Securities News: SEC Orders Voya to Pay $3.1M For Not Disclosing Mutual Fund Sale-Related Payments, FINRA Bars Ex-Waddell & Reed Broker, and Alabama Pension Fund Loses Millions in Ponzi Scam

Voya Accused of Not Disclosing Revenue Received for Mutual Fund Sales
The US Securities and Exchange Commission said that Voya Financial Advisors (VOYA) would pay approximately $3.1M to regulators and investors for not telling customers about revenue the firm was paid related to a mutual fund program that didn’t bill transaction fees. Voya’s clearing broker-dealer paid the firm a percentage of the money made from the mutual fund sales. This was information that should have been shared with investors.

Also, since 2014, Voya and the third-party brokerage firm were involved in a separate agreement under which Voya provided certain administrative services in return for a percentage of service fees involving certain mutual funds. The regulator said that these payments were a conflict because they gave Voya incentive to preference these funds over other investments, which could have impacted what the firm recommended to advisory clients. As part of the settlement, Voya will pay about $2.6M of disgorgement, approximately $175K of interest, and a $300K penalty. The firm is not, however, denying or admitting to the SEC’s findings.

Fired Waddell & Reed Broker is Barred from the Securities Industry
The Financial Industry Regulatory Authority has barred an ex-Waddell & Reed Inc. broker from the industry. Paul D. Stanley was fired from the firm last year for allegedly violating its policies regarding supervision, compensation, and conduct.

Stanley’s BrokerCheck profile notes that he did not provide full information when Waddell & Reed conducted its own probe, “allowed” an improperly licensed representative to take part in soliciting the firm’s investment advisory business, and violated policy by “directly” compensating representatives.

Wadell did not appear to provide testimony, despite FINRA’s request. He did not deny or admit to the regulator’s findings.

Birmingham Pension Fund Lost Over $4M in Ponzi-Like Scam
A Ponzi-style scam has led to $4.3M in losses for the Birmingham Water Works’ pension fund. The fraud, linked to a questionable bond deal, also bilked the Oglala Sioux Indian tribe, as well as other investors.

The pension funds invested in a Wakpamni tribal economic development bond in 2014. The tribal bond was not marketable nor was it a rated security, even though Water Works’ policies mandate that securities need to have at least an “A” grade investment rating and be marketable. The pension fund employees were notified of their losses.

Investors’ money was used to pay for the expensive lifestyles of the fraudsters, who included Jason Galanis and his dad John Galanis of New York. The US Securities and Exchange Commission brought charges against the two men and their co-conspirators. Jason Galanis pleaded guilty to a parallel criminal case earlier this year. The case involved him persuading an Oglala Sioux tribal entity to issue $63M in tribal bonds, instructing associates to sell the bonds to investors, and making money of the sales. Last month, Galanis was sentenced to over 11 years in prison for a separate securities case involving defrauding of Gerova Financial Group (GVFG) shareholders. HE also pleaded guilty in that case.

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Voya to Pay $3.1M for Not Disclosing Payments Tied to Fund Sales, Think Advisor, March 9, 2017

Fired Waddell & Reed broker barred by Finra, InvestmentNews, March 15, 2017