By Kenneth Corbin
Commonwealth Financial Network will pay $5 million to resolve years-old allegations that it concealed revenue-sharing agreements that resulted in clients overpaying for pricey share classes of mutual funds when cheaper options were available. A federal judge approved the negotiated settlement between Commonwealth and the Securities and Exchange Commission on Monday, bringing the matter to an end.
The ultimate settlement is a far cry from the $93 million penalty a federal district court judge had initially imposed. An appellate court overturned that judgment a year ago, holding that a jury should have a chance to review the award, which included substantial interest and disgorgement components.
"We are pleased with this resolution and happy to put this matter behind us," says Peggy Ho, Commonwealth's general counsel and chief risk officer. Commonwealth settled the matter without admitting or denying wrongdoing.
The SEC declined to comment on the settlement.
The case, which the SEC originally brought in 2019, turned on Commonwealth's relationship with its clearing broker, a unit of Fidelity Investments. The commission said that arrangement incentivized Commonwealth advisors to steer clients into costly share classes over cheaper ones in a violation of the firm's fiduciary duty.
The case was a high-profile example of the SEC's crackdown on how firms were handling their compliance obligations amid strong financial incentives to invest clients' money in high-cost share classes. It followed a self-reporting period when the SEC invited firms to come forward and acknowledge their share-class conflicts in exchange for a lighter enforcement penalty.
In the dispute with Commonwealth, the SEC initially won a hefty disgorgement and interest judgment of $65 million and $21 million, respectively, though the appellate court questioned the fairness of those awards and the calculations used to arrive at them.
The $5 million the Commonwealth agreed to pay to finally settle the matter is off slightly from the $6.5 million civil penalty included in the original judgment.
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(END) Dow Jones Newswires
March 24, 2026 17:36 ET (21:36 GMT)
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