A Florida-based investment firm agreed to return more than $700,000 to harmed investors and pay a $225,000 fine for failing to disclose conflicts of interest regarding its mutual fund share class selection process.

Aventura Capital Management agreed to settle charges levied by the Securities and Exchange Commission (SEC) it violated the antifraud, principal trading, and compliance provisions of federal securities laws when it selected mutual funds for clients that collected fees for its broker-dealer affiliate, Aventura Securities, when other similarly priced mutual funds did not produce similar fees for the firm.

Aventura Securities received mark-ups and mark-downs on certain trades where Aventura Capital did not provide written disclosure or obtain prior consent from clients in advance of the transactions, the SEC said Tuesday.

The agency’s order also found the firm “failed to disclose that it selected higher-cost share classes of money market funds used as cash sweep vehicles for advisory clients, which also paid compensation to Aventura Securities, instead of available lower-cost share classes of the same funds that did not.”

All these practices occurred at various times from 2015-2022, the order said. Aventura “failed to adopt and implement written compliance policies and procedures reasonably designed to prevent these violations,” the SEC said in an administrative proceeding.

The firm agreed to the settlement without admitting or denying the agency’s findings.

Compliance considerations: Aventura agreed to implement remediations within 30 days to prevent future violations, including:

  • Reviewing and correcting all relevant disclosure documents;
  • Evaluating whether clients should move to a lower-cost mutual fund share class or cash sweep vehicle and moving clients as necessary;
  • Evaluating and updating policies and procedures as they relate to “making recommendations and selection of mutual fund share classes and cash sweep vehicles in the best interests of advisory clients”; and
  • Notifying current and former investors who were harmed by the firm’s actions of the settlement terms.

Within 40 days, the firm must certify, in writing, to the SEC all the remediations have been completed.

Aventura did not respond to a request for comment.

Aaron Nicodemus covers regulatory policy and compliance trends for Compliance Week. He previously worked as a reporter for Bloomberg Law and as business editor at the Telegram & Gazette in Worcester, Mass.View full Profile

More from Aaron Nicodemus

Topics