Two BMO advisory firms have agreed to pay over $37 million in a settlement with the Securities and Exchange Commission for misleading clients on aspects of their retail investment advisory program.

According to the SEC’s order, from at least July 2012 through March 2016, BMO Harris Financial Advisors (BMO Harris) and BMO Asset Management Corp. (BMO Asset Mgmt.) failed to tell clients about certain aspects of how advisers selected investments in their Managed Asset Allocation Program (MAAP). The firms allegedly invested approximately 50 percent of MAAP client assets in proprietary funds managed by BMO Asset Mgmt., which led to the payment of additional management fees to BMO Asset Mgmt.

The SEC’s order finds the BMO advisers each neglected to inform clients of this practice. BMO Harris was also found to have failed to disclose conflicts of interest with regard to investing MAAP client assets in higher-cost share classes, including those managed by BMO Asset Mgmt., when lower-cost options were available. These alleged violations took place from at least July 2012 through September 2015.

“These BMO advisers repeatedly put their own financial interests ahead of clients by giving preference to their own mutual funds or selecting higher-cost share classes,” stated C. Dabney O’Riordan, co-chief of the SEC Enforcement Division’s Asset Management Unit. “This is important information for an adviser to tell clients, as it goes to the heart of the adviser-client relationship and will impact the clients’ returns.”

The BMO advisers will pay disgorgement and prejudgment interest of $29.73 million, a civil penalty of $8.25 million, and to be censured. Amounts of the financial penalties will be redistributed to harmed investors.

Specifically, BMO Harris and BMO Asset Mgmt. were charged with violating Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. The two firms neither admitted nor denied the findings as part of the settlement.