City National Rochdale to Pay $30 Million to Settle SEC Charges over Undisclosed Conflicts
The Securities and Exchange Commission reported that registered investment adviser City National Rochdale, LLC has agreed to pay more than $30 million to settle charges.
The Securities and Exchange Commission reported that registered investment adviser City National Rochdale, LLC has agreed to pay more than $30 million to settle charges that “its undisclosed conflicts of interest defrauded current and prospective clients.” The money will be placed into an SEC fair fund for distribution to harmed investors.
City National Rochdale, a subsidiary of City National Bank, provides advisory services to individuals who give the firm discretionary authority to trade on their behalf and acts as an investment adviser to mutual funds offered by City National Rochdale Funds. The RIA has total assets under management of approximately $45 billion.
According to the SEC, from at least 2016 through 2019, City National Rochdale failed to inform its clients of its practice of investing their assets in proprietary mutual funds that generate fees for the RIA and its affiliates, rather than in competitor funds whose fees may be lower.
The SEC also alleges that the firm failed to inform some prospective clients that they could invest in its proprietary funds at lower cost. Clients who opened accounts with certain City National Rochdale affiliates did not pay annual marketing or distribution fees, known as 12b-1 fees, but most clients who invested through their own financial advisors did.
“CNR’s failures to disclose its conflicts of interest deprived clients of their ability to make informed investment decisions while generating fees for the adviser and its affiliates,” said Melissa Hodgman, associate director of the SEC Enforcement Division. “When investors entrust their hard-earned money with an adviser, it is crucial they receive full and fair disclosures to allow them to understand and reject any conflicts of interest, and if the adviser does not abide by these rules, then the SEC will hold them accountable so we can return that money to investors.”
Without admitting or denying the SEC’s findings, City National Rochdale agreed to a cease and desist and censure, and to retain an independent compliance consultant. The firm will pay disgorgement, prejudgment interest, and a civil penalty totaling $30.4 million that will be distributed to investors.
