No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Saturday, October 4, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Financial Planning

Commonwealth gets $93M landmark judgment overturned

by TheAdviserMagazine
6 months ago
in Financial Planning
Reading Time: 5 mins read
A A
Commonwealth gets M landmark judgment overturned
Share on FacebookShare on TwitterShare on LInkedIn



One day after announcing it was being acquired by LPL Financial, Commonwealth Financial Network won its appeal of a $93.2 million penalty in a SEC case over mutual fund recommendations.

A three judge panel of the First Circuit Court of Appeals sided with Commonwealth on Tuesday after finding that a lower district court had made “fundamental legal errors” when handing down the landmark judgment in April last year. Commonwealth was walloped with more than $72 million in disgorgement and civil penalties and $21.2 million in prejudgment interest over allegations that it had failed to properly disclose brokers’ conflicts of interest when recommending certain mutual fund products. 

The SEC had contended that at least some clients would have gone for cheaper alternatives had they known they were available. Judge Indira Talwani of the U.S. District Court in Boston agreed in a ruling handed down in April last year.

“Had Commonwealth’s clients known they were invested in higher-cost shares of funds for which lower-cost shares existed, and that the higher cost resulted in greater profit for Commonwealth, there is reason to believe that at least some of those clients would have elected to move their money to the lower-cost funds,” Talwani wrote.

READ MORE:Commonwealth appeals $93M fine, says there’s no evidence of client harm$72M Commonwealth judgment hammers home firms’ disclosure dutiesLPL to pay $2.7 billion for Commonwealth FinancialLPL to ‘bend’ to become more like Commonwealth, Steinmeier says

Commonwealth filed its appeal of what it called a “draconian” judgment roughly three months later. In siding with the firm, judges on the federal First Circuit Court of Appeals faulted Judge Talwani for deciding on her own that conflict-of-interest information Commonwealth allegedly withheld from investors might have caused them to act differently and invest in cheaper products than they actually did. That question, according to the opinion written by appelate judge Sandra Lynch, should have been left to a jury.

And there’s no guarantee that jurors would have reached the same conclusion as Talwani, the appellate judges wrote. “There are material issues of fact as to the importance of price, Commonwealth’s influence over the funds selected, and about the significance of the allegedly deficient disclosures, themselves,” according to the decision. “It is the role of a jury to determine those questions.”

The ruling sends the dispute back to district court in Boston, where regulators can again try to pursue their claims against Commonwealth. The SEC, which originally filed its case in 2019, did not respond to a request for comment.

No impact on LPL’s acquisition decision

In its appeal, Commonwealth said that the $93 million penalty would strike a substantial blow to its finances. The amount, the firm wrote, was nearly double the profits it had reported for 2014.

But the judgment did not figure in the announcement this week that Commonwealth will be sold to LPL Financial for $2.7 billion in a deal expected to close in the second half of this year. In an interview on Tuesday, LPL CEO Rich Steinmeier said the pending $93 million judgment wasn’t viewed as an impediment to the negotiations.

“With the size and the scope of the transaction, that was not really a concern as we went through our due diligence,” Steinmeier said.

An LPL spokesperson declined to comment on Commonwealth’s successful appeal, and Commonwealth did not return a request for comment.

‘Negligent mistakes’ — but a substantial sanction

Commonwealth noted in court filings that the required disclosures weren’t entirely absent. Forms ADV filed with the SEC between 2014 and 2018, for instance, revealed that the firm had a possible conflict of interest through its arrangement with Fidelity’s National Financial Services clearing arm. Commonwealth also noted in its appeal that its advisors received no additional compensation for recommending certain mutual fund products over others.

“It is no flight of fancy to wonder if there has been another case in the annals of federal administrative regulation in which a greater civil sanction was imposed for only negligent mistakes made during attempted compliance with unwritten rules and without proven harm or complaining victims,” Commonwealth argued.

In its decision Tuesday, the court of appeals wrote that investors have many reasons for choosing investment products, and nothing guarantees that their needs will always be met by the cheapest option. The judges noted that various Commonwealth brokers testified to having researched and gone over various investing alternatives with clients before making any recommendations.

The appellate court said Commonwealth was working with roughly 319,000 investors in 2018.

