September 16, 2019 / 7:22 PM / a month ago

Prudential subsidiaries to pay nearly $33 million to settle disclosure charges: SEC

WASHINGTON (Reuters) - Two Prudential subsidiaries have agreed to pay nearly $33 million to settle charges they failed to disclose conflicts of interest and made misleading disclosures regarding 94 insurance-dedicated mutual funds they advised, the U.S. securities regulator said on Monday.

The Securities and Exchange Commission (SEC) said it had censured AST Investment Services Inc and PGIM Investments LLC, requiring them to disgorge $27.6 million and pay a civil fine of $5 million. The subsidiaries did not admit or deny the SEC’s findings, the SEC said.

The SEC acknowledged that AST and PGIM self-reported their misconduct, cooperated with its investigation and had voluntarily reimbursed the funds more than $155 million.

In 2006, Prudential reorganized its mutual fund business so it could receive certain tax benefits, the SEC said.

This move benefited Prudential but the funds advised by the company’s two subsidiaries wound up losing income from a temporary recall of securities the mutual funds had out on loan.

Neither Prudential nor the subsidiary disclose any potential conflict of interest to the affected mutual fund clients about the connection between the company reorganization and the recalls.

Monday’s settlement comes as the SEC is seeking to stamp out undisclosed conflicts of interest among investment advisers and their clients.

“Investment advisers must be vigilant in monitoring for conflicts related to actions taken by affiliates, and must act consistently with their representations to their clients,” said Dabney O’Riordan, co-chief of the SEC Enforcement Division’s Asset Management Unit.

“Here, AST and PI acted to benefit their parent company despite the costs those acts imposed on their clients.”

Reporting by Lisa Lambert and Katanga Johnson; Editing by Michelle Price and Tom Brown

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