Huntleigh Advisors, Inc.

Allegations: AS SET FORTH IN THE COMMISSION'S FEBRUARY 27, 2023 ORDER INSTITUTING ADMINISTRATIVE AND CASE-AND-DESIST PROCEEDINGS, THE COMMISSION ALLEGES THAT HAI AND DTX ("THE FIRMS") WERE SUBJECT TO AN ADMINISTRATIVE ORDER ISSUED BY THE SEC IN FEBRUARY 2023. THE ORDER OUTLINED FAILURES TO PROVIDE FULL AND FAIR DISCLOSURE REGARDING THEIR CONFLICTS OF INTEREST ASSOCIATED WITH: (A) COMPENSATION THE FIRMS RECEIVED BASED ON CLIENT TRANSACTION FEES; (B) REVENUE THE FIRMS' AFFILIATED BROKER-DEALER HUNTLEIGH SECURITIES CORP. ("HSC") RECEIVED IN CONNECTION WITH ADVISORY CLIENT CASH SWEEP ACCOUNTS; AND (C) HSC'S RECEIPT OF FEES PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 ("12B-1 FEES") FROM CLIENTS' INVESTMENTS IN CERTAIN MUTUAL FUND SHARE CLASSES, INCLUDING WHEN LOWER-COST, NON FEE-PAYING SHARE CLASSES WERE ALSO AVAILABLE.THE FIRMS ALSO BREACHED THEIR DUTY OF CARE, INCLUDING THEIR DUTY TO SEEK BEST EXECUTION. LASTLY THE FIRMS ARE ALLEGED TO HAVE 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 DISCLOSURE OF THEIR CONFLICTS OF INTEREST, BEST EXECUTION, AND MUTUAL FUND SHARE CLASS SELECTION. Status: Final Sanction Detail: THE FIRMS SHALL PAY DISGORGEMENT, PREJUDGMENT INTEREST, AND A CIVIL PENALTY, TOTALING $893,502 AS FOLLOWS: (I) RESPONDENT HUNTLEIGH SHALL PAY DISGORGEMENT OF $608,251 AND PREJUDGMENT INTEREST OF $105,251. (II) RESPONDENT HUNTLEIGH SHALL PAY A CIVIL PENALTY OF $130,000.. (III) RESPONDENT DATATEX SHALL PAY A CIVIL PENALTY OF $50,000. Summary: ON FEBRUARY 27, 2023, THE COMMISSION ISSUED AN ORDER ANNOUNCING THAT IT ACCEPTED RESPONDENTS' OFFER OF SETTLEMENT AS IT PERTAINS TO THE ALLEGATIONS SET FORTH IN RESPONSE NO. 7 ABOVE. AS PART OF THE ORDER, THE COMMISSION CONCLUDED THAT HUNTLEIGH AND DATATEX FAILED TO FULLY AND FAIRLY DISCLOSE TO THEIR ADVISORY CLIENTS CERTAIN CONFLICTS OF INTEREST ASSOCIATED WITH (I) HUNTLEIGH'S RECEIPT OF TRANSACTION FEES THAT ADVISORY CLIENTS PAID TO HUNTLEIGH'S AFFILIATED BROKER-DEALER (HSC); (II) REVENUE SHARING PAYMENTS HUNTLEIGH'S AFFILIATED BROKER-DEALER (HSC) RECEIVED AND SHARED WITH HUNTLEIGH FROM CLIENTS' INVESTMENTS IN CASH SWEEP VEHICLES; (III) MUTUAL FUND SHARE CLASS SELECTION PRACTICES THAT PAID FEES TO HUNTLEIGH'S AFFILIATED BROKER-DEALER PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 WHEN LOWER-COST SHARE CLASSES THAT DID NOT CHARGE THOSE FEES WERE SOMETIMES AVAILABLE; AND (IV) REVENUE HUNTLEIGH'S AFFILIATED BROKER-DEALER RECEIVED AND SHARED WITH HUNTLEIGH BASED ON THE RATE OF MARGIN INTEREST CHARGED TO ADVISORY CLIENTS. THE COMMISSION ALSO CONCLUDED THAT HUNTLEIGH AND DATATEX BREACHED THEIR DUTY OF CARE (AND THEIR DUTY TO SEEK BEST EXECUTION) REGARDING THEIR EVALUATION OF TRANSACTION FEES CHARGED TO ADVISORY CLIENTS AND THE SELECTION OF CASH SWEEP OPTIONS AND MUTUAL FUND SHARE CLASSES. WITHOUT ADMITTING OR DENYING THESE FINDINGS, HUNTLEIGH AND DATATEX AGREED TO PAY DISGORGEMENT, PREJUDGMENT INTEREST, AND A CIVIL PENALTY TOTALING $893,502 AND TO COMPLY WITH CERTAIN UNDERTAKINGS AS SET FORTH IN THE FEBRUARY 27, 2023 ORDER (A COPY OF WHICH HAS BEEN PROVIDED TO EACH AFFECTED ADVISORY CLIENT). RESPONDENTS ALSO AGREED TO A CEASE-AND-DESIST ORDER AND CENSURE AND TO REVIEW SOME OF THEIR POLICIES AND PROCEDURES. WHILE ACCEPTING RESPONDENTS' OFFER OF SETTLEMENT, TWO SEC COMMISSIONERS NOTED THEIR DISSENT WITH THE COMMISSION'S FINDINGS REGARDING BREACH OF THE DUTY TO SEEK BEST EXECUTION AS IT PERTAINS TO MUTUAL FUND SHARE CLASS SELECTION STATING, AMONG OTHER THINGS, THAT IT WAS "UNFORTUNATE THAT THE COMMISSION CHOOSES TO CREATE NOVEL REGULATORY INTERPRETATIONS THROUGH ENFORCEMENT." THE FULL DISSENT CAN BE FOUND AT: HTTPS://WWW.SEC.GOV/NEWS/STATEMENT/PEIRCE-UYEDA-STATEMENT-HUNTLEIGH-DATATEX-022723