Khuzami Says SEC Reviewing Bonds, Problem Advisers, and Fund Fees
In testimony to the Senate Judiciary Committee, the SEC’s Director of the Division of Enforcement, Robert Khuzami, said that the Asset Management Unit has launched a “Bond Fund Initiative,” a “Problem Adviser Initiative,” and a “Mutual Fund Fee Initiative.” The Bond Fund Initiative focuses on “disclosure and valuation in mutual fund bond portfolios” and the identification of “red flags” for investigation such as “misrepresentations of leverage, outlier performance, and problematic valuations.” The Problem Adviser Initiative involves a review of representations about an adviser’s education, experience, and past performance. The Mutual Fund Fee Initiative inquires into “the extent to which mutual fund advisers charge retail investors excessive fees” with the expectation of examinations and investigations of advisers and boards.
OUR TAKE: These appear to be the first substantive initiatives taken by the new Asset Management Unit. Expect OCIE sweeps in the near future on these topics.