The SEC Office of Compliance Inspections and Examinations ("OCIE") alerted investment advisers to common compliance issues related to advisory fees and expenses. The issues were identified based on the results of over 1,500 adviser examinations conducted in the previous two years.
In its Risk Alert, the OCIE highlighted the following problematic adviser practices:
- incorrect valuation of assets resulting in overbilled advisory fees;
- improperly billing fees in advance, or billing clients monthly instead of quarterly;
- calculating advisory fees based on an incorrect fee rate;
- failing to apply discounts or rebates in accordance with advisory agreements;
- failing to meet disclosure obligations related to fees and billing practices; and
- misallocating expenses to clients instead of the adviser.
The OCIE urged advisers to evaluate their fee and expense policies and procedures in order to meet compliance obligations.
Commentary / Steven Lofchie
From OCIE's mouth to Compliance's ear.
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