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SEC Distribution

SEC Distribution

You probably saw the article that was in Ignites today – “SEC Bigs on Distribution-Fee Cases: We’re Not Out For Blood”.

“The agency is focused on whether fund firms have a “rigorous process” in place for making sure that fund assets are not used to pay for sales efforts, except when approved by the fund board under a so-called 12b-1 plan, said Andrew Bowden, head of the agency’s Office of Compliance Inspections and Examinations, at a conference Wednesday.”

We would like to know what the SEC considers a “rigorous process” in place for making sure fund assets are not used to pay for sales efforts, except when approved by the fund board under 12b-1”. Since most firms have moved to omnibus positions at the fund, we would think having an omnibus fee invoice system is one of the components, since in many cases the firms are billing the funds for the 12b-1 and sub-TA fees. If the fund is paying a premium sub TA fee to encourage distribution of the fund company’s products, where the premium is being funded by the distribution company and not the fund company, then they need accurate calculations (Fee Manager!) to show how the fees are being funded.

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