Compliance and Regulatory Alerts  |  04-23-18

Update: SEC Mutual Fund Share Class Disclosures

Update: SEC Mutual Fund Share Class Disclosures

The SEC Division of Enforcement announced a "Share Class Selection Disclosure Initiative" intended to protect and reimburse investors from an adviser’s conflict of interest. (Click here for Bates Alert.)

The new initiative offers an incentive to advisers and related individuals and entities to review and potentially self-report conflicts of interest, as they relate to the adviser’s collection of 12b-1 fees, as well as its disclosure of such fees, that are in violation of fiduciary duties imposed under the Investment Advisers Act The SEC initiative encourages the adviser to self-report the conflict and return the money to investors. If the advisor takes these actions, the Division of Enforcement will recommend that the Commission accept favorable settlement terms and not impose civil penalties that would otherwise have been imposed. Investment advisers that do not self-report and reimburse may face stronger sanctions.

The deadline to conduct this analysis, address these issues, and self-report is Tuesday, June 12, 2018 – which is only seven weeks away.

Bates’ Share Class Disclosure Plan: How we can help

To support advisers facing Share Class Selection Disclosure issues, Bates has developed a roadmap and implementation plan that provides essential end-to-end steps and solutions to identify and address accounts and impacted mutual funds. We perform data analysis, examine regulatory reporting, review share class selection policies and disclosure practices, identify methodology and impacted accounts, perform calculations and provide remediation. Most important, after consultation with counsel, our roadmap culminates in a report that can be used directly with the SEC. Our plan includes back-end steps to clear exceptions, track client communications, and update written supervisory policies, procedures and compliance programs.

Time is running out to participate in this program.

Please contact Robert Lavigne, Managing Director, Bates Compliance Solutions, to discuss your share class selection policies and procedures and disclosure practices, and how Bates can help your firm take advantage of this SEC initiative.


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