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May 01, 2018 at 04:43 PM
SEC headquarters in Washington. (Photo: National Law Journal)
The Securities and Exchange Commission’s enforcement unit on Tuesday issued frequently asked questions guidance on its Share Class Selection Disclosure Initiative, which provides more information about advisor eligibility, disgorgement as well as the distribution of funds to clients.
Stephanie Avakian, co-director of the agency’s enforcement division, said in mid-April that the FAQs was forthcoming, as the division has received “a number of questions” about the voluntary program.
The deadline for firms to self-report share class violations is June 12.
Under the SCSD Initiative, the Enforcement Division will recommend standardized, favorable settlement terms to investment advisors who self-report that they failed to disclose conflicts of interest associated with the receipt of 12b-1 fees by the advisor, its affiliates, or its supervised persons for investing advisory clients in a 12b-1 fee paying share class when a lower-cost share class of the same mutual fund was available for the advisory clients.
In such cases the Enforcement Division will recommend settlements that do not impose a civil monetary penalty while requiring participating advisors to return ill-gotten gains to harmed clients.
C. Dabney O’Riordan, co-chief of the division’s Asset Management Unit, said in releasing the FAQ that “it appears that many investment advisors are working diligently to evaluate whether they can take advantage of the initiative and we believe that providing these FAQs will help them make that determination.”
The initiative, he said, “provides a framework to quickly and efficiently resolve these issues with self-reporting advisers and return money to their clients.”
