Effective February 15, 2018, Bruce Bruinsma named Chief Compliance Officer.
TMX Enterprises (holding company for Envoy Advisory Inc.) is now 100% owned by Bruce Bruinsma. Bethany Palmer has left the firm and is active in another ministry endeavor. There is no assignment of existing Advisory Agreements and this announcement is for notification purposes only. Because of the change in control, you may discontinue the Advisory services currently being offered. Please notify us in writing within 30 days of receipt of this notice.
Disciplinary Information
Pursuant to Rule 206(4)-4 of the Investment Advisers Act of 1940, investment advisers are required to provide their clients with disclosure as to any legal or disciplinary activities deemed material to the clients’ evaluation of the adviser.
In September 2017, the SEC issued an Order Instituting Administrative and Cease-and-Desist Proceedings as to Envoy alleging that it breached its fiduciary duty, provided inadequate disclosures, and had a deficient compliance program based on the receipt by its affiliated broker-dealer of certain marketing and distribution fees known as “12b-1 fees” paid by mutual funds directly or indirectly recommended by Envoy. The statutes and rules that the SEC alleged Envoy violated do not require proof of scienter (i.e., with an intent to defraud or recklessness); rather they merely require proof of negligence. Envoy agreed to the issuance of this Order on a no-admit, no-deny basis.
The Commission determined that from January 2013 through March 2017, Envoy recommended Class A shares of two mutual funds with 12b-1 fees when plan participants and IRA holders were eligible to purchase or hold share classes without 12b-1 fees of those same funds. Envoy’s Form ADV disclosures to Plan Sponsors during the Relevant Period disclosed that certain mutual funds “may” pay a “dealer” 12b-1 fees, but failed to disclose that the “dealer” receiving the 12b1 fees was Envoy’s affiliate. Envoy’s Form ADV disclosures to IRA Holders during the Relevant Period failed to make any mention at all 12b-1 fees, or the actual conflict of interest associated with its affiliated broker-dealer’s receipt of those fees. In making these disclosures, Envoy relied on the advice of a national compliance firm, but understands it is ultimately responsible for its own disclosures and this is no defense to liability.
As part of its settlement with the SEC, Envoy agreed to rebate to the affected clients on a voluntary basis approximately $25,000 in fees and to pay an approximately $25,000 civil penalty, plus prejudgment interest. Over the past several years, the SEC has filed numerous actions in which an investment adviser “failed to make required disclosures relating to its selection of mutual fund share classes that paid the adviser (as a dually registered broker-dealer) or its related entities or individuals” 12b-1 fees when a lower-cost share class for the same fund was available, according to the announcement of the program. Some of these actions involved major firms such as Credit Suisse Securities (USA) LLC and SunTrust Investment Services, Inc. In addition to the monetary payments described above, Envoy has retained an independent compliance consultant to assist the firm in a comprehensive review of its compliance policies and procedures and its Form ADV disclosures and other disclosure documents.
Further background review of both the firm and its personnel may be found by visiting the SEC’s Investment Adviser Public Disclosure website www.adviserinfo.sec.gov.