In re BOK FINANCIAL

UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 5160 / March 11, 2019 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-19063 
 
 
In the Matter of 
 
BOK FINANCIAL  
            SECURITIES, INC.  
 
Respondent. 
 
 
 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS, PURSUANT TO 
SECTIONS 203(e) AND 203(k) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A 
CEASE-AND-DESIST ORDER  
   
 
I. 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”) against BOK Financial Securities, Inc. (“Respondent”).   
II. 
 In anticipation of the institution of these proceedings, Respondent has submitted an 
Offer of Settlement (the “Offer”), which the Commission has determined to accept.  Solely for 
the purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over it and the subject matter of 
these proceedings, which are admitted, Respondent consents to the entry of this Order 
Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and 
203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial 
Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 

 
 
2 
 
III. 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that  
Summary 
1. These proceedings arise out of breaches of fiduciary duty and inadequate 
disclosures by registered investment adviser BOK Financial Securities, Inc. in connection with 
its mutual fund share class selection practices and the fees it and its associated persons received 
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”).  At times 
during the period January 1, 2014 to July 6, 2018 (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 and its associated persons received 12b-1 fees in connection with these 
investments.  Respondent failed to disclose in its Form ADV or otherwise the conflicts of interest 
related to (a) its receipt of 12b-1 fees, and/or (b) its selection of mutual fund share classes that 
pay such fees.  During the Relevant Period, Respondent and its associated persons received 12b-
1 fees for advising clients to invest in or hold such mutual fund share classes.   
2. Respondent self-reported to the Commission the violations discussed in this 
Order pursuant to the Division of Enforcement’s (the “Division”) Share Class Selection 
Disclosure Initiative (“SCSD Initiative”).
2
  Accordingly, this Order and Respondent’s Offer are 
based on the information self-reported by Respondent. 
Respondent 
3. Respondent BOK Financial Securities, Inc. incorporated in Oklahoma and 
headquartered in Tulsa, Oklahoma, has been dually registered with the Commission as an 
investment adviser and broker-dealer since February 14, 1986.  In its Form ADV filed March 
26, 2018, Respondent reported regulatory assets under management of approximately $623 
million.  
                                                 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 
other person or entity in this or any other proceeding.  
2
  See Div. of Enforcement, U.S. Sec. & Exch. Comm’n, Share Class Selection Disclosure Initiative, 
https://www.sec.gov/enforce/announcement/scsd-initiative (last modified Feb. 12, 2018). 

 
 
3 
Mutual Fund Share Class Selection 
4. Mutual funds typically offer investors different types of shares or “share 
classes.” Each share class represents an interest in the same portfolio of securities with the same 
investment objective.  The primary difference among the share classes is the fee structure. 
5. For example, some mutual fund share classes charge 12b-1 fees to cover fund 
distribution and sometimes shareholder service expenses.  These recurring fees, which are 
included in a mutual fund’s total annual fund operating expenses, vary by share class, but 
typically range from 25 to 100 basis points.  They are deducted from the mutual fund’s assets 
on an ongoing basis and paid to the fund’s distributor or principal underwriter, which generally 
remits the 12b-1 fees to the broker-dealer that distributed or sold the shares.   
6. Many mutual funds also offer share classes that do not charge 12b-1 fees (e.g., 
“Institutional Class” or “Class I” shares (collectively, “Class I shares”)).
3
  An investor who 
holds Class I shares of a mutual fund will usually pay lower total annual fund operating 
expenses over time – and thus will almost always earn higher returns – than one who holds a 
share class of the same fund that charges 12b-1 fees.  Therefore, if a mutual fund offers a 
Class I share, and an investor is eligible to own it, it is often, though not always, better for the 
investor to purchase or hold the Class I share.  
7. During the Relevant Period, Respondent advised clients to purchase or hold
4
 
mutual fund share classes that charged 12b-1 fees when lower-cost share classes of those same 
funds were available to those clients.  Respondent and its associated persons received 12b-1 
fees that they would not have collected had those clients been invested in the available lower-
cost share classes. 
Inadequate Disclosures Concerning Mutual Fund Investments  
8. As an investment adviser, Respondent was obligated to disclose all material 
facts to its clients, including any conflicts of interest between itself and its associated persons 
and its clients that could affect the advisory relationship and how those conflicts could impact 
advice the Respondent provided its clients.  Relevant to the issue herein, Respondent was 
required to give its clients sufficient information so that they could understand the conflicts of 
interest of the Respondent and its associated persons concerning their advice about investing in 
the different classes of mutual funds and have a basis on which they could consent to or reject 
such conflicted transactions.  
                                                 
3
  Share classes that do not charge 12b-1 fees also go by a variety of other names in the mutual fund 
industry, such as “Class F2,” “Class Y” and “Class Z” shares.  As used in this Order, the term “Class I shares” 
refers generically to share classes that do not charge 12b-1 fees.   
4
  In many cases, mutual funds permit certain advisory clients who hold shares in classes charging 12b-1 
fees to convert those shares to Class I shares without cost or tax consequences to the client.  

 
 
4 
9.  At times during the Relevant Period, Respondent did not disclose adequately to 
its clients either in its Forms ADV or otherwise it and its associated persons’ conflicts of interest 
related to (a) its receipt of 12b-1 fees, and/or (b) its selection of mutual fund share classes that 
pay such fees.  
Violations 
10. As a result of the conduct described above, Respondent willfully
5
 violated 
Section 206(2) of the Advisers Act, which makes it unlawful for any investment adviser, 
directly or indirectly, to “engage in any transaction, practice or course of business which 
operates as a fraud or deceit upon any client or prospective client.”  Scienter is not required to 
establish a violation of Section 206(2), but rather may rest on a finding of negligence.  SEC v. 
Steadman, 967 F.2d 636, 643 n.5 (D.C. Cir. 1992) (citing SEC v. Capital Gains Research 
Bureau, Inc., 375 U.S. 180,194-95 (1963)). 
11. As a result of the conduct described above, Respondent willfully violated 
Section 207 of the Advisers Act, which makes it “unlawful for any person willfully to make any 
untrue statement of a material fact in any registration application or report filed with the 
Commission . . . or willfully to omit to state in any such application or report any material fact 
which is required to be stated therein.”   
Self-Reporting 
12. In determining to accept Respondent’s offer, the Commission considered that 
Respondent self-reported its conduct to the Commission pursuant to the SCSD Initiative. 
Undertakings 
13. Respondent has undertaken to: 
a. Within 30 days of the entry of this Order, review and correct as 
necessary all relevant disclosure documents concerning mutual fund share class 
selection and 12b-1 fees. 
b. Within 30 days of the entry of this Order, evaluate whether existing 
clients should be moved to a lower-cost share class and move clients as 
necessary. 
c. Within 30 days of the entry of this Order, evaluate, update (if necessary), 
and review for the effectiveness of their implementation, Respondent’s policies 
and procedures so that they are reasonably designed to prevent violations of the 
                                                 
5
  A willful violation of the securities laws means merely “‘that the person charged with the duty knows 
what he is doing.’”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 
969, 977 (D.C. Cir. 1949)).  There is no requirement that the actor “‘also be aware that he is violating one of the 
Rules or Acts.’”  Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 

 
 
5 
Advisers Act in connection with disclosures regarding mutual fund share class 
selection. 
d. Within 30 days of the entry of this Order, notify affected investors (i.e., 
those former and current clients who, during the Relevant Period of inadequate 
disclosure, purchased or held 12b-1 fee paying share class mutual funds when 
a lower-cost share class of the same fund was available to the client) 
(hereinafter, “affected investors”) of the settlement terms of this Order in a 
clear and conspicuous fashion. 
e. Within 40 days of the entry of this Order, certify, in writing, compliance 
with the undertaking(s) set forth above.  The certification shall identify the 
undertaking(s), provide written evidence of compliance in the form of a 
narrative, and be supported by exhibits sufficient to demonstrate compliance.  
The certification and supporting material shall be submitted to Barbara Gunn, 
Assistant Director, Fort Worth Regional Office, Securities & Exchange 
Commission, 801 Cherry Street, Unit 18, Fort Worth, Texas 76102-3821, or 
such other address as the Commission staff may provide, with a copy to the 
Office of Chief Counsel of the Division of Enforcement, Securities and 
Exchange Commission, 100 F. Street, NE, Washington, DC 20549.   
f. For good cause shown, the Commission staff may extend any of the 
procedural dates relating to these undertakings.  Deadlines for procedural dates 
shall be counted in calendar days, except that if the last day falls on a weekend 
or federal holiday, the next business day shall be considered the last day. 
IV. 
 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, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 
ORDERED that: 
 A. Respondent shall cease and desist from committing or causing any violations and 
any future violations of Sections 206(2) and 207 of the Advisers Act. 
B. Respondent is censured.   
C. Respondent shall pay disgorgement and prejudgment interest to affected 
investors, totaling $197,801.23 as follows: 
(i.) Respondent shall pay disgorgement of $182,318.31 and prejudgment 
interest of $15,482.92, consistent with the provisions of this Subsection C and 
subject to the offset provisions of Subsection C.(vii) below.    

