On May 1st, the Securities and Exchange Commission’s Division of Enforcement released answers to frequently asked questions concerning the Share Class Selection Disclosure (SCSD) Initiative. This initiative was announced earlier this year on February 12th with the goal of protecting advisory clients from undisclosed conflicts of interest and aid in returning money to those investors affected by previous undisclosed conflicts of interest.
Under SCSD, the Enforcement Division will recommend standardized, favorable settlement terms to investment advisers who self-report that they failed to disclose conflicts of interest. This applies to 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 those clients. In these cases, the Enforcement Division recommends settlements that will not impose a civil monetary penalty while requiring participating advisers to return ill-gotten gains.
The complete FAQ regarding the SCSD is available here. The cut-off date for self-reporting under the initiative is June 12. Questions can be directed to SCSDInitiative@sec.gov.
Sources:
SEC Enforcement Division Issues FAQs for Share Class Selection Disclosure Initiative (www.sec.gov)
Share Class Selection Disclosure Initiative - FAQs (www.sec.gov)
Share Class Selection Disclosure Initiative (www.sec.gov)
