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Rating:The SEC Shines a Light on Revenue Sharing. Is a Crack Down Next? Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, September 05, 2014

The SEC Shines a Light on Revenue Sharing. Is a Crack Down Next?

News summary by MFWire's editors

Looks like the SEC is gearing up for a crusade.

Reuters reports that the regulator began an investigation 18-months ago into the incentive fees paid by fund sponsors to brokerage firms and advisors who sell their products. A full analysis is expected by the end of the year, the newswire reports, and could lead to an overhaul of the practice.

Reuters scribe Jed Horowitz writes that:

If SEC commissioners should act on the pending analysis, however, it could lead to an overhaul of how the fund industry pays for sales and how the brokerage industry discloses the money it collects, fund industry officials said.

Earlier this week, the SEC leveled fraud charges against a Houston RIA for allegedly failing to disclose the revenue-sharing fees it received from broker for assets allocated to funds on one particular custodial platform.

As all fund executives know, the revenue-sharing web is a complex weave. Reuters' Horowitz writes that "firms vary greatly in what they disclose and how they describe payments from fund companies," according to a review conducted by his newswire on the subject.

MFWire published a comparison of revenue-sharing disclosures from 22 broker dealers late last month.

The Reuters scribe also writes about another trend that fund executives have been struggling in recent years: brokerages asking for increasingly more support for selling the funds as well as payments. The support, Horowitz writes, can come in the form of specialized attention from wholesalers in the form of "presentations to clients and even offer practice management tools and advice."

Recently, Horowitz writes, the "requests have hardened into monetary demands."

Read more about the SEC investigation into revenue-sharing here in Horowitz's article for Reuters

Edited by: Tommy Fernandez


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