SEC Enforcement: Self-Reporting Share Class Selection Disclosure Initiative

Abstract

Purpose

This paper aims to explain the U.S. Securities and Exchange Commission’s (SEC’s) recent Share Class Selection Disclosure (SCSD) Initiative, which offers potentially favorable settlement terms to investment advisers who self-report to the SEC’s Enforcement Division violations of the federal securities laws relating to certain mutual fund share class selection issues and to discuss factors for consideration by investment advisers regarding their possible participation in this initiative.

Design/methodology/approach

This paper discusses the conditions and terms of the SEC’s SCSD Initiative, the SEC’s focus on conflicts of interest associated with mutual fund share class selection, the applicable law, the complex nature of these issues and the factors that investment advisers should consider in determining whether to participate in the initiative.

Findings

The assessment of the facts and the evaluation and analysis of the issues may be both time-consuming and complex. Firms need to carefully consider whether the potential benefits of self-reporting outweigh any possible downsides, including the potential collateral consequences that an SEC enforcement action may have on their business operations.

Originality/value

This paper contains valuable information about a recent SEC Enforcement Initiative and provides practical guidance from experienced securities counsel.

Citation

Greenberg, E. (2018), "SEC Enforcement: Self-Reporting Share Class Selection Disclosure Initiative", Journal of Investment Compliance, Vol. 19 No. 2, pp. 16-18. https://doi.org/10.1108/JOIC-04-2018-0037