SEC Concludes Share Class Disclosure Initiative
The SEC announced that it has concluded its Share Class Disclosure Initiative whereby firms could self-report share class recommendation violations without incurring a civil penalty. Since February 2018, the SEC settled with 100 firms and returned $139 Million to investors. The initiative encouraged advisers who had recommended mutual fund share classes despite the availability of lower expense classes to self-report, return money to investors, and avoid a civil fine. The SEC has also charged and fined several advisers that did not self-report. An SEC official warned that the Enforcement Division will “continue to pursue disclosure failures that financially benefit the adviser to the detriment of the client.” The SEC concluded the SCDI with three settled cases.
Just because the SEC has concluded what could be viewed as an amnesty program doesn’t mean that advisers are free to recommend any share class. Just the opposite. Failures to recommend the lowest share classes so that that advisers benefit from revenue sharing will result in significant civil penalties.