The latest compliance and regulatory developments in North America's wealth management sector.

SunTrust Banks
A US regulator has charged the investment services arm of SunTrust Banks with collecting more than $1.1 million in avoidable fees from clients by urging them to expensive share classes of mutual funds when cheaper options were available.

The charges have been brought by the Securities and Exchange Commission.

SunTrust Investment Services has agreed to pay a penalty of more than $1.1 million to settle the charges.  The organization separately began refunding the overcharged fees plus interest to affected clients after the SEC started its investigation.  SEC examiners cited the practice during a compliance review of the firm in mid-2015.  More than 4,500 accounts were affected, the SEC said in a statement yesterday.

The Atlanta-based firm breached its fiduciary duty to act in clients’ best interests by recommending and purchasing costlier mutual fund share classes that charge a type of marketing and distribution fee known as 12b-1 fees.  Investors were not informed that they were eligible for less costly share class options that did not charge 12b-1 fees.  The avoidable fees flowed back to SunTrust in the form of higher commissions from the funds, the SEC said.

“SunTrust made self-serving investment recommendations to the detriment of everyday investors who rely on mutual funds to secure their financial futures,” Aaron W Lipson, associate regional director for enforcement in the SEC’s Atlanta office, said.  “The story has a happy ending for customers with the extra fees back in their accounts, and an obvious lesson for investment advisory representatives that you must always recommend the best deal for your clients, not yourselves,” he added.

Without admitting or denying the findings, SunTrust agreed to pay the penalty totaling $1,148,071.77 as well as disgorgement plus interest on any leftover amount of the avoidable 12b-1 fees that are being refunded to clients.  The firm also agreed to be censured.

Credit Suisse
Credit Suisse has reached a final settlement with Massachusetts Mutual Life Insurance Company (MassMutual), related to its legacy residential mortgage-backed securities (RMBS) business, the firm said in a statement.

The agreement with MassMutual settles claims pending in the United States District Court for the District of Massachusetts related to the sale of 19 residential mortgage-backed securities certificates in 2006 and 2007. The agreement resolves all claims in the two pending securities lawsuits filed by MassMutual against Credit Suisse.

Credit Suisse has said that it "is pleased to have reached an amicable settlement with MassMutual that allows the bank to put this legacy matter behind it."

The Swiss lending giant will take a pre-tax charge of approximately $79.5 million in addition to its existing reserves against the matter. This charge will be taken in its Q3 2017 financial results, which will be announced on November 2.