OCIE issues risk alert on the most frequently identified advisory fee and expense compliance issues

Abstract

Purpose

To summarize and interpret a Risk Alert issued on April 12, 2018 by the US SEC’s Office of Compliance Inspections and Examinations (OCIE) on the most frequent advisory fee and expense compliance issues identified in recent examinations of investment advisers.

Design/methodology/approach

Summarizes deficiencies identified by the OCIE staff pertaining to advisory fees and expenses in the following categories: fee billing based on incorrect account valuations, billing fees in advance or with improper frequency, applying incorrect fee rates, omitting rebates and applying discounts incorrectly, disclosure issues involving advisory fees, and adviser expense misallocations.

Findings

In the Risk Alert, OCIE staff emphasized the importance of disclosures regarding advisory fees and expenses to the ability of clients to make informed decisions, including whether or not to engage or retain an adviser.

Practical implications

In light of the issues identified in the Risk Alert, advisers should assess the accuracy of disclosures and adequacy of policies and procedures regarding advisory fee billing and expenses. As a matter of best practice, advisers should implement periodic forensic reviews of billing practices to identify and correct issues relating to fee billing and expenses.

Originality/value

Expert guidance from experienced investment management lawyer.

Citation

Van Grover, R. (2018), "OCIE issues risk alert on the most frequently identified advisory fee and expense compliance issues", Journal of Investment Compliance, Vol. 19 No. 4, pp. 1-3. https://doi.org/10.1108/JOIC-06-2018-0046