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Oppenheimer & Co. Takes Advantage of SEC Amnesty Program
Levin Law | 4.23.2019
It was announced in February 2018 that the Division of Enforcement of the Securities and Exchange Commission would be offering an amnesty program for firms that self-report potential mutual fund sales violations. Oppenheimer & Co was one of the firms to take advantage of the Share Class Selection Disclosure Initiative (SCSD Initiative). The company has agreed to return $3.5 million to customers who could have bought less expensive mutual fund share classes.
According to the SCSD Initiative, the SEC will not recommend additional penalties if self-reporters disgorge 12b-1 fees, paying them back to harmed investors. The initiative which lasted until June 2018 was an effort to make companies disclose conflicts of interests around mutual fund share class selection. Under Section 206 of the Investment Advisers Act of 1940, investment advisers are required to disclose all conflicts of interests including if they are receiving compensation for recommending a more expensive mutual fund share when a less expensive alternative exists. Companies who failed to take advantage of the self-reporting incentive are likely to face harsher penalties.
The SEC announced on March 11, 2019, that 79 investment advisers took advantage of the self-reporting incentive. Over $125 million will be returned to clients under the SCSD initiative. According to the summary of the Settlement Terms investment advisers conceded that the “failed to include adequate disclosure regarding the receipt of 12b-1 fees; and/or failed to adequately disclose additional compensation received for investing clients in a fund’s 12b-1 fee-paying share class when a lower-cost share class was available for the same fund.”
