Enforcement Issues FAQs On The Share Class Selection Disclosure Initiative

On May 1, the SEC's Division of Enforcement issued a series of frequently asked questions (FAQs) related to its Share Class Selection Disclosure Initiative ("SCSD Initiative"). The SCSD Initiative, which was originally announced February 12, 2018, provides that the Enforcement Division will agree to recommend to the Commission standardized, favorable settlement terms for investment advisers who self-report possible securities law violations related to their failure to make certain disclosures concerning mutual fund share class selection.

Under the SCSD Initiative, the cut-off date for self-reporting is June 12, 2018.

Background

Over the last several years, the SEC filed several administrative actions against investment advisers that failed to adequately disclose to clients conflicts of interest arising from the receipt of 12b-1 fees for investing clients in, or recommending that clients invest in, a mutual fund share class that paid the adviser a 12b-1 fee when