SEC Authorizes Transfer of Remaining Distribution Funds and Terminates Investmark Fund

Key Takeaways

• The Securities and Exchange Commission (SEC) has approved the final accounting for a distribution fund related to an enforcement action against Investmark Advisory Group LLC.
• This order authorizes the transfer of any unreturned or infeasible funds to the U.S.
• Treasury and officially terminates the distribution fund.

Deep Dive

This regulatory update marks the conclusion of an administrative proceeding initiated in March 2019, which was part of the SEC's Share Class Selection Disclosure Initiative. The original enforcement action addressed disclosure failures regarding conflicts of interest related to 12b-1 fees and the selection of higher-cost share classes. For compliance teams, this signifies the formal closure of a long-standing remediation obligation for the respondent.

The order specifically addresses the administration of a distribution fund originally totaling USD $103,107.84 in disgorgement and interest. The Respondent successfully disbursed approximately 99.99% of the funds, leaving only USD $2.92 in uncashed checks. The SEC has now approved the final accounting, meaning the legal obligation to maintain the fund for investor return is effectively terminated, with any remaining or future returned funds being diverted to the U.S. Treasury.

For compliance professionals, this action highlights the importance of meticulous record-keeping and diligent administration during the remediation phase of an enforcement action. The requirement for the Respondent to provide a final accounting and the subsequent SEC approval process demonstrates that regulatory oversight extends well beyond the initial imposition of sanctions into the actual execution of investor restitution.

Recommended actions include reviewing internal processes for managing disgorgement funds and ensuring that any self-reported disclosure failures are accompanied by a robust, auditable plan for fund distribution. Risk implications involve potential reputational and operational risks if the administration of such funds is not handled with high precision, as failure to properly execute court-ordered or regulator-mandated distributions can lead to further regulatory scrutiny.

Source: Securities and Exchange Commission