According to Drinker Biddle & Reath’s lawyers, the SEC’s Enforcement Division has started investigations against companies that didn’t self-report in the Share Class Selection Disclosure Initiative. There is a huge risk that these companies will be subjected to monetary penalties, additional charges, including charges against individuals.
The Share Class Selection Disclosure Initiative that was announced last year is now focused on checking potentially conflicting RIA compensations to protect advisory clients from undisclosed conflicts of interest and return money to investors. According to Mr. Reish, a partner at Drinker Biddle, more clients from companies start receiving inquiries regarding payments from mutual funds.
The share-class initiative is made to investigate advisers’ inability to disclose their 12b-1 fees receipt, while the follow-up enforcement checks are being extended to revenue-sharing payments, and according to Mr. Holch, executive director of the Coalition of Mutual Fund Investors, “It’s going to remain a high priority for the agency”.
The SEC are highly concerned about cost disclosures, because the money paid in fees and expenses is considered not invested.
