SEC Examinations Highlight Advisory Fee Compliance Deficiencies

In a new risk alert, the SEC Division of Examinations (the "Division") identified common compliance deficiencies related to supervision, disclosure, billing and calculation of advisory fees, among others.

In its examinations, the Division observed the following deficiencies:

• inaccurate calculations of advisory fees or account valuations, instances of over-billing, incorrect tiered or breakpoint fees and the improper "householding" of accounts;
• the failure to refund unearned fees due to clients, such as prepaid fees for terminated accounts and fees that were not assessed on a pro rata basis for new clients;
• fee-related disclosure issues, including omitted or misleading Form ADV Part 2 disclosures, and inaccurate disclosures regarding the valuation and timing of billing; and