 
 
6 
(ii.) Within ten (10) days of the entry of this Order, Respondent shall deposit 
the full amount of the disgorgement and prejudgment interest (the “Distribution 
Fund”) into an escrow account at a financial institution not unacceptable to the 
Commission staff and Respondent shall provide evidence of such deposit in a 
form acceptable to the Commission staff.  If timely deposit is not made, 
additional interest shall accrue pursuant to SEC Rule of Practice 600 [17 C.F.R. 
§ 201.600]. 
(iii.) Respondent shall be responsible for administering the Distribution Fund 
and may hire a professional acceptable to the Commission, at its own cost, to 
assist it in the administration of the distribution.  The costs and expenses of 
administering the Distribution Fund, including any such professional services, 
shall be borne by Respondent and shall not be paid out of the Distribution Fund.   
(iv.) Respondent shall distribute the amount of the Distribution Fund to each 
affected investor an amount representing: (a) the 12b-1 fees attributable to the 
affected investor during the Relevant Period; and (b) reasonable interest paid on 
such fees,
6
 pursuant to a disbursement calculation (the “Calculation”) that will be 
submitted to, reviewed, and approved by the Commission staff in accordance 
with this Subsection C.  The Calculation shall be subject to a de minimis 
threshold.  No portion of the Distribution Fund shall be paid to any affected 
investor account in which Respondent or its past or present officers or directors 
have a financial interest. 
(v.) Respondent shall, within ninety (90) days of the entry of this Order, 
submit a Calculation to the Commission staff for review and approval.  
Respondent shall also provide to the Commission staff such additional 
information and supporting documentation as the Commission staff may request 
for the purpose of its review.  In the event of one or more objections by the 
Commission staff to Respondent’s proposed Calculation or any of its information 
or supporting documentation, Respondent shall submit a revised Calculation for 
the review and approval of the Commission staff or additional information or 
supporting documentation within ten (10) days of the date that Respondent is 
notified of the objection.  The revised Calculation shall be subject to all of the 
provisions of this Subsection C.   
(vi.) Respondent shall, within thirty (30) days of the written approval of the 
Calculation by the Commission staff, submit a payment file (the “Payment File”) 
for review and acceptance by the Commission staff demonstrating the application 
of the methodology to each affected investor.  The Payment File should identify, 
                                                 
6
  Reasonable interest will be calculated at the Short-Term Applicable Federal Rate plus three percent 
(3%), compounded quarterly from the end of the year when Respondent and its associated persons received the 
12b-1 fees to the date the Respondent completed its self-report pursuant to the SCSD Initiative. 
      

 
 
7 
at a minimum: (1) the name of each affected investor, (2) the exact amount of the 
payment to be made from the Distribution Fund to each affected investor, and (3) 
the application of a de minimis threshold. 
 
(vii.) Respondent shall disburse all amounts payable to affected investors 
within 90 days of the date the Commission staff accepts the Payment File unless 
such time period is extended as provided in Paragraph (x.) of this Subsection C.  
The amount Respondent pays to affected investors on or after February 12, 
2018, up until the lapse of 90 days following the date of staff’s acceptance of the 
Payment File for 12b-1 fees the Respondent received during the Relevant 
Period, will dollar for dollar offset the disgorgement payable to the Commission 
pursuant to this Subsection C, subject to approval by Commission staff.  If, after 
Respondent’s reasonable efforts to distribute the Distribution Fund pursuant to 
the approved Payment File, Respondent is unable to distribute any portion of the 
Distribution Fund for good cause, including factors beyond Respondent’s 
control, Respondent shall transfer any such undistributed funds to the 
Commission for transmittal to the United States Treasury in accordance with 
Section 21F(g)(3) of the Securities Exchange Act of 1934 when the distribution 
of the funds is complete and before the final accounting provided for in 
Paragraph (ix.) below is submitted to Commission staff.  Any such payment 
shall be made in accordance with Paragraph (xi.) below.  
 
