The Securities and Exchange Commission has terminated the investor compensation fund created for clients of NPB Financial Group, closing a case that returned $628,439 to people harmed by undisclosed mutual fund fees. The California firm steered advisory clients into higher-cost share classes that paid it 12b-1 fees for five years without telling them.
What happened
On November 6, the SEC ordered the NPB Financial Group Fair Fund closed after the firm finished paying affected clients. The fund grew out of a 2020 enforcement action against the Burbank, California-based firm, which was registered as both an investment adviser and a broker-dealer.
Regulators found that from January 2014 through March 2019, NPB placed advisory clients in mutual fund share classes that charged 12b-1 fees even when lower-cost share classes of the same funds were available. NPB and its associated persons received those fees, but the firm never disclosed the practice or the conflict of interest it created.
The firm was eligible to self-report under the SEC’s Share Class Selection Disclosure Initiative. It did not.
Key facts
The 2020 order required NPB to pay $532,519.96 in disgorgement, $92,668.15 in prejudgment interest, and a $425,000 civil penalty, a total of $1,050,188.11. Under Section 308(a) of the Sarbanes-Oxley Act, that money became a Fair Fund so it would flow back to harmed clients rather than stay with the government.
| NPB Financial Group Fair Fund | Figure |
|---|---|
| Disgorgement ordered (2020) | $532,519.96 |
| Prejudgment interest | $92,668.15 |
| Civil penalty | $425,000 |
| Total ordered | $1,050,188.11 |
| Payments distributed | 879 payments, $628,439.04 total |
| Amounts successfully disbursed | $609,065.08 |
| Clients fully compensated | 96.13% |
| Largest single payment | $31,874.77 |
| Residual to U.S. Treasury | $452,748.65 |
NPB administered the fund at its own expense and issued 879 payments ranging from $0.01 to $31,874.77. The SEC’s termination order reports that 96.13 percent of harmed investors ended up fully compensated for their losses, including reasonable interest.
NPB Financial Group client impact
The harm in share-class cases is quiet but real. Clients earned less than they should have because part of their money went to 12b-1 fees, which mutual funds use to compensate brokers and advisers. The shortfall compounds across years of holding the same funds.
Most payments in this fund were small, which reflects how the harm occurs: a few dollars a quarter in excess fees, multiplied across hundreds of accounts. At the time of the order, NPB reported roughly $183 million in regulatory assets under management.
What investors should do
The claims process is over, but share-class fee conflicts have not gone away. Every investor who owns mutual funds through an adviser can take three steps now.
- Ask which share class you own in each fund, and whether a lower-cost share class of the same fund is available to you.
- Read the conflicts-of-interest section of your adviser’s Form ADV, which must disclose 12b-1 fee compensation.
- Request a year-end fee summary that separates advisory fees from fund-level fees, then compare it with each fund’s prospectus fee table.
A written response from your adviser creates a record. If the answers are vague or inconsistent, that itself is information.
How to recover your losses
Advisers who charge undisclosed fees rarely stop at one client. Investors who suspect excess or hidden fees in their own accounts can have an independent securities attorney review the account history at no cost.
Haselkorn & Thibaut fights for investor recovery
Haselkorn & Thibaut is a securities law firm founded by former Wall Street defense attorneys who shifted their practice to represent investors. The firm has recovered over $520 million for clients in securities matters and maintains a 98 percent success rate in resolved nontraded REIT cases. Attorneys are AV Preeminent rated through Martindale-Hubbell, designated as Super Lawyers, and hold a 5.0-star client review average. The firm operates on a contingency basis — no recovery, no fee.
Contact Haselkorn & Thibaut today
Time matters in investment recovery cases. The earlier you act, the stronger your position. The firm offers a free case evaluation to assess your losses, review your account history, and explain your options under arbitration or settlement.
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Offices in Florida, New York, Arizona, Texas, and North Carolina. Former Wall Street defense attorneys with 95+ years of combined experience. No recovery, no fee.
