Fund Distribution

SEC Notes Failure to Self-Report in Latest Share Class Settlement

The SEC, in its latest share class disclosure settlement with an advisory firm, makes a point of noting, fairly prominently in the settlement order, that the firm chose not to self-report its alleged violations to the Division of Enforcement. The result appears to be that the adviser got hit with more than $900,000 in disgorgement and civil money penalties – part of which could have been avoided by voluntarily coming forward.

SEC Proposes New Derivatives Rule

If at first you don’t succeed, try again. That appears to be what the SEC has done with the Commission’s unanimous November 25 vote to propose a new Derivatives Rule, designed to “modernize” or “standardize” the use of these financial instruments by mutual funds, exchange-traded funds and other registered funds, as well as business development companies. Now the ball is with the asset management community to decide whether they like this proposed Rule better than the last one.

Share Class Settlement Focuses on Fiduciary Breach, Inadequate Disclosure, Best Execution Failure

SECs settlements with advisory firms involving share class violations have gotten a lot of attention recently, particularly when the advisers self-reported under an agency initiative and avoided civil money penalties. Not every advisory firm qualified for that initiative, however, as a recent settlement shows where an adviser had to pay more than $1.5 million, including a $140,000 fine.

SEC Will Not Fine Advisers that Self-Report Share Class Violations by June 12

Its a limited time offer. The SECs Division of Enforcement will not impose financial penalties against advisory firms that voluntarily report placing clients in certain share classes when less expensive share classes for the same investment are available. Advisers taking advantage of this offer will still have to pay disgorgement and prejudgment interest, be censured and face the possibility of individual liability.

Know What Your Firm Solicits Before Moving on Compliance

There are two kinds of solicitation that advisory firms might pursue: seeking new advisory clients, and finding new investors for private funds. In terms of compliance, while the two solicitation types share some requirements, they dont share them all - and, in fact, there are some compliance requirements that are unique to each. It is essential that advisory firms design compliance procedures that address the type of solicitation they perform.

SECs Distribution-in-Guise Enforcement Drive Scores Multiple Wins

Advisers managing funds that pay for marketing and distribution services would be wise to make sure those payments fall within each funds 12b-1 plan. The SECs distribution-in-guise crackdown, which resulted in several settlements in recent months, has already netted two in May - and the month isnt over yet.

Misclassified Distribution Agreements May Lead to 12b-1 Consequences

Sometimes simple errors can lead to dire consequences. An advisory firm that inadvertently misclassifies distribution and marketing service agreements outside its Rule 12b-1 Plan and then causes its funds to pay for those services, for instance, may well find itself facing an SEC enforcement action.

Share All Risks and Costs with Investors When Selling Securities

Sometimes even the big players need to learn a lesson about disclosure. Morgan Stanley Smith Barney and Citigroup Global Markets found this out the hard way when they each settled charges from the SEC that they made false and misleading statements about a foreign exchange trading program they sold to investors.

Beware Finders Not Registered as Broker Dealers

Question: When does a third-party marketer need to be registered as a broker-dealer? Answer: Almost always.

SEC Alleges Conflict of Interest In Adviser Favoring 12b-1 Funds Over Others

Theres nothing wrong with putting clients into funds that charge fees for distribution - as long as you first let your clients know of any other funds you manage that do not charge such fees. Its also probably best to if your firm didnt receive those distribution fees.

Audio Interviews

How to Read an SEC Enforcement Action

Stern Tannenbaum law firm partner Aegis Frumento on how to get the most from reading an SEC administrative order or court complaint.

Most Important Supreme Court Decisions for Advisers and Funds

Find out the high court decisions from recent years that are likely to affect how advisers and investment companies work from Debevoise partner Robert Kaplan. 

Top 10 Cybersecurity Steps to Take Now

Sutherland law firm partner Brian Rubin shares the most urgent cybersecurity steps for investment advisers.

Top Marketing Problems … and Solutions

Get solutions for the top marketing challenges that advisers face from ACA Compliance Group managing director Kimberly Daly

Watch Out for 5 Cybersecurity Myths

ACA Aponix Director Pascal Busnel on the most common cybersecurity myths that may cause firms to spend resources where they may not be needed.

The Hidden Costs of Non-Compliance

Proskauer law firm partner and former SEC Division of Investment Management deputy director Robert Plaze on why the costs of non-compliance go way beyond an SEC penalty.

CCO Liability: How to Protect Yourself

Find out from Blue Edge Capital CCO Margaret Fretz what chief compliance officers may be liable for and best practices to make sure you are protected.

Ethics or Compliance: Making the Choice

Find out the difference an ethics, rather than a compliance, perspective makes at an advisory firm from former Ethics and Compliance Officer Association COO Timothy Mazur.