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Victor J. Blue / Bloomberg News
WASHINGTON-
Prudential Financial
Inc.
PRU -0.80%
agreed to disburse $ 32.6 million for the settlement of claims, claiming that it did not indicate how a reorganization of its mutual fund business would cost the funds millions of dollars in lost interest.
The Securities and Exchange Commission said on Monday that the 2006 reorganization – intended to provide tax benefits for Prudential – created a conflict of interest because the company was taking advantage of it while the funds were losing revenue from securities lending. . They also paid higher taxes in some foreign jurisdictions. In addition to paying the fines, Prudential repaid more than $ 155 million to the funds, the SEC announced in a settlement release.
"Investment advisors should be vigilant in monitoring conflicts related to actions taken by subsidiaries and acting in a manner consistent with their reporting to their clients," he said.
Dabney O'Riordan,
co-director of the SEC's asset management unit within its executive division. Prudential's subsidiaries "have acted in the best interest of their parent company despite the costs that these actions impose on their customers".
The allegations stemmed from Prudential's decision to recall from 2005 to 2015 various securities of funds loaned to banks and other traders. Mutual funds regularly lend stocks or bonds they own to enhance their returns. Prudential's decision to recall the debt securities has allowed it to receive tax deductible dividends, the SEC said.
Prudential has enjoyed tax benefits of more than $ 229 million between 2005 and 2015 through this practice, the SEC said. During the same period, the funds did not receive $ 72 million in securities lending or other income, the agency said.
Prudential neither admitted nor denied the claims, but said in a statement that it had reported the behavior to the SEC and cooperated with the regulators. The company "has a long history of transparency and constructive relationships with regulators," said the company.
The SEC said in its settlement order that Prudential employees had not fully disclosed the problem to regulators when Prudential had been subject to a routine regulatory review in 2014. The issue appeared after An employee of the Prudential securities lending agent mentioned him in 2015 before a Prudential compliance officer, which triggered an internal investigation, the order said. The company reported the problems to the SEC in 2016, said the order.
Write to Dave Michaels at [email protected]
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