MFS Investment Management, a subsidiary of Sun Life Financial Inc. said it has settled “administrative proceedings” with the Securities and Exchange Commission (SEC) regarding disclosure of brokerage allocation practices in connection with fund sales.
Under the terms of the settlement, in which MFS neither admitted nor denied any wrongdoing, MFS agreed to pay $1.00 in disgorgement and $50 million in penalties to certain MFS funds, pursuant to a plan approved by an independent consultant.
The settlement noted that MFS had in place policies designed to obtain best execution of all fund trades.
MFS engaged in the common practice of forming preferred arrangements with some broker-dealers selling MFS fund shares. The settlement order states that MFS told its trustees and shareholders of the MFS funds that, subject to best execution, it considered the sale of fund shares when selecting a broker-dealer. It also reported annually to the trustees on the total commissions allocated to each broker-dealer pursuant to these arrangements.
According to the settlement order, however, MFS did not adequately communicate to MFS fund trustees and shareholders the details behind such arrangements.
“Our settlement with the SEC reflects our eagerness to put this matter behind us, and to focus on the meaningful pro-investor reforms we have put in place to strengthen fund governance, tighten our business practices and achieve the highest standards of transparent disclosure in the industry,” said Robert C. Pozen, non-executive Chairman of MFS Investment Management.
“MFS has taken steps far beyond those required of us to assure shareholders of our commitment to protecting their interests,” said Pozen.
MFS already has eliminated the practice of using brokerage commissions to recognize fund sales, the company said. Earlier this month, MFS announced it would also ban the use of soft dollars to pay for third-party research and market data.