SEC Charges Investment Adviser for Failing to Disclose Conflicts of Interest Created by Paying Incentive Compensation, Orders It to Pay Affected Clients

ADMINISTRATIVE PROCEEDING
File No. 3-22426

January 17, 2025 – The Securities and Exchange Commission today announced settled charges against registered investment adviser Transamerica Retirement Advisors, LLC (“Transamerica”) for failing to disclose conflicts of interest created by Transamerica’s incentive compensation payments to investment adviser representatives (“IARs”) in connection with the referral and rollover of retirement assets to thousands of Transamerica accounts. The SEC also charged Transamerica with failing to implement disclosure-related policies and procedures.

The SEC’s order finds that Transamerica failed to provide full and fair disclosure regarding conflicts associated with paying its IARs incentive compensation between at least June 1, 2017, and February 1, 2022. The order further finds that in years prior to 2022, Transamerica made limited conflicts disclosures regarding incentives it “may” provide its advisors, which were misleading in light of the incentive compensation Transamerica was actually paying its IARs concerning referrals and rollovers of employer plan participants’ assets. According to the order, this compensation included: (i) variable incentive compensation based on several metrics, including the number of referrals made, (ii) flat fee payments for referrals in certain years, (iii) variable compensation based on a percentage of the assets rolled over into the advisory accounts, and/or (iv) a flat fee if assets were rolled over. 

The SEC's order finds that Transamerica willfully violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Without admitting or denying the SEC's findings, Transamerica consented to a cease-and-desist order and to a censure, and agreed to pay a $2.9 million penalty. Transamerica also agreed to distribute funds to affected investors.

The SEC's investigation was conducted by Matthew B. Reisig and Brittany Hamelers, and was supervised by Timothy England and Pei Y. Chung.