A recent SEC enforcement action against a registered investment adviser demonstrates the need for registrants to disclose to its clients in writing any and all conflicts of interest. In In re Focus Point Solutions, Inc., SEC Admin. Proc. File No. 3-15011, 9/6/1012, the SEC charged that the registered investment adviser failed to disclose to clients that the firm was receiving a percentage of revenues form a broker-dealer that managed mutual funds the adviser recommended for purchase by its clients. In addition, the SEC charged the investment adviser for the failure to inform clients of its conflict of interest before it voted on behalf of clients to add itself as a sub-adviser to a certain mutual fund.
This matter demonstrates the SEC’s recent focus to review and uncover undisclosed revenue-sharing arrangements between registered investment advisers and broker-dealers.
In order to settle the matter, the adviser agreed to return over $1 million in ill-gotten gains and pay penalties of $150,000.