Adviser Failed to Fully Disclose Revenue Sharing
A registered investment adviser agreed to a fine and to notify all clients of its enforcement action related to failure to fully disclose compensation arrangement received from fund companies and broker-dealers. Although the firm did disclose that it received shareholder servicing fees from specified fund companies, it did not disclose that it could receive compensation from both the fund company and the broker-dealer custodian, thereby exceeding the aggregate amount disclosed. The respondent invested a majority of client assets in funds for which it received compensation.
OUR TAKE: The SEC has heavily criticized advisers that receive mutual fund or broker-dealer revenue sharing by alleging faulty disclosure. Perhaps, the SEC really intends to outlaw the practice through enforcement actions.