SunTrust probed over mutual fund sales
Federal regulators have launched a fraud investigation into SunTrust Banks for allegedly selling clients mutual funds that charge annual marketing fees when cheaper funds were available.
The Securities and Exchange Commission is investigating whether the Atlanta company’s investment services unit committed fraud through the purchase of mutual funds that impose 12b-1 marketing fees. The $205 billion-asset SunTrust disclosed the existence of the investigation Friday in its annual report.
SunTrust Investment Services, a registered broker-dealer and an insurance agency, estimates that the amount of marketing fees that its clients were charged was $5 million or less. However, the SEC told SunTrust that it has made a preliminary determination to bring an enforcement action against its subsidiary. An enforcement action could cause SunTrust Investment Services to lose well-known seasoned issuer status and hurt its ability to earn investment advisory referral fees, the annual report warned.
SunTrust said it is cooperating with the probe and remains in talks with the SEC.