SEC Launches Self-Reporting Initiative for Investment Advisers

In line with Chairman Jay Clayton’s oft-stated priority of protecting the long-term interests of Main Street investors, on Feb. 12, 2018, the Securities and Exchange Commission’s Division of Enforcement announced the launch of a new self-reporting initiative for investment advisers. This new initiative — the Share Class Selection Disclosure Initiative — aims to address undisclosed conflicts of interest associated with the receipt of 12b-1 fees by investment advisers, their affiliates or their supervised persons paid by advisory clients who were eligible to invest in a lower-cost share class of the same mutual fund. The SEC’s position on investment advisers’ disclosure obligations regarding conflicts of interest as they pertain to mutual fund share classes are well-known. Indeed, the Office of Compliance Inspections and Examinations released a National Exam Program Risk Alert on the topic in July 2016, as well as identified mutual fund share…

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