SEC Settles Suit For Misleading Advisory Contract Approval Disclosure

Settlement with mutual fund directors and service providers serves as a reminder of responsibilities for disclosures relating to the approval of investment advisory contracts and provides insight into SEC enforcement priorities.

On May 2, the Securities and Exchange Commission (SEC) settled an enforcement action against the board of trustees (Trustees) of the Northern Lights Fund Trust and the Northern Lights Variable Trust (Trusts), Northern Lights Compliance Services (NLCS), and Gemini Fund Services (Gemini) in relation to disclosure, reporting, recordkeeping, and compliance violations stemming from the Trusts' advisory contract approval and reporting process.¹ The settlement answers a number of questions that many within the mutual fund industry had with respect to the underlying facts of this proceeding since the Trusts publicly disclosed receipt of a Wells Notice in 2012. At the time, the Wells Notice generated particular attention because the