November 12, 2021
On November 10, 2021, the staff (Staff) of the SEC’s Division of Examinations (Division) issued a Risk Alert (Risk Alert or 2021 Risk Alert) based on observations from the Division’s recently concluded national initiative (Initiative) that focused on advisory fees charged by registered investment advisers. The Staff conducted approximately 130 examinations of SEC-registered investment advisers and assessed the various ways in which investment advisers charge fees for their services, as well as evaluated the adequacy of fee disclosures and the accuracy of fee calculations.
In 2018, the Division published a risk alert (2018 Risk Alert) highlighting compliance issues the Staff observed relating to advisory fees. The 2021 Risk Alert supplements the 2018 Risk Alert by providing greater detail on certain compliance issues observed during the recent Initiative.
The Staff observed advisory fee-related deficiencies including the following: advisory fee calculation errors, such as over-billing of advisory fees, inaccurate calculations of tiered or breakpoint fees, inaccurate calculations due to incorrect householding of accounts; and not crediting certain fees due to clients, such as prepaid fees for terminated accounts or pro-rated fees for onboarding clients.
In the Alert, the Division encouraged advisers to review, refine, and improve, as appropriate, their fee billing policies, procedures, and practices and to address new risks as they are identified. In addition, the Division encouraged advisers to review their disclosures regarding such practices to ensure that clients are provided with full and fair disclosure of all fees and expenses and related material conflicts of interest. The Risk Alert noted that advisers that fail to adhere to the terms of their agreement and disclosures, or otherwise engage in inappropriate fee billing and expense practices, may violate their fiduciary duties and the Advisers Act, including its antifraud provisions.
The 2018 Risk Alert can be found here.
The 2021 Risk Alert can be found here.
March 22, 2023
March 21, 2023
March 6, 2023
February 28, 2023
February 15, 2023
February 10, 2023
February 6, 2023
January 25, 2023
January 11, 2023
December 29, 2022
December 14, 2022
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
One Battery Park Plaza
New York, NY 10004
Phone (212) 574-1200
Fax (212) 480-8421
901 K Street, NW
Washington, DC 20001
Phone (202) 737-8833
Fax (212) 480-8421
General/Media Inquiries – firstname.lastname@example.org
Legal Recruiting – email@example.com
Staff Recruiting – firstname.lastname@example.org