(viii.) A Distribution Fund is a Qualified Settlement Fund (“QSF”) under 
Section 468B(g) of the Internal Revenue Code (“IRC”), 26 U.S.C. §§1.468B.1-
1.468B.5. Respondent agrees to be responsible for all tax compliance 
responsibilities associated with distribution of the Distribution Fund, including 
but not limited to tax obligations resulting from the Distribution Fund’s status as 
a QSF and the Foreign Account Tax Compliance Act (“FATCA”), and may 
retain any professional services necessary. The costs and expenses of any such 
professional services shall be borne by Respondent and shall not be paid by the 
Distribution Fund. 
  
(ix.) Within 150 days after Respondent completes the distribution of all 
amounts payable to the affected investors, Respondent shall submit to the 
Commission staff a final accounting and certification of the disposition of the 
Distribution Fund for Commission approval.  The final accounting shall be in a 
format to be provided by the Commission staff. The final accounting and 
certification shall include: (1) the amount paid to each affected investor, with 
reasonable interest; (2) the date of each payment; (3) the check number or other 
identifier of money transferred to each affected investor; (4) the amount of any 
returned payment and the date received; (5) a description of any effort to locate 
an affected investor whose payment was returned or to whom payment was not 
made for any reason; (6) the total amount, if any, to be forwarded to the 
Commission for transfer to the United States Treasury; and (7) an affirmation 

 
 
8 
that Respondent has made payments from the Distribution Fund to affected 
investors in accordance with the Payment File approved by the Commission 
staff.  Respondent shall submit the final accounting and certification, together 
with proof and supporting documentation of such payment in a form acceptable 
to Commission staff, under a cover letter that identifies BOK Financial 
Securities, Inc. as the Respondent in these proceedings and the file number of 
these proceedings to Barbara Gunn, Assistant Director, Fort Worth Regional 
Office, Securities & Exchange Commission, 801 Cherry Street, Unit 18, Fort 
Worth, Texas 76102-3821, or such other address as the Commission staff may 
provide.  Any and all supporting documentation for the accounting and 
certification shall be provided to the Commission staff upon request, and 
Respondent shall cooperate with any additional requests by the Commission 
staff in connection with the accounting and certification. 
  
(x.) The Commission staff may extend any of the procedural dates set forth 
in Paragraphs (ii.) through (ix.) of this Subsection C for good cause shown. 
Deadlines for dates relating to the Distribution Fund shall be counted in calendar 
days, except if the last day falls on a weekend or federal holiday, the next 
business day shall be considered the last day.  
(xi.) Respondent’s transfer of any undistributed funds to the Commission for 
transmittal to the United States Treasury must be made in one of the following 
ways:   
(a) Respondent may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(b) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(c) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter 
identifying Respondent as a Respondent in these proceedings, and the file 
number of these proceedings; a copy of the cover letter and check or money 
order must be sent to Barbara Gunn, Assistant Director, Fort Worth Regional 
Office, Securities & Exchange Commission, 801 Cherry Street, Unit 18, Fort 

 
 
9 
Worth, Texas 76102-3821, or such other address as the Commission staff may 
provide. 
D.   Respondent acknowledges that the Commission is not imposing a civil penalty 
based upon Respondent’s self-report in the SCSD Initiative.  If at any time following the entry 
of this Order, the Division obtains information indicating that Respondent knowingly provided 
materially false or misleading information or materials to the Commission, or in a related 
proceeding, the Division may, at its sole discretion and with prior notice to the Respondent, 
petition the Commission to reopen this matter and seek an order directing that the Respondent 
pay a civil money penalty.  Respondent may contest by way of defense in any resulting 
administrative proceeding whether it knowingly provided materially false or misleading 
information, but may not: (1) contest the findings in this Order; or (2) assert any defense to 
liability or remedy, including, but not limited to, any statute of limitations defense. 
E. Respondent shall comply with the undertakings enumerated in Section III, 
paragraphs 13.a through 13.e above. 
 By the Commission. 
 
       Vanessa A. Countryman 
       Acting Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 5160 / March 11, 2019 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-19063 

 

 

In the Matter of 

 

BOK FINANCIAL  

            SECURITIES, INC.  

