Published on Dec 23rd, 2021 |

$4.5 Million Fine for Fees and Expense Disclosures

Fee and Expense Disclosure Failures | SEC Releases

On Monday, December 20th, the SEC released an Order announcing that they charged an RIA $4.5 Million for Fee and Expense Disclosure Failures.

What is the Main Cause, and Key Takeaways?

  • Main Cause:
    • Failure to properly offset management fees.
    • Misleading statements about the fees and expenses it charged.
  • Key Takeaways:
    • It was a requirement under the offering and governing documents for this RIA to offset particular portfolio company fees against management fees that were charged to clients.
      • This resulted in Millions that were overpaid by clients in additional management fees.
    • Conflicting statements were provided to investors that were inconsistent about how the management fees were calculated.
    • The SEC has continued to make it an emphasis that investors must be provided with accurate information, and that they are not to pay more in expenses or fees than they bargained for.

Final Conclusion

It is evident in this order that there were deficiencies in the Compliance Program for this RIA. The SEC provided a quote regarding the importance of a Robust Compliance Program stating, “Robust compliance programs are critical to help ensure that clients are not misled and receive full and accurate disclosure.” As the SEC continues to stay on top of accurate information being provided with fees and expenses, it is important to make sure that you have an efficient Compliance Program in place for the new year.

At Vigilant, we have been in the industry for 17 years and have over 300+ years of experience uniting Regulatory Compliance, Legal, and Financial Expertise. If you would like to learn more about Vigilant, please contact us.