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Friday, July 17, 2015

Who Else Should Be Losing Sleep Over the SEC's Sub-TA Sweep?

News summary by MFWire's editors

It's still not clear which mutual fund shops have an SEC-style sword of Damocles hanging over their heads when it comes to sub-transfer agency fees. Yet the Wall Street Journal is now on the case and offers an update on the probe.

For more than two years the regulatory agency's examiners have been conducting a "Distribution in Guise" sweep into sub-TA fees and the like. Two months ago news broke that the SEC's examiners had referred cases involving at least two fund shops to the SEC's enforcement division. Yet only a single target, OppenheimerFunds [profile], has been outed so far.

Now Kirsten Grind of the WSJ is highlighting the probe. The article reaffirms, per unnamed sources, that OpFunds is one of the probed targets referred to the enforcement division so far and that others, still unnamed, have also been similarly referred.

Yet the WSJ piece also confirms that more than 12 fund shops were reviewed in the first step, examination. And the paper IDs two others, Franklin Templeton [profile] and J.P. Morgan [profile], that were targeted at least in that first round. Spokespeople for Franklin, J.P. Morgan, and the SEC all declined to comment to the paper, and the piece does not clarify whether or not Franklin or J.P. Morgan's cases have made it to the next level, enforcement.

The SEC's concern with fees received by broker-dealers and 401(k) recordkeepers and the like comes as fund firms are taking a smaller share of fees, which in turn have fallen. Per the 2015 "Performance Intelligence" asset management benchmarking survey results released earlier this week by Casey Quirk, McLagan, the U.S. Institute, and the European Institute, asset managers' collective share of fees in intermediary channels fell to 28 percent last year, from 32 percent in 2007; the rest of the money is being paid, directly or indirectly, to FAs and platforms. 

Edited by: Neil Anderson, Managing Editor

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