Sigma Planning Corporation

Allegations: FIRST, DURING THE PERIOD 1/1/2013 THROUGH 3/1/2017, SPC PURCHASED, RECOMMENDED, OR HELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THAT CHARGED 12B-1 FEES INSTEAD OF LOWER-COST SHARE CLASSES OF THE SAME FUNDS FOR WHICH ADVISORY CLIENTS WERE ELIGIBLE. SPC RECEIVED 12B-1 FEES DIRECTLY FROM ITS THIRD-PARTY CLEARING BROKER IN CONNECTION WITH THESE INVESTMENTS. SPC FAILED TO DISCLOSE IN ITS FORMS ADV OR OTHERWISE THE CONFLICTS OF INTEREST RELATED TO ITS RECEIPT OF 12B-1 FEES AND ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. BY INVESTING ADVISORY CLIENTS IN MORE EXPENSIVE SHARE CLASSES WHEN LOWER-COST SHARE CLASSES OF THE SAME FUNDS WERE AVAILABLE, SPC VIOLATED ITS DUTY TO SEEK BEST EXECUTION. BECAUSE SPC ENGAGED IN BROKERAGE ACTIVITIES WITHOUT EVER REGISTERING AS A BROKER-DEALER AND RECEIVED THE 12B-1 FEES DIRECTLY, IT ALSO ACTED AS AN UNREGISTERED BROKER-DEALER. SECOND, DURING THE PERIOD 1/1/2013 THROUGH 3/1/2018, SPC HAD A SEPARATE ASSET-BASED FEE AGREEMENT WITH ITS CLEARING BROKER, PURSUANT TO WHICH SPC PAID THE CLEARING BROKER A FEE ON CERTAIN "CHARGEABLE ASSETS." THE AGREEMENT PROVIDED THAT LOWER-COST MUTUAL FUND SHARES THAT DID NOT CARRY A 12B-1 FEE WERE INCLUDED IN CHARGEABLE ASSETS, WHILE MORE EXPENSIVE 12B-1 FEE-PAYING MUTUAL FUND SHARES WERE NOT. BY INVESTING CLIENTS IN SHARE CLASSES THAT PAID 12B-1 FEES, SPC AVOIDED PAYING AN ASSET-BASED FEE TO THE CLEARING BROKER. SPC FAILED TO DISCLOSE THIS CONFLICT OF INTEREST IN ITS FORM ADV FILINGS OR ELSEWHERE. THIRD, DURING THE PERIOD 1/1/2013 THROUGH 3/1/2017, SPC FAILED TO DISCLOSE TO ITS ADVISORY CLIENTS THAT ITS AFFILIATED BROKER-DEALERS RECEIVED REVENUE-SHARING PAYMENTS PURSUANT TO TIERED SPONSORSHIP AGREEMENTS WITH VARIOUS ALTERNATIVE INVESTMENT SPONSORS. SPC'S INVESTMENT ADVISER REPRESENTATIVES, WHO WERE ALSO REGISTERED REPRESENTATIVES OF SPC'S AFFILIATED BROKER-DEALERS, SOLD THESE PRODUCTS TO SPC'S ADVISORY CLIENTS. FOURTH, SPC FAILED TO ADOPT AND IMPLEMENT WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT VIOLATIONS OF THE ADVISERS ACT AND THE RULES THEREUNDER IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASS SELECTION PRACTICES AND REVENUE-SHARING ARRANGEMENTS. AS A RESULT OF THIS CONDUCT, THE SEC CONCLUDED THAT SPC VIOLATED SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER, AND SECTION 15(A) OF THE EXCHANGE ACT. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE SEC'S FINDINGS, SPC CONSENTED TO A CENSURE, CEASE AND DESIST ORDER, DISGORGEMENT OF $1,920,809.00, PREJUDGMENT INTEREST OF $225,909.00, AND A CIVIL PENALTY IN THE AMOUNT OF $400,000.00 Summary: ON SEPTEMBER 19, 2019, THE SEC ACCEPTED SPC'S OFFER OF SETTLEMENT AND ENTERED AN ADMINISTRATIVE ORDER (ADVISERS ACT RELEASE NO. 5356).