SunTrust Investment Arm to Pay SEC $1.1M in High Fees Case

Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...

By Andrew Ramonas

The investment services unit of SunTrust Banks Inc. agreed to pay more than $1.1 million to resolve allegations it recommended more expensive classes of mutual funds to clients when cheaper shares were available, the SEC said Sept. 14 ( In re SunTrust Investment Services Inc. , S.E.C., Admin. Proc. File No. 3-18178, 9/14/17 ).

SunTrust Investment Services Inc. took in more than $1.1 million in unnecessary fees from its customers from 2011 to 2015, abandoning its fiduciary duty to act in the best interest of its clients, according to the Securities and Exchange Commission. More than 4,500 customers in dozens of states paid the extra money, the agency said.

The Atlanta-based firm disclosed in brochures to clients and the SEC that it “may” receive marketing and distribution charges called 12b-1 fees by investing in certain mutual funds, according to the commission. SunTrust, however, failed to inform customers that some mutual funds had a number of share classes, including ones without the fees, the SEC said.

Customers began receiving refunds from SunTrust after the agency launched an investigation into the fees, according to the commission. The firm also has released new guidance to its advisers, telling them they have a responsibility to recommend or purchase mutual fund share classes that are the most cost effective for their clients, the agency said.

Obvious Lesson

“SunTrust made self-serving investment recommendations to the detriment of everyday investors who rely on mutual funds to secure their financial futures,” Aaron Lipson, an associate regional director in the SEC’s Atlanta office, said in a statement. “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.”

The firm, which also agreed to be censured, didn’t admit or deny any wrongdoing.

“We addressed the matter on a prospective basis with remedial actions starting in the summer of 2015,” SunTrust spokeswoman Sue Mallino said in a statement to Bloomberg BNA. “Although we believe that our disclosures were in accordance with industry standards, we cooperated fully with the SEC and are pleased to have settled this matter.”

To contact the reporter on this story: Andrew Ramonas in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

For More Information

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law