Direct Services LLC and Voya Investment LLC, two Voya Holdings Inc. investment adviser subsidiaries, will pay about $3.6M to settle Securities and Exchange Commission charges accusing them of failing to make certain disclosures related to securities lending. Of that amount, over $2M will go straight to mutual funds that were impacted.
The two investment advisers worked with a number of “insurance-dedicated mutual funds” that insurers affiliated with Voya Holdings and Direct Services offer to life insurance and annuity customers. The two advisers lent fund-held securities to certain parties. They then called back the securities so that the insurer affiliates would get a tax benefit. These same affiliates were record shareholders for the funds’ shares. Meantime, this led to the funds and their investors losing income while not getting to avail of the tax benefit.
According to SEC Enforcement Division Asset Management Co-Chief Anthony S. Kelly, the mutual funds and its investors were not notified that they would be losing money in order for the affiliates to get this tax benefit. The regulator said that Voya advisors did not disclose that this conflict of interest existed.
In settling, the Voya adviser affiliates consented to cease and desist from further violations. However, it did not deny or admit to the SEC’s findings.
SEC Revokes DMS Advisors’ License
In a different SEC case, the regulator has revoked the license of mutual fund advisor DMS Advisors, which is the investment adviser to a number of The DMS Funds-administered emerging market mutual funds. Peter Kohli runs DMS Advisors and The DMS Funds.
According to the regulator’s administrative proceeding, Kohli and DMS Advisor pursued investors for the DMS mutual funds and then used their money instead for other purposes. Kohli is accused of hiding the alleged fraud via purportedly bogus financial statements so that it would appear as if investors’ money had gone into the mutual funds.
The SEC had previously issued an emergency asset freeze against Kohli. The regulator charged him with fraudulently raising over $3.2M from at least 120 investors.
Please contact our investment fraud lawyers today if you suspect that your losses are due to investment advisor fraud. Your first consultation with Shepherd Smith Edwards and Kantas, LTD LLP is a free, no obligation case consultation.
More Blog Posts from SSEK Law Firm:
Ex-Wells Fargo Broker Barred for Alleged $180K Elder Financial Fraud, Stockbroker Fraud Blog, February 26, 2018
BitFunder and Its Founder Face Fraud Allegations, Stockbroker Fraud Blog, February 19, 2018
Ameriprise Ordered to Pay $8M Over F-Squared Alpha Sector Strategy Sales, Institutional Investor Securities Blog, December 8, 2017