Voya slapped with fine for securities lending conflict
09 March 2018 Washington DC
Image: Shutterstock
The Securities and Exchange Commission (SEC) has ordered Voya Holdings to pay $3.6 million over alleged conflicts of interest and misleading disclosures that were detrimental to its customers.
According to the SEC, Voya recalled portfolio securities of mutual funds they advised, before the dividend record date. This practice enabled the insurance affiliates to take a tax deduction and resulted in lost securities lending income for the mutual funds.
Voya offers retirement, investment and insurance products and services to individual and institutional customers, including over one hundred mutual funds.
The SEC said this recall practice resulted in an “undisclosed conflict of interest”.
It added: “The insurance affiliates benefited from the dividend received deduction, while the funds and individuals invested in those funds through their variable life annuity contracts and variable life insurance policies lost securities lending income during the period when the securities were recalled.”
The affected mutual funds will receive more than $2 million of the $3.6 million settlement.
Anthony Kelly, co-chief of the SEC enforcement division’s asset management unit, commented: ”These funds and those investing in them weren’t told that they were losing income so that the Voya advisers could provide a tax benefit to their affiliates. Now money will be heading back to the funds to help investors.
He added: “Investment advisers must not place the interests of their affiliates over those of clients, depriving them of information necessary to make informed investment decisions.”
According to the SEC, Voya recalled portfolio securities of mutual funds they advised, before the dividend record date. This practice enabled the insurance affiliates to take a tax deduction and resulted in lost securities lending income for the mutual funds.
Voya offers retirement, investment and insurance products and services to individual and institutional customers, including over one hundred mutual funds.
The SEC said this recall practice resulted in an “undisclosed conflict of interest”.
It added: “The insurance affiliates benefited from the dividend received deduction, while the funds and individuals invested in those funds through their variable life annuity contracts and variable life insurance policies lost securities lending income during the period when the securities were recalled.”
The affected mutual funds will receive more than $2 million of the $3.6 million settlement.
Anthony Kelly, co-chief of the SEC enforcement division’s asset management unit, commented: ”These funds and those investing in them weren’t told that they were losing income so that the Voya advisers could provide a tax benefit to their affiliates. Now money will be heading back to the funds to help investors.
He added: “Investment advisers must not place the interests of their affiliates over those of clients, depriving them of information necessary to make informed investment decisions.”
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