“Those investors differed in many categories of ways, including as to the types of investors, types of investments, types of investment goals they set, and what advice they received from their representatives,” according to the court. “The SEC’s motion and supporting evidence in many ways assumed that these investors were identically situated. Yet a reasonable jury could find those assumptions questionable and not substantiated.”

Nor did the SEC, the court wrote, provide testimony from clients indicating they attributed any significance to information Commonwealth may have withheld.

A ‘wrongly influenced’ decision and a disgorgement disconnect

Bill Singer, a securities lawyer and retired author of the Broke and Broker blog, said there was a time not long ago when federal courts were inclined to give great deference to agencies like the SEC. But that willingness has been chipped away under a series of Supreme Court cases like SEC v. Jarkesy, in which the justices stripped the federal regulator of its authority to handle cases internally and instead said fraud charges have to be brought before juries.

Clearly, Singer said, the court of appeals viewed the lower court’s decision “as too quickly undertaken and wrongly influenced by inappropriate inferences.”

The appellate judges also faulted the lower court for the $65.6 million in disgorgement it ordered Commonwealth to pay as part of the $93 million penalty. Disgorgement is generally used to force violators to pay back any “ill-gotten gains” they may have realized from their misdeeds.

But the SEC, according to the court of appeals, failed to connect the disgorgement amount it was seeking with the money Commonwealth might have made by failing to disclose information about mutual fund transactions. Instead, the judges wrote, the SEC based its claim for disgorgement on Commonwealth’s profit figure for the entire year.

“The district court justified the use of the SEC’s entire sum as a disgorgement award by reasoning that causation was ‘self-evident’ because ‘at least some’ clients would have moved money to lower-cost funds had Commonwealth more fully disclosed its conflict of interest,” the judges wrote. “This is not the relevant standard and it is incompatible with the requirement that disgorgement represent ‘a reasonable approximation’ of Commonwealth’s unjust enrichment.”

The SEC’s case against Commonwealth came in many ways as the culmination of a series of SEC investigations into firms’ alleged failure to adequately disclose how they were making money from recommending mutual funds and similar investment vehicles. 

In April 2023, for instance, the SEC hit the wealth management giant Merrill with a $9.5 million penalty over allegations that it had failed to notify clients of more than $4 million in undisclosed foreign exchange fees. The previous November, two subsidiaries of the large independent broker-dealer Cetera Financial Group were ordered to pay $8.6 million for not disclosing various fees and payments it received for the sale of mutual funds.



Source link

Tags: 93MCommonwealthjudgmentLandmarkoverturned
ShareTweetShare
Previous Post

Grant Cardone says owning a home in America is a ‘terrible investment’ — what to do instead

Next Post

8 Real Estate Agent Tactics That Deserve a Closer Look

Related Posts

edit post
Our Favorite Zucchini Bread Recipe

Our Favorite Zucchini Bread Recipe

by TheAdviserMagazine
October 4, 2025
0

Got extra zucchini? This easy zucchini bread recipe is the perfect way to use it up! Moist, lightly-spiced, and made...

edit post
Shop Your Way Mastercard to be Discontinued

Shop Your Way Mastercard to be Discontinued

by TheAdviserMagazine
October 4, 2025
0

Starting Nov. 3, 2025, the card will be rebranded, and existing holders will be sent a different Citi-issued Mastercard with...

edit post
High earners will lose pre-tax 401(k) catch-ups in 2026

High earners will lose pre-tax 401(k) catch-ups in 2026

by TheAdviserMagazine
October 3, 2025
0

A major 401(k) tax break is about to disappear for some of America's most diligent retirement savers. Beginning in 2026,...

edit post
*HOT* Extra 50% off Gap Factory Clearance + Free Shipping = Prices from .99 shipped!

*HOT* Extra 50% off Gap Factory Clearance + Free Shipping = Prices from $3.99 shipped!

by TheAdviserMagazine
October 3, 2025
0

Wow! Don’t miss this hot deals at Gap Factory! Gap Factory is offering an extra 50% clearance items automatically at...

edit post
Vanguard to lose competitive edge on dual share class structure

Vanguard to lose competitive edge on dual share class structure

by TheAdviserMagazine
October 3, 2025
0

For more than two decades, U.S. money managers have looked on enviously as Vanguard reaped the benefits of a unique...

edit post
Weekend Reading For Financial Planners (October 4–5)

Weekend Reading For Financial Planners (October 4–5)

by TheAdviserMagazine
October 3, 2025
0

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that...

