TIAA-CREF Individual & Institutional Services, a subsidiary of TIAA-CREF, agreed to pay $97 million to settle charges filed by the SEC alleging it issued inaccurate and misleading statements and failed to adequately disclose conflicts of interest to retirement plan participants while making rollover recommendations.
The $97 million will be distributed to investors affected by the misconduct and settles both the SEC's case and a parallel action also announced Tuesday by the office of the New York attorney general.
The subsidiary, also known as TC Services, did not admit to or deny the SEC's findings in agreeing to the settlement.
From Jan. 1, 2013, through March 30, 2018, TC Services and its wealth management advisers did not adequately disclose the full nature of their conflicts of interest in recommending rollovers into a managed account program called "Portfolio Advisor," according to the SEC order.
Moreover, TC Services trained advisers to make representations that they offered "objective" and "non-commissioned" advice, "put the client first," and acted in the client's best interest while holding themselves out as fiduciaries, the order noted. But the SEC said that was misleading because TC Services' financial incentives for its advisers rendered their advice non-objective and TC Services did not ensure that advisers' recommendations were actually in the best interest of its clients.
TC Services simultaneously applied continual pressure to compel advisers to prioritize the rollover of retirement plan assets into Portfolio Advisor over lower-cost alternatives, the SEC found. The order also stated that TC Services failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act in connection with rollover recommendations.
Rollovers of retirement plan assets "are of paramount importance to investors seeking financial security in retirement, and advisers acting in a fiduciary capacity need to provide their clients with complete and accurate disclosure so that they may make fully informed investment decisions," Melissa Hodgman, acting director of the SEC enforcement division, said in a news release.
TIAA cooperated with regulators and is pleased to settle the matter, a representative said in an email. "We regret the times that we did not live up to our clients' expectations of us," the representative said. "We have learned some valuable lessons and have applied those lessons to enhancing our training, supervisory controls and disclosures."
The company began implementing enhancements before regulators opened their investigations, the representative added.
