Enforcement Division “Share Class Selection Disclosure Initiative” offers “favorable” settlement terms to advisers who self-report potential violations concerning Rule 12b-1 fees.
Over the past several years, the Commission’s Office of Compliance Inspections and Examinations has placed an enhanced focus on identifying situations in which an adviser does not adequately disclose that it receives compensation for purchasing, or recommending a client purchase, mutual fund shares of a share class that pays fees under Rule 12b-1 when a less expensive share class is available and appropriate for the client.
On February 12, 2018, the Enforcement Division announced the “Share Class Selection Disclosure Initiative” (the “SCSD Initiative”), a new initiative that offers “favorable” standardized settlement terms to advisers who self-report potential share class selection violations.
To participate in the initiative, an adviser must first notify the Enforcement Division that it intends to participate. Within ten business days of notification, the adviser must complete an SCSD Questionnaire and Attachment that discloses information including amount of 12b-1 fees that the adviser received “in excess of the lower-cost share class” for the period from January 1, 2014 “through the date the misconduct stopped,” and a “proposed amount of disgorgement.”