SEC Authorizes Transfer of Remaining Distribution Funds to U.S. Treasury for Santander Securities LL

Key Takeaways

• The Securities and Exchange Commission (SEC) has issued an order authorizing the transfer of all remaining funds from a previously established distribution fund to the U.S.
• Treasury.
• This concludes the administrative proceedings related to Santander Securities LLC's failure to disclose conflicts of interest regarding 12b-1 fees.

Deep Dive

This regulatory action represents the final stage of a long-running enforcement matter initiated in March 2019. The original order was part of the SEC's Share Class Selection Disclosure Initiative, which targeted investment advisers who failed to disclose conflicts of interest when selecting share classes that paid 12b-1 fees to the firm or its affiliates despite lower-cost options being available.

For compliance teams, this update signifies the formal termination of the Distribution Fund. The Respondent was previously responsible for administering the fund at its own expense to compensate affected investors. While the majority of the funds were successfully disbursed, a residual amount of USD $46,933.52 remained due to uncashed checks and returned funds. The SEC has now approved the final accounting and ordered that any remaining or future returned funds be transferred to the U.S. Treasury.

The timeline for this specific matter is effectively closed. The administrative proceedings and the obligation to manage the distribution fund are terminated following the Commission's approval of the final accounting. There are no further active deadlines for Santander Securities LLC regarding this specific distribution mandate, other than the execution of the transfer to the Treasury.

Compliance professionals should view this as a case study in the importance of robust disclosure programs and the operational complexities of remediation. The requirement for the Respondent to fund the administration of the distribution fund at its own expense highlights the significant operational and financial burden that can accompany regulatory settlements. Organizations should ensure that their self-reporting and disclosure protocols are sufficiently rigorous to mitigate the need for such extensive, long-term remedial actions.

Source: Securities and Exchange Commission