The SEC Office of Compliance Inspections and Examinations ("OCIE") outlined an initiative to identify conflicts of interest related to compensation or financial incentives when registered advisers recommend mutual fund and 529 Plan share classes that have substantial loads or distribution fees ("Share Class Initiative").
The OCIE elaborated that the Share Class Initiative will examine a registered adviser's execution of their fiduciary duty, including:
- examination of their investment practices to determine whether the adviser and their associated persons are acting in his/her clients' best interests and seeking the best execution when recommending mutual fund and 529 Plan investments;
- whether or not there has been disclosure of all material facts to the clients, including all material conflicts of interest that could affect the advisory relationship; and
- existence of written policies and compliance procedures reasonably designed to prevent violations of the Investment Advisers Act.
The OCIE encouraged all registered advisers to "reflect upon their own practices, policies, and procedures in these areas and to make improvements in their advisory compliance programs where necessary."
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