UNITED STATES SECURITIES AND EXCHANGE COMMISSION

On May 13, 2020, the U.S. District Court for the Eastern District of Pennsylvania issued this Complaint as to defendants Ambassador Advisors, LLC, Bernard I. Bostwick, Robert E. Kauffman, and Adrian E. Young. Plaintiff Securities and Exchange Commission alleges as follows against defendants: From at least August 15, 2014, through December 2018, Ambassador Advisors-an investment adviser registered with the Commission-and Bostwick, Kauffman, and Young-part owners, executives, and investment adviser representatives of Ambassador Advisors-unlawfully invested their advisory clients in mutual fund share classes with 12b-1 fees when lower-cost mutual fund share classes were available to the clients. As investment advisers, Ambassador Advisors, Bostwick, Kauffman, and Young owed their advisory clients a fiduciary duty to act in their clients' best interests. Defendants' fiduciary duty included their obligation to seek best execution of clients' transactions, and to fully disclose all material facts about the advisory relationship, including those relating to conflicts of interest that might cause them to put their own interests before their clients' interests. Nevertheless, Defendants invested their advisory clients in mutual fund share classes that charged 12b-1 fees when lower-cost share classes of the same funds were available to the clients. As a result, clients received a lower return on their investment, and Bostwick, Kauffman, and Young received additional compensation in the form of 12b-1 fee revenue. Defendants violated their duty to seek best execution for clients' mutual fund transactions by causing certain clients to invest in fund share classes that charged 12b-1 fees when share classes of the same funds were available to the clients that presented a more favorable value under the particular circumstances in place at the time of the transactions. Defendants also violated their fiduciary duty by failing adequately to disclose to their clients the conflict of interest inherent in these transactions. Specifically, Defendants did not disclose that, even though share classes of mutual funds without 12b-1 fees were available to their advisory clients, Defendants would select share classes of the same mutual funds with ongoing 12b-1 fees, lowering clients' returns and generating additional revenue for Bostwick, Kauffman, and Young. By failing to seek best execution of the mutual fund trades and failing to disclose their conflicts of interest, Bostwick, Kauffman, and Young enriched themselves at the expense of their clients and without their clients' knowledge. In addition, Ambassador Advisors failed to adopt and implement written policies and procedures reasonably designed to make mutual fund share class recommendations in clients' best interests and to disclose Defendants' conflicts of interest in connection with mutual fund share class selection. As a result of the conduct described in this Complaint, Defendants violated, and unless enjoined will continue to violate, Section 206(2) of the Investment Advisers Act of 1940, and Ambassador Advisors violated, and unless enjoined will continue to violate, Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.

Judgment Rendered

Civil and Administrative Penalty(ies)/Fine(s)

Disgorgement

$136,627.00

Monetary Penalty other than Fines

corrective notice; correct and remove misleading statements

CLIENT ALLEGES UNSUITABILITY WITH REGARD TO THE SALE OF A VARIABLE ANNUITY. CLIENT IS REQUESTING THE FIRM TO INVESTIGATE THIS MATTER. DAMAGES UNSPECIFIED.

DUE TO NO RESPONSE FROM CLIENT, THE FIRM HAS CLOSED THE FILE ON THIS MATTER. CLIENT COMPLAINT WAS FOUND TO HAVE NO MERIT BY THE FIRM, AS WELL AS THE STATE DEPARTMENT OF INSURANCE REGULATORS AND, AFTER MAKING THE ATTORNEY-IN-FACT AWARE OF THESE FINDINGS, NO ADDITIONAL COMMUNICATION FROM THE COMPLAINTANT OCCURRED. AS SUCH, THE FIRM HAS CLOSED THE FILE ON THIS MATTER.