Securities Exchange Commission (SEC) Share Class Selection Disclosure Initiative
In 2018, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC (“the Firms”) elected to participate in the Securities and Exchange Commission’s Mutual Fund Share Class Selection Disclosure Initiative (“SCSD Initiative”). The SCSD Initiative provided the opportunity for firms to voluntarily self-report to the SEC’s Division of Enforcement possible securities law violations related to the adequacy of their disclosures concerning mutual fund share class selection and fees received pursuant to Rule 12b-1 under the Investment Company Act of 1940. As part of the SCSD Initiative, the Firms conducted a thorough review of disclosures and activities related to mutual fund share class selection within its advisory programs during the period of January 1, 2014 through July 31, 2015.
At the conclusion thereof, the Firms jointly and severally consented to a settlement agreement finding violations of Sections 206(2) and Section 207 of the Investment Advisers Act of 1940 and entry of an order under which the Firms were censured, agreed to cease and desist from committing further violations and to pay disgorgement and prejudgment interest totaling $17,363,847.29. The SEC did not impose a fine or civil penalty based on our self-reporting action.
In addition, under the settlement the Firms agreed to distribute the full amount of disgorgement and pre-judgement interest to affected clients. These refunds will be distributed to eligible current and former advisory clients, with the exception of de minimis refunds, in September 2019. “De minimis refunds” refers to refunds of 12b-1 fees paid by accounts that are now closed and no longer maintain a relationship with Wells Fargo Advisors/Wells Fargo Advisors Financial Network, when the amount of the 12b-1 fees to be refunded, plus interest, is less than $10.
To view the order in its entirety, visit https://www.sec.gov/litigation/admin/2019/ia-5199.pdf.