In an attempt to “increase transparency, strengthen compliance, and inform the public and the financial services industry about key risks,” the SEC’s Office of Compliance Inspections and Examinations (OCIE) published its 2013 examination priorities of its National Examination Program (NEP). While the announcement contained few surprises, OCIE’s subtle shift of priorities may be a harbinger of enforcement cases to come. For example, OCIE said it will specifically focus on broker-dealer sales practices, newly registered advisers, and conflicts of interest. Perhaps most notably, OCIE will look at whether “revenue sharing” payments by investment advisers and payments by funds are really “payments for distribution in guise.” OCIE’s release states:
The IA-IC Program is focusing on the wide variety of payments made by advisers and funds to distributors and intermediaries, the adequacy of disclosure made to fund boards about these payments, and boards’ oversight of the same. These payments go by many names and are purportedly made for a variety of services, most commonly revenue sharing, sub-TA, shareholder servicing, and conference support. The staff will assess whether such payments are made in compliance with regulations, including Investment Company Act Rule 12b-1, or whether they are instead payments for distribution and preferential treatment.
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Topics: Broker-Dealer, Conflicts of Interest, Corporate Governance, Enterprise Risks, Fund Distribution, Investment Adviser, NEP, OCIE, Revenue Sharing, Risk Management, SEC
Published In: Finance & Banking Updates, Securities Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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