Frequently Asked Questions
- What is this case about?
- Why did I receive a Notice?
- Who is eligible to participate in the KM Advisory Services Fair Fund?
- Who is excluded from participating in the KM Advisory Services Fair Fund?
- What is the amount of the KM Advisory Services Fair Fund?
- What do I need to do to participate in the KM Advisory Services Fair Fund?
- Who is the Fund Administrator?
- How do I get more information or contact the Fund Administrator?
- Can I dispute the amount of my Recognized Loss if I believe it to be incorrect?
- Am I required to provide a tax form W9 with my claim?
- What is this case about?
On June 6, 2022, the Commission instituted and simultaneously settled, separate but related, administrative and cease-and-desist proceedings (the “Orders”) against Kathryn Jane Meredith, d/b/a KM Advisory Services (“Meredith”) and John Paul Harnish, d/b/a KM Advisory Services (“Harnish”) (collectively, the “Respondents”). In the Orders, the Commission found that former registered investment adviser KM Advisory Services (“KMA”) an unincorporated sole-proprietorship owned by Meredith from 1994 through February 2020, and purchased by Harnish in February 2020—breached its fiduciary duties in connection with receipt of mutual fund fees pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”) and commissions in the form of sales “loads” from advisory client investments without fully and fairly disclosing its related conflicts of interest in the period of January 1, 2016 through December 31, 2020 (the “Relevant Period”).
Since at least January 2016, and continuing through December 2020, KMA invested the vast majority of its clients’ assets in certain mutual funds that paid 12b-1 fees and charged sales load commissions exclusively through an introducing broker-dealer (the “Introducing Broker-Dealer”), with whom Meredith and later Harnish was a registered representative. As a result, KMA’s clients paid 12b-1 fees and commissions to the Introducing Broker-Dealer, a portion of which were shared with KMA (Meredith and Harnish). KMA failed to disclose fully and adequately this arrangement and the attendant conflicts of interest. KMA also breached its duty of care by not routinely comparing the Introducing Broker-Dealer’s order execution with other broker-dealers, which KMA’s advisory relationship with its clients required. KMA therefore caused its advisory clients to invest through the Introducing Broker-Dealer and in share classes of mutual funds that charged 12b-1 fees when other broker-dealers made available share classes of the same funds to their customers that may have presented a more favorable value for KMA’s clients under the particular circumstances in place at the time of the transactions. KMA also 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 its mutual fund share class and broker-dealer selection practices.
The Commission ordered Meredith to pay $574,743.53 in disgorgement, $77,252.39 in prejudgment interest, and a $100,000.00 civil money penalty, and Harnish to pay $220,097.30 in disgorgement, $5,549.69 in prejudgment interest, and a $75,000 civil money penalty, to the Commission. In each of the Orders, the Commission also created a Fair Fund and further ordered the Fair Funds to be combined to form the KM Advisory Services Fair Fund, so the penalties paid, along with the disgorgement and interest paid, can be distributed to harmed investors. The Respondents have paid in full. The Fair Fund has been deposited in a Commission-designated account at the United States Department of the Treasury, and any accrued interest will be added to the Fair Fund.
In total, the Fair Fund consists of the $1,052,641.99 paid by the Respondents. The assets of the Fair Fund are subject to the continuing jurisdiction and control of the Commission. The Fair Fund has been deposited in a Commission-designated account at the U.S. Department of the Treasury, and any accrued interest will be added to the Fair Fund.
Top - Why did I receive a Notice?
You received a Notice because you were identified as a Preliminary Claimant who may have been harmed by KMA’s breach of its fiduciary duties in connection with receipt of mutual fund fees pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”) and commissions in the form of sales “loads” from advisory client investments without fully and fairly disclosing its related conflicts of interest in the period of January 1, 2016 through December 31, 2020 (the “Relevant Period”).
Top - Who is eligible to participate in the KM Advisory Services Fair Fund?
You are eligible to participate if you are not an Excluded Party and you have been identified by the Commission as having suffered a loss from paying excess 12b-1 fees and/or sales load commissions in accounts managed by KM Advisory Services during the Relevant Period.
Top - Who is excluded from participating in the KM Advisory Services Fair Fund?
Excluded from the KM Advisory Services Fair Fund are:
(a) the Respondents, and Respondents’ advisers, agents, nominees, assigns, creditors, heirs, distributees, spouses, parents, children, or controlled entities;
(b) the Fund Administrator, its employees, and those Persons assisting the Fund Administrator in its role as the Fund Administrator; and
(c) any purchaser or assignee of another Person’s right to obtain a recovery from the Fair Fund for value; provided, however, that this provision shall not be construed to exclude those Persons who obtained such a right by gift, inheritance, or devise.
Top - What is the amount of the KM Advisory Services Fair Fund?
The Fair Fund consists of the $1,052,641.99 paid by the Respondents and has been deposited in a Commission-designated account at the United States Department of the Treasury. Any accrued interest will be added to the Fair Fund.
Top - What do I need to do to participate in the KM Advisory Services Fair Fund?
In order to be considered for eligibility to receive a Distribution Payment under the approved Plan of Distribution, you must access the Fair Fund’s website and complete the online Preliminary Claimant Certification Form with the claim number and PIN supplied in your notice. All submissions must be received by January 19, 2024 in order to participate. If you are unable to access the online Preliminary Claimant Certification Form or would prefer to submit a paper copy of the certification form, please immediately contact the Fund Administrator by phone at 1-866-573-3969 or by email to [email protected]. A paper copy of the certification form will be provided upon request.
A Preliminary Claimant, as that term is defined in the approved Plan of Distribution, whose address the Fund Administrator has not been able to verify and/or who does not timely respond to the Fund Administrator’s attempts to obtain information, including any information sought in the Plan Notice, shall be deemed as unresponsive. Unresponsive Preliminary Claimants will not be eligible for a distribution under the approved Plan of Distribution.
Top - Who is the Fund Administrator?
The Commission appointed KCC Class Action Services, LLC, (“KCC”) as the Fund Administrator for the KM Advisory Services Fair Fund on July 31, 2023. The Fund Administrator will be responsible for administering the Fair Fund in accordance with the approved Plan of Distribution.
Top - How do I get more information or contact the Fund Administrator?
Additional information regarding the KM Advisory Services Fair Fund may be found on this website. You may also call the toll-free number 1-866-573-3969 to ask questions or to update your address, or you may email the Fund Administrator at [email protected]. If you would like to get copies of the relevant documents,
including the Plan of Distribution, please visit the Case Documents tab on this website.
Contact Us:
Email: [email protected]
Tel: 1-866-573-3969
Physical Address:
KM Advisory Services Fair Fund
c/o KCC Class Action Services
P.O. Box 6198
Novato, CA 94948-6198
Top - Can I dispute the amount of my Recognized Loss if I believe it to be incorrect?
Yes, you can dispute your Recognized Loss Amount. When certifying your filing on the Online Portal, check the box to indicate you wish to dispute the calculation of your Recognized Loss. You must also explain the reason for disputing the Recognized Loss, the amount you believe the Loss to be and how that amount was calculated. You will also be required to submit documentation of the 12b-1 fees and sales load commissions paid during the Relevant Period to support your dispute.
Top - Am I required to provide a tax form W9 with my claim?
The interest portion of your ultimate payout may be considered taxable income and, under certain circumstances, could be subject to withholding. Therefore, we require the submission of a W-9 or substitute W-9 tax form to supplement your filing. Upon submission of your filing, please navigate to the W9 Kiosk on the Fair Fund website at www.kmafairfund.com, login using the Claim Number and PIN at the top of your notice and complete the requested information.
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