SEC Risk Alert finds deficiencies in funds’ disclosures to investors

On Behalf of | Nov 1, 2021 | Securities and Compliance

The Securities and Exchange Commission released a Risk Alert on Tuesday that reported flaws in disclosures by mutual funds and exchange-traded funds, according to ThinkAdvisor.

The SEC said its Division of Examinations had conducted a series of exams of more than 50 fund complexes and nearly 100 advisors. The exams revealed “deficiencies or weaknesses observed by the staff related to the funds’ disclosures to investors in fund filings, advertisements, sales literature and/or other shareholder communications.”

The staff said funds had inaccurate, incomplete and/or omitted disclosures on a number of topics, including investment strategies and portfolio holdings, average total returns and/or gross expenses and net expenses, and differences in investment objective between predecessor and successor funds.

The Division of Examination issued deficiency letters to some firms but not others, while also noting that its findings could help all funds assess their compliance risks. The SEC said the Risk Alert is intended to highlight risk areas and help funds enhance their compliance programs and practices.

The commission added that many of the funds and their advisors revised their compliance policies, amended disclosures or changed certain practices in response to the alert.

The attorneys at Lewitas Hyman fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm should be in need of qualified counsel on securities regulatory, compliance and enforcement matters, please contact us at (312) 291-4600 or through our online contact form.

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