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Two Bank of Montreal Units to Pay $38M to Settle SEC Charges
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The U.S. Securities and Exchange Commission (“SEC”) recently said that two advisory units of Bank of Montreal (BMO - Free Report) have agreed to pay a penalty of nearly $38 million for overcharging clients. The SEC’s claim states that the advisers failed to disclose conflicts of interest by not informing clients that their money was often being invested in proprietary funds and costlier share classes.
The Chicago-based units, BMO Harris Financial Advisors and BMO Asset Management will pay a civil fine of $8.25 million along with $29.73 million of disgorgement and interest.
Per the SEC, between July 2012 and March 2016, these units disproportionately invested nearly 50% of client’s assets in their retail Managed Asset Allocation Program in proprietary mutual funds without informing them. Using this strategy, BMO Asset Management was able to generate higher management fees at the cost of clients.
In addition to this, BMO Harris Financial Advisors often invested clients’ assets from the program in more expensive share classes, even when they could be invested in lower-cost share classes, resulting in lower returns for clients.
Co-chief of the SEC enforcement division's asset management unit, C. Dabney O'Riordan, said, “BMO advisers repeatedly put their own financial interests ahead of clients.”
A spokeswoman for Bank of Montreal stated, “We are pleased to have resolved this matter with the SEC. We have enhanced our conflict of interest disclosures and processes for identifying and addressing conflicts. We have a strong culture of compliance and a robust control framework that fully meets legal and regulatory requirements.”
Shares of Bank of Montreal have gained 12.9% so far this year, outperforming 2.8% growth recorded by the industry.
Many finance companies across the globe have been facing increasing scrutiny for their business practices. Many of these firms paid billions of dollars as fines and compensation to settle lawsuits and probes.
Recently, Deutsche Bank AG (DB - Free Report) agreed to pay $15 million in penalty to settle allegations that it exploited its market presence by overcharging clients for unsecured bonds issued by Fannie Mae and Freddie Mac between 2009 and 2016.
In June 2019, State Street Corporation (STT - Free Report) agreed to pay $94.3 million for consistently overcharging mutual fund customers and other clients through concealed markups on back-office expenses for around 17 years.
In May, Wells Fargo & Company (WFC - Free Report) said that it might refund fees wrongfully charged to some customers on account of confusion about the types of transactions counted toward the minimum usage of debit cards that would have waived service fees.
Free: Zacks’ Single Best Stock Set to Double
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This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
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Two Bank of Montreal Units to Pay $38M to Settle SEC Charges
The U.S. Securities and Exchange Commission (“SEC”) recently said that two advisory units of Bank of Montreal (BMO - Free Report) have agreed to pay a penalty of nearly $38 million for overcharging clients. The SEC’s claim states that the advisers failed to disclose conflicts of interest by not informing clients that their money was often being invested in proprietary funds and costlier share classes.
The Chicago-based units, BMO Harris Financial Advisors and BMO Asset Management will pay a civil fine of $8.25 million along with $29.73 million of disgorgement and interest.
Per the SEC, between July 2012 and March 2016, these units disproportionately invested nearly 50% of client’s assets in their retail Managed Asset Allocation Program in proprietary mutual funds without informing them. Using this strategy, BMO Asset Management was able to generate higher management fees at the cost of clients.
In addition to this, BMO Harris Financial Advisors often invested clients’ assets from the program in more expensive share classes, even when they could be invested in lower-cost share classes, resulting in lower returns for clients.
Co-chief of the SEC enforcement division's asset management unit, C. Dabney O'Riordan, said, “BMO advisers repeatedly put their own financial interests ahead of clients.”
A spokeswoman for Bank of Montreal stated, “We are pleased to have resolved this matter with the SEC. We have enhanced our conflict of interest disclosures and processes for identifying and addressing conflicts. We have a strong culture of compliance and a robust control framework that fully meets legal and regulatory requirements.”
Shares of Bank of Montreal have gained 12.9% so far this year, outperforming 2.8% growth recorded by the industry.
Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our Take
Many finance companies across the globe have been facing increasing scrutiny for their business practices. Many of these firms paid billions of dollars as fines and compensation to settle lawsuits and probes.
Recently, Deutsche Bank AG (DB - Free Report) agreed to pay $15 million in penalty to settle allegations that it exploited its market presence by overcharging clients for unsecured bonds issued by Fannie Mae and Freddie Mac between 2009 and 2016.
In June 2019, State Street Corporation (STT - Free Report) agreed to pay $94.3 million for consistently overcharging mutual fund customers and other clients through concealed markups on back-office expenses for around 17 years.
In May, Wells Fargo & Company (WFC - Free Report) said that it might refund fees wrongfully charged to some customers on account of confusion about the types of transactions counted toward the minimum usage of debit cards that would have waived service fees.
Free: Zacks’ Single Best Stock Set to Double
Today you are invited to download our just-released Special Report that reveals 5 stocks with the most potential to gain +100% or more in 2020. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
Download Free Report Now >>