SEC and Commonwealth Financial Network Move Toward Settlement in Revenue Sharing Disclosure Case
From the desk of Jim Eccleston at Eccleston Law
The Securities and Exchange Commission (SEC) and Commonwealth Financial Network notified a federal court that they are attempting to resolve a long running enforcement dispute involving alleged disclosure failures tied to revenue sharing payments, according to ThinkAdvisor.
On January 30, the parties asked the U.S. District Court for the District of Massachusetts to pause the litigation so they could continue settlement negotiations, as reported by ThinkAdvisor. Judge Indira Talwani granted the request and directed both sides to submit a joint status report by March 31.
The SEC filed the case in 2019. The agency alleged that from July 2014 through December 2018 Commonwealth breached its fiduciary duty to advisory clients by failing to disclose conflicts of interest in a revenue sharing arrangement with National Financial Services. ThinkAdvisor's review of the complaint reveals that certain mutual fund share classes produced millions in revenue sharing payments for the firm while lower cost alternatives generated little or no additional compensation.
According to ThinkAdvisor, the court previously ruled that the firm did not adequately disclose that it received portions of fees connected to No Transaction Fee and Transaction Fee programs and did not clearly explain the revenue impact of higher cost share classes.
In March 2024, the district court ordered Commonwealth to pay $93 million, including $65.6 million in disgorgement, $21.2 million in interest, and a $6.5 million civil penalty.
In April 2025, a federal appeals court reversed the decision and returned the case for further proceedings. The appellate court determined that a jury must decide whether the alleged omissions were material, as reported by ThinkAdvisor.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, sec enforcement, commonwealth financial network, revenue sharing, disclosure failures, securities law
