SEC Amnesty Opportunity: 12b-1 fees

SEC Amnesty Opportunity: 12b-1 fees

How often does a firm receive an amnesty opportunity from a regulator?

It just happened.

The Division of Enforcement of the Securities and Exchange Commission agreed not to recommend financial penalties against Investment Advisers, including dually Registered Broker-Dealers, who self-report violations of the federal securities laws relating to certain mutual fund share class selection issues and promptly return money to harmed clients, under the Share Class Selection Disclosure Initiative (SCSD Initiative).

The self-reporting deadline is 12:00 am EST on June 12, 2018

Per the SEC, “Under the SCSD Initiative, the Enforcement Division will recommend standardized, favorable settlement terms to investment advisers that self-report that they failed to disclose conflicts of interest associated with the receipt of 12b-1 fees by the adviser, its affiliates, or its supervised persons for investing advisory clients in any 12b-1 fee paying share class when a lower-cost share class of the same mutual fund was available for the advisory clients.”

Through its data analytics capabilities and processes, CFI has already assisted firms with their 12b-1 remediations. CFI’s proprietary system assists firms with data gathering, analyzes the investment advisers’ mutual fund share class selection exposure and provides a detailed remediation plan by client account. CFI also provides compliance consulting services to help firms update Form ADV disclosures and WSPs. If your firm doesn’t have an automated process for validating the selection of the lowest mutual fund share class for advisory clients or needs help with remediation, please contact CFI at 888-970-1700, or

Please review SEC links below for additional information:

SEC announcement on 2/12/18

2018-15 SCSD Initiative Eligibility Requirements: