The Real Nightmare Before Christmas: SEC Gets Tough on Firms that Did Not Self-Report during SCSD Initiative

The SEC’s Enforcement Division is following up on the Share Class Selection Disclosure Initiative (the “SCSD Initiative”) by sending out document requests to dually-registered investment advisers and investment advisers with broker-dealer affiliates that did not self-report.  The focus of this sweep is 12b-1 fees and revenue sharing and requires advisers to review their records going back to 2013.

Similar to the questionnaire from SCSD Initiative, the Enforcement Division is asking for disclosure about the aggregate amount of 12b-1 fees received by firms and their affiliates and the amount of 12b-1 fees charged to clients over the past five years.  The division may also ask firms to perform an analysis of all available share classes of the mutual funds purchased for client accounts to determine the amount of 12b-1 fees (if any) that the adviser’s clients would have incurred if they had been invested in the lowest-cost share class available.  This analysis can be a nightmare of data-gathering for firms, depending on the number of mutual funds used in client accounts.

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Advisers Fall Short on Referral Arrangements, Mutual Fund Exams Planned, Updates to Annual and FOCUS Reports Finalized, and Compliance Program Fails. . .

December Regulatory Updates from Jaqueline Hummel at Hardin Compliance Consulting LLC.

Topics include:

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