Founders Financial Securities, Llc

Allegations: SEC ADMIN RELEASE 34-87177; IA RELEASE 5397, SEPTEMBER 30, 2019: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE INSTITUTED AGAINST FOUNDERS FINANCIAL SECURITIES, LLC ("RESPONDENT"). ON THE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THE COMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OF BREACHES OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURES BY THE RESPONDENT IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASS SELECTION PRACTICES AND THE FEES IT RECEIVED. AT TIMES DURING THE RELEVANT PERIOD, RESPONDENT 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 THE CLIENTS WERE ELIGIBLE. RESPONDENT RECEIVED OR BENEFITED FROM 12B-1 FEES IN CONNECTION WITH THESE INVESTMENTS. RESPONDENT FAILED TO ADEQUATELY DISCLOSE THE CONFLICTS OF INTEREST RELATED TO ITS RECEIPT OF 12B-1 FEES AND ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. IN ADDITION, RESPONDENT BREACHED ITS DUTY TO SEEK BEST EXECUTION FOR ITS CLIENTS BY INVESTING THEM IN MUTUAL FUND SHARE CLASSES WITH 12B-1 FEES RATHER THAN AVAILABLE LOWER-COST SHARE CLASSES OF THE SAME FUNDS. DURING THE RELEVANT PERIOD, RESPONDENT RECEIVED, OR BENEFITED FROM, OVER $1.24 MILLION IN 12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD SUCH MUTUAL FUND SHARE CLASSES. RESPONDENT ALSO FAILED TO ADOPT AND IMPLEMENT WRITTEN COMPLIANCE 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. AS A RESULT OF ITS CONDUCT, RESPONDENT WILLFULLY VIOLATED SECTION 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER. Status: Final Sanction Detail: RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 PROMULGATED THEREUNDER. RESPONDENT IS CENSURED, SHALL PAY DISGORGEMENT OF $1,246,133.60 AND PREJUDGMENT INTEREST OF $229,332.28, SHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $140,000 TO THE SECURITIES AND EXCHANGE COMMISSION FOR TRANSFER TO THE GENERAL FUND OF THE UNITED STATES TREASURY AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. Summary: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE, AND IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN RESPONDENT'S OFFER. ACCORDINGLY, IT IS ORDERED THAT RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 PROMULGATED THEREUNDER. RESPONDENT IS CENSURED, SHALL PAY DISGORGEMENT OF $1,246,133.60 AND PREJUDGMENT INTEREST OF $229,332.28, SHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $140,000 TO THE SECURITIES AND EXCHANGE COMMISSION FOR TRANSFER TO THE GENERAL FUND OF THE UNITED STATES TREASURY AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. IN DETERMINING TO ACCEPT THE OFFER, THE COMMISSION CONSIDERED REMEDIAL ACTS TAKEN BY RESPONDENT, INCLUDING ENDING THE PRACTICE OF RECEIVING OR BENEFITING FROM 12B-1 FEES IN FEBRUARY 2017, AND REVISING ITS DISCLOSURES AND COMPLIANCE POLICIES AND PROCEDURES.