Share Class Selection – Time is Short to Review Fees and Disclosures

On April 12, the SEC announced its Share Class Selection Disclosure Initiative (SCSD Initiative). Under the SCSD Initiative, “the 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 by the adviser, 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.” This initiative comes after a series of enforcement actions against RIAs over the past few years related to disclosures and share class selection processes.  Investment Advisors have until June 12, 2018 to notify the SEC’s Division of Enforcement the intent to self-report.

Now is the time to:

  • Review your disclosures to make sure they are clear;
  • Determine if your clients purchased share classes with 12b-1 fees when lower cost share classes were available;
  • Determine if you received 12b-1 fees or rebated them to the customer;
  • Review your policies and procedures; and
  • Decide if you will participate in this initiative

Oyster has worked with our clients during these types of settlements to help firms:

  • Create a remediation plan;
  • Collect and test data to make sure the scope of transactions is accurate and complete;
  • Conduct the analysis and determine the remediation amount;
  • Distribute funds to clients;
  • Amend policies, procedures and disclosures to ensure ongoing compliance; and
  • Help clients work with counsel and regulators to resolve the action.

About The Author

As CEO of Oyster Consulting, Buddy Doyle has led the charge to create a successful organization built on the belief that transforming experienced industry practitioners into consultants adds more value to our clients.

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Whether you are looking to change from self-clearing to fully-disclosed (or vice-versa), exploring your clearing options or starting a broker-dealer, Oyster can assist with the assessment, analysis, vendor selection and conversion processes.

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