 

Respondent. 

 

 

 

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-AND-

DESIST PROCEEDINGS, PURSUANT TO 

SECTIONS 203(e) AND 203(k) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A 

CEASE-AND-DESIST ORDER  

   

 

I. 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative and cease-and-desist proceedings be, and hereby 

are, instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against BOK Financial Securities, Inc. (“Respondent”).   

II. 

 In anticipation of the institution of these proceedings, Respondent has submitted an 

Offer of Settlement (the “Offer”), which the Commission has determined to accept.  Solely for 

the purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the 

findings herein, except as to the Commission’s jurisdiction over it and the subject matter of 

these proceedings, which are admitted, Respondent consents to the entry of this Order 

Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and 

203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial 

Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 



 

 

2 

 

III. 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that  

Summary 

1. These proceedings arise out of breaches of fiduciary duty and inadequate 

disclosures by registered investment adviser BOK Financial Securities, Inc. in connection with 

its mutual fund share class selection practices and the fees it and its associated persons received 

pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”).  At times 

during the period January 1, 2014 to July 6, 2018 (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 and its associated persons received 12b-1 fees in connection with these 

investments.  Respondent failed to disclose in its Form ADV or otherwise the conflicts of interest 

related to (a) its receipt of 12b-1 fees, and/or (b) its selection of mutual fund share classes that 

pay such fees.  During the Relevant Period, Respondent and its associated persons received 12b-

1 fees for advising clients to invest in or hold such mutual fund share classes.   

2. Respondent self-reported to the Commission the violations discussed in this 

Order pursuant to the Division of Enforcement’s (the “Division”) Share Class Selection 

Disclosure Initiative (“SCSD Initiative”).2  Accordingly, this Order and Respondent’s Offer are 

based on the information self-reported by Respondent. 

Respondent 

3. Respondent BOK Financial Securities, Inc. incorporated in Oklahoma and 

headquartered in Tulsa, Oklahoma, has been dually registered with the Commission as an 

investment adviser and broker-dealer since February 14, 1986.  In its Form ADV filed March 

26, 2018, Respondent reported regulatory assets under management of approximately $623 

million.  

                                                 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 

other person or entity in this or any other proceeding.  

2
  See Div. of Enforcement, U.S. Sec. & Exch. Comm’n, Share Class Selection Disclosure Initiative, 

https://www.sec.gov/enforce/announcement/scsd-initiative (last modified Feb. 12, 2018). 



 

 

3 

Mutual Fund Share Class Selection 

4. Mutual funds typically offer investors different types of shares or “share 

classes.” Each share class represents an interest in the same portfolio of securities with the same 

investment objective.  The primary difference among the share classes is the fee structure. 

5. For example, some mutual fund share classes charge 12b-1 fees to cover fund 

distribution and sometimes shareholder service expenses.  These recurring fees, which are 

included in a mutual fund’s total annual fund operating expenses, vary by share class, but 

typically range from 25 to 100 basis points.  They are deducted from the mutual fund’s assets 

on an ongoing basis and paid to the fund’s distributor or principal underwriter, which generally 

remits the 12b-1 fees to the broker-dealer that distributed or sold the shares.   

6. Many mutual funds also offer share classes that do not charge 12b-1 fees (e.g., 

“Institutional Class” or “Class I” shares (collectively, “Class I shares”)).3  An investor who 

holds Class I shares of a mutual fund will usually pay lower total annual fund operating 

expenses over time – and thus will almost always earn higher returns – than one who holds a 

share class of the same fund that charges 12b-1 fees.  Therefore, if a mutual fund offers a 

Class I share, and an investor is eligible to own it, it is often, though not always, better for the 

investor to purchase or hold the Class I share.  

7. During the Relevant Period, Respondent advised clients to purchase or hold4 

mutual fund share classes that charged 12b-1 fees when lower-cost share classes of those same 

funds were available to those clients.  Respondent and its associated persons received 12b-1 

fees that they would not have collected had those clients been invested in the available lower-

cost share classes. 

