The U.S. Securities and Exchange Commission issued an order instituting administrative and cease-and-desist proceedings against IFMG Securities Inc. for failing to adequately disclose material information to its customers in selling mutual funds and variable insurance products.

The commission simultaneously accepted IFMG’s offer of settlement, in which it consented to the entry of the order without admitting or denying its findings.

The SEC’s order finds that, from January 2000 through November 2003, IFMG, a subsidiary of Sun Life Financial (U.S.) Holdings Inc., gave preferred sales treatment to certain mutual fund complexes and variable insurance product issuers participating in its revenue sharing program. Five mutual fund families and between six and 12 insurers participated in the program at various times.

The order alleges that IFMG provided financial incentives to its registered reps, including reducing the commission paid for the sale of products whose advisers or insurers did not participate in its Preferred Program, to sell funds from the Preferred Families over other funds. Preferred Families also received other forms of preferential sales treatment including placement on a preferred list, prominent billing in new business presentations and enhanced access to its sales force.

The SEC claims that IFMG did not adequately disclose the existence of its Preferred Program, the receipt of revenue sharing payments, or the potential conflicts of interest created by these payments.

The order censures IFMG and requires it to pay US$2,827,408 in disgorgement and prejudgment interest and civil penalties of US$1 million. It also requires IFMG to comply with certain undertakings including the retention of an independent consultant to conduct a comprehensive review of its revenue sharing program.