First Citizens Asset Management, Inc

Allegations: COMPLAINANT ALLEGED ANNUITY SALE WAS IMPROPER AND UNSUITABLE GIVEN FINANCIAL CIRCUMSTANCES AND NEEDS. Status: Final Summary: CLAIMANT, THROUGH COUNSEL, FILED A COMPLAINT THROUGH THE STATE OF SOUTH CAROLINA'S MAGISTRATE COURT DEMANDING A JURY BY TRIAL. THE ADVISOR, FIRST CITIZENS ASSET MANAGEMENT, INC., WAS NAMED AS DEFENDANT. CLAIMANT ALLEGED FCAM NEGLIGENTLY ADVISED HER TO INVEST FUNDS INTO AN ANNUITY THAT FCAM KNEW THE COMPLAINANT MIGHT NEED FOR A LOAN REFINANCE. THE COMPLAINANT ALLEGEDLY SUFFERED LOSSES DUE TO THE WITHDRAWAL OF FUNDS FROM THE ANNUITY, WHICH ALSO SERVED TO INCREASE HER ANNUAL INCOME. THE INCREASE TO ANNUAL INCOME IS ALLEGED TO HAVE CAUSED ADVERSE TAX AND SOCIAL SECURITY INCOME CONSEQUENCES. CLAIMANT REQUESTED REIMBURSEMENT FOR THE COSTS OF LITIGATION, ATTORNEY'S FEES, EARLY WITHDRAWAL CHARGES IMPOSED, ADDITIONAL TAX AMOUNTS PAID, AND THE REDUCED PORTION OF SOCIAL SECURITY PAYMENTS RESULTING FROM THE WITHDRAWAL OF FUNDS FROM THE ANNUITY. FCAM DENIES ANY AND ALL ALLEGATIONS MADE BY CLAIMANT. CASE STATUS IS PENDING.

Allegations: IN FEBRUARY 2018, THE U.S. SECURITIES AND EXCHANGE COMMISSION ("SEC") ANNOUNCED AN INDUSTRY-WIDE INITIATIVE TO IDENTIFY AND REMEDY CONFLICTS OF INTEREST THAT ARISE WHERE INVESTMENT ADVISERS FAILED TO MAKE REQUIRED DISCLOSURES RELATING TO THEIR SELECTION OF CERTAIN MUTUAL FUND SHARE CLASSES THAT PAID THE ADVISER (OR ITS RELATED ENTITIES) A FEE PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 ("12B-1 FEE") WHEN A LOWER-COST SHARE CLASS FOR THE SAME FUND WAS AVAILABLE TO CLIENTS. BASED ON INFORMATION THAT FIRST CITIZENS ASSET MANAGEMENT, INC. ("FCAM") SELF-DISCLOSED, THE SEC ISSUED AN ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS AGAINST FCAM ON MARCH 11, 2019 (THE "ORDER"). THE SEC DETERMINED THAT, FOR THE PERIOD FROM JANUARY 1, 2014 TO JULY 20, 2018, FCAM PURCHASED, RECOMMENDED OR HELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THAT PAID 12B-1 FEES TO FCAM (OR ITS AFFILIATED BROKER-DEALER) INSTEAD OF LOWER-COST SHARE CLASSES FOR THE SAME FUNDS FOR WHICH THE CLIENTS WERE ELIGIBLE. THE SEC DETERMINED THAT FCAM DID NOT ADEQUATELY DISCLOSE: (A) ITS (OR ITS AFFILIATED BROKER-DEALER'S) RECEIPT OF 12B-1 FEES, AND/OR (B) ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. THE SEC FOUND THAT THIS CONDUCT VIOLATED SECTIONS 206(2) AND 207 OF THE INVESTMENT ADVISERS ACT OF 1940 (THE "ADVISERS ACT"). FCAM CONSENTED TO THE ORDER WITHOUT ADMITTING OR DENYING THE SEC'S FINDINGS. Status: Final Sanction Detail: THE SEC CENSURED AND ORDERED FCAM TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 206(2) AND 207 OF THE ADVISERS ACT. THE SEC ALSO ORDERED FCAM TO PAY $ 54,820.40 IN DISGORGEMENT AND $ 7,598.04 IN PREJUDGMENT INTEREST TO FCAM INVESTORS AFFECTED BY THE CONDUCT DESCRIBED IN THE ORDER, PURSUANT TO PROCEDURES OUTLINED THEREIN. THE SEC DID NOT ORDER A CIVIL MONETARY PENALTY OR FINE Summary: ON MARCH 11, 2019, FCAM CONSENTED, WITHOUT ADMITTING OR DENYING THE FINDINGS (EXCEPT AS TO JURISDICTION), TO THE ISSUANCE OF THE ORDER. (ON THE SAME DAY, THE SEC ISSUED SIMILAR ORDERS AGAINST 78 OTHER INVESTMENT ADVISERS.) THE SEC'S FINDINGS AGAINST FCAM ARE SUMMARIZED IN RESPONSE TO QUESTION 7 ABOVE. IN ACCORDANCE WITH THE SEC'S ORDER, FCAM HAS DEPOSITED THE DISGORGEMENT AND PREJUDGMENT INTEREST AMOUNTS INTO AN ESCROW ACCOUNT AND HAS COMPLIED WITH ALL RELEVANT DEADLINES RELATED TO THE CONTEMPLATED DISTRIBUTION OF THESE FUNDS. FCAM ALSO IS IN THE PROCESS OF IMPLEMENTING (AND IN SOME CASES ALREADY HAS IMPLEMENTED) THE UNDERTAKINGS SET FORTH IN RESPONSE TO QUESTION 12.B, ABOVE.