Inadequate Disclosures Concerning Mutual Fund Investments  

8. As an investment adviser, Respondent was obligated to disclose all material 

facts to its clients, including any conflicts of interest between itself and its associated persons 

and its clients that could affect the advisory relationship and how those conflicts could impact 

advice the Respondent provided its clients.  Relevant to the issue herein, Respondent was 

required to give its clients sufficient information so that they could understand the conflicts of 

interest of the Respondent and its associated persons concerning their advice about investing in 

the different classes of mutual funds and have a basis on which they could consent to or reject 

such conflicted transactions.  

                                                 
3
  Share classes that do not charge 12b-1 fees also go by a variety of other names in the mutual fund 

industry, such as “Class F2,” “Class Y” and “Class Z” shares.  As used in this Order, the term “Class I shares” 

refers generically to share classes that do not charge 12b-1 fees.   

4
  In many cases, mutual funds permit certain advisory clients who hold shares in classes charging 12b-1 

fees to convert those shares to Class I shares without cost or tax consequences to the client.  



 

 

4 

9.  At times during the Relevant Period, Respondent did not disclose adequately to 

its clients either in its Forms ADV or otherwise it and its associated persons’ conflicts of interest 

related to (a) its receipt of 12b-1 fees, and/or (b) its selection of mutual fund share classes that 

pay such fees.  

Violations 

10. As a result of the conduct described above, Respondent willfully5 violated 

Section 206(2) of the Advisers Act, which makes it unlawful for any investment adviser, 

directly or indirectly, to “engage in any transaction, practice or course of business which 

operates as a fraud or deceit upon any client or prospective client.”  Scienter is not required to 

establish a violation of Section 206(2), but rather may rest on a finding of negligence.  SEC v. 

Steadman, 967 F.2d 636, 643 n.5 (D.C. Cir. 1992) (citing SEC v. Capital Gains Research 

Bureau, Inc., 375 U.S. 180,194-95 (1963)). 

11. As a result of the conduct described above, Respondent willfully violated 

Section 207 of the Advisers Act, which makes it “unlawful for any person willfully to make any 

untrue statement of a material fact in any registration application or report filed with the 

Commission . . . or willfully to omit to state in any such application or report any material fact 

which is required to be stated therein.”   

Self-Reporting 

12. In determining to accept Respondent’s offer, the Commission considered that 

Respondent self-reported its conduct to the Commission pursuant to the SCSD Initiative. 

Undertakings 

13. Respondent has undertaken to: 

a. Within 30 days of the entry of this Order, review and correct as 

necessary all relevant disclosure documents concerning mutual fund share class 

selection and 12b-1 fees. 

b. Within 30 days of the entry of this Order, evaluate whether existing 

clients should be moved to a lower-cost share class and move clients as 

necessary. 

c. Within 30 days of the entry of this Order, evaluate, update (if necessary), 

and review for the effectiveness of their implementation, Respondent’s policies 

and procedures so that they are reasonably designed to prevent violations of the 

                                                 
5
  A willful violation of the securities laws means merely “‘that the person charged with the duty knows 

what he is doing.’”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 

969, 977 (D.C. Cir. 1949)).  There is no requirement that the actor “‘also be aware that he is violating one of the 

Rules or Acts.’”  Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 



 

 

5 

Advisers Act in connection with disclosures regarding mutual fund share class 

selection. 

d. Within 30 days of the entry of this Order, notify affected investors (i.e., 

those former and current clients who, during the Relevant Period of inadequate 

disclosure, purchased or held 12b-1 fee paying share class mutual funds when 

a lower-cost share class of the same fund was available to the client) 

(hereinafter, “affected investors”) of the settlement terms of this Order in a 

clear and conspicuous fashion. 

e. Within 40 days of the entry of this Order, certify, in writing, compliance 

with the undertaking(s) set forth above.  The certification shall identify the 

undertaking(s), provide written evidence of compliance in the form of a 

narrative, and be supported by exhibits sufficient to demonstrate compliance.  

The certification and supporting material shall be submitted to Barbara Gunn, 

Assistant Director, Fort Worth Regional Office, Securities & Exchange 

Commission, 801 Cherry Street, Unit 18, Fort Worth, Texas 76102-3821, or 

such other address as the Commission staff may provide, with a copy to the 

Office of Chief Counsel of the Division of Enforcement, Securities and 

Exchange Commission, 100 F. Street, NE, Washington, DC 20549.   

f. For good cause shown, the Commission staff may extend any of the 

procedural dates relating to these undertakings.  Deadlines for procedural dates 

shall be counted in calendar days, except that if the last day falls on a weekend 

or federal holiday, the next business day shall be considered the last day. 

