Under a new self-reporting initiative just announced by the SEC staff, the SEC’s Enforcement Division will recommend “standardized, favorable settlement terms” to investment advisers that self-report that they failed to disclose conflicts of interest associated with the receipt of 12b-1 fees. This is the latest effort by the SEC to crack–down on inadequate disclosure of adviser receipt of 12b-1 fees in connection with advisory accounts where a lower -cost share class of the same mutual fund was available for the advisory clients. The SEC States that among other things, the Division will recommend settlements that will require the adviser to “disgorge its ill-gotten gains and pay those amounts to harmed clients. ” The plus: no civil monetary penalty. Investment advisers must notify the Division of Enforcement of their intent to self-report no later than June 12, 2018.
The Department of Labor (DOL) extended until July 1, 2019, the date for compliance with the full conditions in its new “investment
advice” fiduciary definition and related exemptions (Final Rule), which became generally applicable on June 9. After considering the commentary it received, DOL has extended the Transition Period as proposed, without change. Thus, the same transition rules and standards in effect on June 9 will remain in effect until July 1, 2019. Of particular note, the DOL explained that:
• It needs more time to “carefully and thoughtfully review” the commentary it has received and to honor the President’s directive, as well as to coordinate with the SEC, FINRA, NAIC and other regulators.
• It anticipates proposing a new streamlined class exemption in the near future, which presumably would address innovative products being developed in response to the Final Rule.
• It “sees no compelling reason” to further extend the “grandfathering exemption” (although it did solicit supplemental comments on this point going forward). The applicability date for determining whether a transaction may be grandfathered remains June 9, 2017.
Additional contributor to this post:
While securities have long been a hot spot for unclaimed property issues, the past several years have seen a continued expansion of audit activity targeting broker-dealers, stock issuers, transfer agents, mutual funds, banks, and others in the financial services industry. Unclaimed property laws—and unclaimed property audits—can present a number of specific challenges in this space.
Additional contributors to this post:
Holly H. Smith, hollysmith@eversheds-sutherland.com
Mary Jane Wilson-Bilik, mjwilson-bilik@eversheds-sutherland.com
On August 3, 2017, the Department of Labor released a fourth set of FAQs related to its new “investment advice” fiduciary definition and related exemptions, which became applicable on June 9. Like the May FAQs, the three new FAQs are positioned as transition period guidance, although their content is not so limited.
Additional contributor to this post:
W. Mark Smith, marksmith@eversheds-sutherland.com