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The weekly news source for investment management legal and compliance professionals

Topic: Fund Expenses, Loads, and Fees

Permission, Disclosure Required Before Tapping Funds to Keep Business Afloat

February 17, 2017
It probably canít hurt to be reminded that the funds an adviser manages are not piggy banks that advisers can dip into when needed. Even if an advisory firm believes it is entitled to compensation beyond what it is contractually due, any such remuneration must be approved by the fundís investors and fully disclosed.

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Mutual Funds Seeking to Modify Fees Must Meet Disclosure Requirements

January 13, 2017
Many mutual funds and their advisers, attempting to comply with the DOL Fiduciary Rule and meet the requirements of the related Best Interest Contract Exemption, are considering ways to "level" the fees they charge clients. Any such changes, the Division of Investment Management says in its new Guidance, must meet disclosure and procedural requirements.

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Implement Promised Corrections to Exam Findings … or Face the Consequences

October 14, 2016
The SEC, like Mother Nature, doesnít like to be ignored. So after an investment adviser allegedly failed to make promised corrections to deficiencies found during three examinations conducted over six years, the agency launched an enforcement action.

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Clover Capital Management Letter at 30: Still Making a Difference

October 7, 2016
Few SEC staff letters retain the kind of clout that makes them relevant through the passage of years. The Clover Capital Management letter, which has its 30-year anniversary October 28, is near the top of that select list.

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Private Equity Adviser Feels the Sting of SEC’s Fee, Expense and Disclosure Focus

September 23, 2016
Itís just the latest one, but itís telling: Private equity fund adviser First Reserve Management on September 14 settled SEC claims that it failed to disclose conflicts of interest involving fees and expenses it charged its funds.

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Private Equity Adviser Exams: Fees and Expenses Likely to Dominate the Visit

August 19, 2016
Advisers to private equity funds preparing for a visit from SEC examiners need to keep their eye on the ball: While examiners may inquire into a number of areas, the bulk of the visit is likely to be spent on the fees and expenses charged to funds and portfolio companies.

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Qualified Client Threshold Adjusted

June 24, 2016
Itís just a little adjustment Ė but a little may make the difference between being able to charge performance fees or not. The SEC on June 14 adjusted the dollar threshold used to exempt an adviser from the prohibition on charging performance fees.

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Pushing Losses to the Next Month to Realize Fees Not a Good Strategy

June 17, 2016
Donít push losses off until tomorrow if they occur today. That would seem to be the guiding principle behind the SECís complaint last month against a hedge fund manager that, the agency claims, orchestrated gains and losses among two funds so that they would each show gains Ė and the adviser could reap incentive payments.

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SEC Panel Wants Mutual Fund Costs Disclosed in Dollars on Account Statements

April 22, 2016
Disclosure of mutual fund fees and other costs in percentages in fund prospectuses or in shareholder reports may no longer be enough. An SEC committee wants those costs listed in dollar terms, and it wants them reported in account statements.

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Adviser Finds That Exemption Does Not Protect Against Enforcement

April 8, 2016
"Exempt" doesnít mean exempt from anti-fraud regulations or the SECís watchful eye. A venture capital fund adviser found this out the hard way when it reached a settlement with the agency over allegations that it misappropriated more than $18 million in investor funds.

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Fee Calculation Errors Leads to Enforcement Action Against Adviser

March 11, 2016
The SEC on March 2 settled an enforcement action with an adviser for allegedly charging clients too much in fees as a result of calculating them differently from the way agreed to in its advisory agreements. The thing is, though, that at other times the miscalculation led to the firm charging clients too little. Was this a case of the SEC going after an adviser for simple mistakes?

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Multiple Disclosure Issues Lead to Enforcement Against Hedge Fund Manager

February 5, 2016
Disclosure is a basic requirement of most SEC regulations. If you want a visit by the SEC, failure to disclose, particularly when it occurs more than once, is one of the best ways to ensure that you get one.

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Fee Disclosure Issues Cause Problems for Futures Fund Adviser

January 29, 2016
Improper fee disclosure has long been a red flag to SEC examiners and investigators. The problem is magnified when the failure to disclose results in overcharging clients. If the disclosure is corrected but refunds are not made to the clients, expect the agency to come calling.

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Don’t Allocate Registration, Exam or Investigation Expenses to Funds Without First Disclosing

November 13, 2015
The SEC on November 5 settled with two affiliated private equity fund advisers for allocating to its funds expenses related to its SEC registration, an examination by the Commission staff, and a Division of Enforcement investigation Ė all without first disclosing to the funds that it was doing so.

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Private Equity + Conflict of Interest + Failure to Disclose = SEC Enforcement

November 13, 2015
Hereís a recipe sure to draw the SECís attention, direct from the Division of Enforcementís cookbook: Take one private equity firm, add a tablespoon of conflict of interest, mix, and then bake. When done, divide among selected colleagues and enjoy the finished product in private. Be sure not to share the recipe with clients, investors or board members. Warning: This recipe may prove significantly more expensive than expected, and you may not be doing much more baking after agency charges lead to a costly settlement.

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SEC Focus on Fees and Their Disclosure Drives Two Enforcement Actions

September 11, 2015
Two recent SEC cases Ė one an administrative settlement with an advisory firm involving exchange fees, the other a court complaint against a hedge fund adviser involving allegedly unearned management fees Ė demonstrate the Division of Enforcementís never-flagging interest in fees and how they are disclosed.

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KKR Settlement: SEC Ratchets Up Pursuit of Private Equity Advisers

July 10, 2015
The SECís settlement with advisory firm giant Kohlberg Kravis Roberts & Company is more than a statement from the agency that major investment firms are not immune from enforcement. The first-ever expense misallocation case involving broken-deal expenses against a private equity adviser is a warning that, when it comes to advisers managing private equity, the Division of Enforcement is armed and hunting for bear.

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OCIE Turns Its Attention to Never-Before-Examined Investment Companies

May 1, 2015
Mutual funds, open-end funds and other investment companies that have never been examined should start getting a bit nervous: Examiners may be coming.

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Firm Executives Agree to Pay $1.6 Million in ‘Referral Fee’ Settlement

December 11, 2014
There are lots of ways to charge fees to clients, but only a few are legal.

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Don’t Play Favorites: Adviser Accused of Charging One Fund’s Expenses to Another

October 17, 2014
Itís wrong to favor one child over another. Itís a crime when you do so with your funds.

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