invest in both a pre-selected “core menu” of affiliated investments and a broader selection of securities, including mutual funds, ETFs, stocks, and bonds through an optional “brokerage window.” That brokerage window offered the lowest-cost share classes of certain funds on the core menu, with investment minimums waived.

Related: LPL Settles With FINRA For $6M Over Reg BI Lapses

But the firm failed to disclose that those lower share classes were available in the brokerage window and the conflicts of interest associated with that, the SEC claims.  

More than 94% of TIAA IRA customers invested only through the core menu, resulting in nearly 6,000 of them paying more than $900,000 in combined expenses that could have been avoided had they used the brokerage window, the SEC order said.

Related: TIAA to Pay $97 Million to Settle Retirement Account Rollover Accusations

“We are pleased to settle this matter and have enhanced our processes and procedures to address the SEC’s concerns,” a TIAA spokesperson said in a statement.

The SEC found the firm violated Reg BI’s General Obligation as well as Disclosure, Care, and Compliance Obligations. TC Services, a subsidiary of TIAA, consented to the entry of the order without admitting nor denying the findings.

The order said the regulator considered the firm’s “prompt remedial efforts, that TC Services disclosed the issue to Commission staff who were in the process of examining TC Services, and the cooperation afforded Commission staff during the investigation.”

Last year, the SEC released additional guidance to help firms meet the demands of the rule’s care obligations.

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Originally posted on: https://www.wealthmanagement.com/regulation-compliance/tiaa-cref-settles-sec-charges-over-reg-bi-violations-22m