IV. 

 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, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 

ORDERED that: 

 A. Respondent shall cease and desist from committing or causing any violations and 

any future violations of Sections 206(2) and 207 of the Advisers Act. 

B. Respondent is censured.   

C. Respondent shall pay disgorgement and prejudgment interest to affected 

investors, totaling $197,801.23 as follows: 

(i.) Respondent shall pay disgorgement of $182,318.31 and prejudgment 

interest of $15,482.92, consistent with the provisions of this Subsection C and 

subject to the offset provisions of Subsection C.(vii) below.    



 

 

6 

(ii.) Within ten (10) days of the entry of this Order, Respondent shall deposit 

the full amount of the disgorgement and prejudgment interest (the “Distribution 

Fund”) into an escrow account at a financial institution not unacceptable to the 

Commission staff and Respondent shall provide evidence of such deposit in a 

form acceptable to the Commission staff.  If timely deposit is not made, 

additional interest shall accrue pursuant to SEC Rule of Practice 600 [17 C.F.R. 

§ 201.600]. 

(iii.) Respondent shall be responsible for administering the Distribution Fund 

and may hire a professional acceptable to the Commission, at its own cost, to 

assist it in the administration of the distribution.  The costs and expenses of 

administering the Distribution Fund, including any such professional services, 

shall be borne by Respondent and shall not be paid out of the Distribution Fund.   

(iv.) Respondent shall distribute the amount of the Distribution Fund to each 

affected investor an amount representing: (a) the 12b-1 fees attributable to the 

affected investor during the Relevant Period; and (b) reasonable interest paid on 

such fees,6 pursuant to a disbursement calculation (the “Calculation”) that will be 

submitted to, reviewed, and approved by the Commission staff in accordance 

with this Subsection C.  The Calculation shall be subject to a de minimis 

threshold.  No portion of the Distribution Fund shall be paid to any affected 

investor account in which Respondent or its past or present officers or directors 

have a financial interest. 

(v.) Respondent shall, within ninety (90) days of the entry of this Order, 

submit a Calculation to the Commission staff for review and approval.  

Respondent shall also provide to the Commission staff such additional 

information and supporting documentation as the Commission staff may request 

for the purpose of its review.  In the event of one or more objections by the 

Commission staff to Respondent’s proposed Calculation or any of its information 

or supporting documentation, Respondent shall submit a revised Calculation for 

the review and approval of the Commission staff or additional information or 

supporting documentation within ten (10) days of the date that Respondent is 

notified of the objection.  The revised Calculation shall be subject to all of the 

provisions of this Subsection C.   

(vi.) Respondent shall, within thirty (30) days of the written approval of the 

Calculation by the Commission staff, submit a payment file (the “Payment File”) 

for review and acceptance by the Commission staff demonstrating the application 

of the methodology to each affected investor.  The Payment File should identify, 

                                                 
6
  Reasonable interest will be calculated at the Short-Term Applicable Federal Rate plus three percent 

(3%), compounded quarterly from the end of the year when Respondent and its associated persons received the 

12b-1 fees to the date the Respondent completed its self-report pursuant to the SCSD Initiative. 

      



 

 

7 

at a minimum: (1) the name of each affected investor, (2) the exact amount of the 

payment to be made from the Distribution Fund to each affected investor, and (3) 

the application of a de minimis threshold. 

 

(vii.) Respondent shall disburse all amounts payable to affected investors 

within 90 days of the date the Commission staff accepts the Payment File unless 

such time period is extended as provided in Paragraph (x.) of this Subsection C.  

The amount Respondent pays to affected investors on or after February 12, 

2018, up until the lapse of 90 days following the date of staff’s acceptance of the 

Payment File for 12b-1 fees the Respondent received during the Relevant 

Period, will dollar for dollar offset the disgorgement payable to the Commission 

pursuant to this Subsection C, subject to approval by Commission staff.  If, after 

Respondent’s reasonable efforts to distribute the Distribution Fund pursuant to 

the approved Payment File, Respondent is unable to distribute any portion of the 

Distribution Fund for good cause, including factors beyond Respondent’s 

control, Respondent shall transfer any such undistributed funds to the 

Commission for transmittal to the United States Treasury in accordance with 

Section 21F(g)(3) of the Securities Exchange Act of 1934 when the distribution 

of the funds is complete and before the final accounting provided for in 

Paragraph (ix.) below is submitted to Commission staff.  Any such payment 

shall be made in accordance with Paragraph (xi.) below.  