Next Post
edit post
8 Real Estate Agent Tactics That Deserve a Closer Look

8 Real Estate Agent Tactics That Deserve a Closer Look

edit post
Even the wealthiest Americans are suffering from shorter lifespans than those in Europe. A new study cites 3 major reasons

Even the wealthiest Americans are suffering from shorter lifespans than those in Europe. A new study cites 3 major reasons

  • Trending
  • Comments
  • Latest
edit post
What Happens If a Spouse Dies Without a Will in North Carolina?

What Happens If a Spouse Dies Without a Will in North Carolina?

September 14, 2025
edit post
California May Reimplement Mask Mandates

California May Reimplement Mask Mandates

September 5, 2025
edit post
Does a Will Need to Be Notarized in North Carolina?

Does a Will Need to Be Notarized in North Carolina?

September 8, 2025
edit post
DACA recipients no longer eligible for Marketplace health insurance and subsidies

DACA recipients no longer eligible for Marketplace health insurance and subsidies

September 11, 2025
edit post
‘Quiet luxury’ is coming for the housing market, The Corcoran Group CEO says. It’s not just the Hamptons, Aspen, and Miami anymore

‘Quiet luxury’ is coming for the housing market, The Corcoran Group CEO says. It’s not just the Hamptons, Aspen, and Miami anymore

September 9, 2025
edit post
Tips to Apply for Mental Health SSDI Without Therapy

Tips to Apply for Mental Health SSDI Without Therapy

September 19, 2025
edit post
During a White House meeting, Hakeem Jeffries spotted a ‘Trump 2028’ hat and asked JD Vance ‘Hey, bro, you got a problem with this?’

During a White House meeting, Hakeem Jeffries spotted a ‘Trump 2028’ hat and asked JD Vance ‘Hey, bro, you got a problem with this?’

0
edit post
Inside the uranium plant at the center of U.S. plans to expand nuclear power

Inside the uranium plant at the center of U.S. plans to expand nuclear power

0
edit post
Walmart’s bold move in logistics

Walmart’s bold move in logistics

0
edit post
Taiwan Declines US Demand To Offshore Chip Production

Taiwan Declines US Demand To Offshore Chip Production

0
edit post
Robert Kiyosaki Wants to Vomit as Buffett Words Signal Crash Ahead, Doubles Down on Bitcoin

Robert Kiyosaki Wants to Vomit as Buffett Words Signal Crash Ahead, Doubles Down on Bitcoin

0
edit post
When the Choir Dies Out: How Religious Life Changes After Loss of Spouse

When the Choir Dies Out: How Religious Life Changes After Loss of Spouse

0
edit post
Robert Kiyosaki Wants to Vomit as Buffett Words Signal Crash Ahead, Doubles Down on Bitcoin

Robert Kiyosaki Wants to Vomit as Buffett Words Signal Crash Ahead, Doubles Down on Bitcoin

October 4, 2025
edit post
During a White House meeting, Hakeem Jeffries spotted a ‘Trump 2028’ hat and asked JD Vance ‘Hey, bro, you got a problem with this?’

During a White House meeting, Hakeem Jeffries spotted a ‘Trump 2028’ hat and asked JD Vance ‘Hey, bro, you got a problem with this?’

October 4, 2025
edit post
Stablecoin Yield Means Banks Must Now offer Customers Real Interest

Stablecoin Yield Means Banks Must Now offer Customers Real Interest

October 4, 2025
edit post
Trump to federalize 300 members of the Illinois National Guard ahead of expected deployment to Democratic state

Trump to federalize 300 members of the Illinois National Guard ahead of expected deployment to Democratic state

October 4, 2025
edit post
Our Favorite Zucchini Bread Recipe

Our Favorite Zucchini Bread Recipe

October 4, 2025
edit post
Spot crypto ETFs outperform trusts and strategy funds (BTC-USD:Cryptocurrency)

Spot crypto ETFs outperform trusts and strategy funds (BTC-USD:Cryptocurrency)

October 4, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Robert Kiyosaki Wants to Vomit as Buffett Words Signal Crash Ahead, Doubles Down on Bitcoin
  • During a White House meeting, Hakeem Jeffries spotted a ‘Trump 2028’ hat and asked JD Vance ‘Hey, bro, you got a problem with this?’
  • Stablecoin Yield Means Banks Must Now offer Customers Real Interest
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.