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- Title
Revenue-sharing disclosure trends and potential requirements under proposed US mutual fund and broker-dealer regulations.
- Authors
Schreiber, Paul S.; Greene, Nathan J.; Jackson, John D.
- Abstract
Fund distributors typically seek to recover distribution-related "revenue-sharing' payments from fund affiliates such as the investment adviser and primary distributor. Because revenue-sharing payments create an inherent conflict of interest for the fund intermediaries that receive them, regulators have heavily scrutinised the disclosure of such arrangements. The focus on revenue sharing has intensified recently, beginning with the enforcement actions against broker-dealer firms that occurred in 2003. This paper looks at some of the enforcement actions related to revenue sharing, examines revenue-sharing disclosure in light of recent rule proposals by the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD), and offers practical tips on ensuring compliance. The first section focuses on the background to, and enforcement history of revenue-sharing payments. Specifically, this section discusses Rule 10b-10 of the Securities Exchange Act of 1934, the no-action letters that followed, and key enforcement actions and lawsuits, including those against Morgan Stanley, Edward Jones and Wells Fargo. The second section discusses recent regulatory efforts in this area, focusing on pending rule proposals by the SEC and NASD. The final section provides practical tips for fund firms and broker-dealers, by analysing who bears the burden of disclosure and providing best practices for ensuring compliance.
- Publication
Journal of Securities Compliance, 2008, Vol 1, Issue 2, p142
- ISSN
1753-1780
- Publication type
Academic Journal