 

(viii.) A Distribution Fund is a Qualified Settlement Fund (“QSF”) under 

Section 468B(g) of the Internal Revenue Code (“IRC”), 26 U.S.C. §§1.468B.1-

1.468B.5. Respondent agrees to be responsible for all tax compliance 

responsibilities associated with distribution of the Distribution Fund, including 

but not limited to tax obligations resulting from the Distribution Fund’s status as 

a QSF and the Foreign Account Tax Compliance Act (“FATCA”), and may 

retain any professional services necessary. The costs and expenses of any such 

professional services shall be borne by Respondent and shall not be paid by the 

Distribution Fund. 

  

(ix.) Within 150 days after Respondent completes the distribution of all 

amounts payable to the affected investors, Respondent shall submit to the 

Commission staff a final accounting and certification of the disposition of the 

Distribution Fund for Commission approval.  The final accounting shall be in a 

format to be provided by the Commission staff. The final accounting and 

certification shall include: (1) the amount paid to each affected investor, with 

reasonable interest; (2) the date of each payment; (3) the check number or other 

identifier of money transferred to each affected investor; (4) the amount of any 

returned payment and the date received; (5) a description of any effort to locate 

an affected investor whose payment was returned or to whom payment was not 

made for any reason; (6) the total amount, if any, to be forwarded to the 

Commission for transfer to the United States Treasury; and (7) an affirmation 



 

 

8 

that Respondent has made payments from the Distribution Fund to affected 

investors in accordance with the Payment File approved by the Commission 

staff.  Respondent shall submit the final accounting and certification, together 

with proof and supporting documentation of such payment in a form acceptable 

to Commission staff, under a cover letter that identifies BOK Financial 

Securities, Inc. as the Respondent in these proceedings and the file number of 

these proceedings to Barbara Gunn, Assistant Director, Fort Worth Regional 

Office, Securities & Exchange Commission, 801 Cherry Street, Unit 18, Fort 

Worth, Texas 76102-3821, or such other address as the Commission staff may 

provide.  Any and all supporting documentation for the accounting and 

certification shall be provided to the Commission staff upon request, and 

Respondent shall cooperate with any additional requests by the Commission 

staff in connection with the accounting and certification. 

  

(x.) The Commission staff may extend any of the procedural dates set forth 

in Paragraphs (ii.) through (ix.) of this Subsection C for good cause shown. 

Deadlines for dates relating to the Distribution Fund shall be counted in calendar 

days, except if the last day falls on a weekend or federal holiday, the next 

business day shall be considered the last day.  

(xi.) Respondent’s transfer of any undistributed funds to the Commission for 

transmittal to the United States Treasury must be made in one of the following 

ways:   

(a) Respondent may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(b) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(c) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter 

identifying Respondent as a Respondent in these proceedings, and the file 

number of these proceedings; a copy of the cover letter and check or money 

order must be sent to Barbara Gunn, Assistant Director, Fort Worth Regional 

Office, Securities & Exchange Commission, 801 Cherry Street, Unit 18, Fort 

http://www.sec.gov/about/offices/ofm.htm


 

 

9 

Worth, Texas 76102-3821, or such other address as the Commission staff may 

provide. 

D.   Respondent acknowledges that the Commission is not imposing a civil penalty 

based upon Respondent’s self-report in the SCSD Initiative.  If at any time following the entry 

of this Order, the Division obtains information indicating that Respondent knowingly provided 

materially false or misleading information or materials to the Commission, or in a related 

proceeding, the Division may, at its sole discretion and with prior notice to the Respondent, 

petition the Commission to reopen this matter and seek an order directing that the Respondent 

pay a civil money penalty.  Respondent may contest by way of defense in any resulting 

administrative proceeding whether it knowingly provided materially false or misleading 

information, but may not: (1) contest the findings in this Order; or (2) assert any defense to 

liability or remedy, including, but not limited to, any statute of limitations defense. 

E. Respondent shall comply with the undertakings enumerated in Section III, 

paragraphs 13.a through 13.e above. 

 By the Commission. 

 

       Vanessa A. Countryman 

       Acting Secretary