July 14, 2021

InvestmentNews Turns to Jim Lundy for Insight on the Latest SEC Revenue Sharing and Markups Settlement

In “Kestra’s $10.3M settlement is proof fund-fee disclosure remains a priority at the SEC,” InvestmentNews spoke to SEC and regulatory enforcement defense partner Jim Lundy about a recent settlement with two registered investment advisers of Kestra Financial that demonstrates the Securities and Exchange Commission (SEC) continues to crack down on alleged inadequate disclosures of certain financial conflicts of interest related to mutual fund fees.

For the past few years, the SEC Enforcement Division’s Asset Management Unit has been zeroing in on conflicts of interest surrounding fund fees, and it will likely continue to flex the muscles it has grown in the area, explained Lundy.

“I would expect [SEC] Chair Gensler to be supportive of the Asset Management Unit continuing to apply the intelligence they’ve developed going forward,” said Lundy. “From [the Kestra] settlement, it appears the outcomes will be somewhat similar to what we saw at the end of Chair Clayton’s tenure.”

Lundy also noted that the revenue-sharing enforcement case against Kestra probably emanated from a “sweep” that was launched a couple of years ago in follow-up to the share-class selection self-reporting initiative.

InvestmentNews noted another takeaway of the Kestra cases was the focus on fee markups. “This is an area the [SEC] staff likely will routinely investigate when it’s looking at potential conflict-disclosure violations,” Lundy added.

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