TIAA-CREF Individual and Institutional Services (TC Services) will pay more than $2.2 million to settle SEC charges that it violated the Best Interest Rule when it recommended that clients open a retirement account TIAA Individual.
Within the IRA, clients can invest in both a pre-selected “core menu” of related investments and a wider selection of securities, including mutual funds, ETFs, stocks and bonds through a ” brokerage window” optional. That brokerage window offered the lowest cost share classes of certain funds on the main menu, with investment minimums removed.
But the firm failed to disclose that those lower share classes were available at the brokerage window and conflicts of interest related to that, the SEC alleges.
More than 94% of TIAA IRA customers invested through the core menu alone, resulting in nearly 6,000 of them paying more than $900,000 in combined expenses that could have been avoided if they had used the brokerage window, the report said. order of the SEC.
“We are pleased to resolve this matter and have improved our processes and procedures to address the SEC's concerns,” a TIAA spokesperson said in a statement.
The SEC found that the firm breached the general obligations of Reg BI, as well as the disclosure, care and compliance obligations. TC Services, a TIAA subsidiary, accepted the order entry without admitting or denying the findings.
The order said the regulator considered the firm's “prompt remedial efforts, that TC Services disclosed the matter to Commission staff who were in the process of examining TC Services, and the cooperation provided to Commission staff during the investigation.”
Last year, The SEC issued additional guidance to help firms meet the rule's duty of care requirements.