According to the report: “These investors are often particularly vulnerable to the conduct of bad actors in the securities markets, and protecting them is a top priority.”

In that vein, the division launched the Mutual Fund Share Class Selection Disclosure Initiative. “In March 2019, just over one year after the initiative was announced, the Commission ordered 79 investment advisors to return more than $125 million to affected investors. In September 2019, the Commission ordered another 16 advisory firms to return an additional $10 million to affected investors,” the division reported.

The Initiative’s standard settlement terms included no civil penalty, but required disgorgement of fees advisors obtained by placing clients in  a 12b-1 fee paying share class without informing clients of the availability of an otherwise identical, lower-cost alternative, the division said.

“The firms that participated … are aligning their share-class selection practices and disclosures going forward, so that clients can make more informed choices about the fees that they are paying. These improvements will make a real difference for retail investors moving forward,” the SEC said. 

Are we nearing the end of the share-class settlements period?

“I suspect that we are seeing the tail end of cases out of that sweep. That being said, fees will continue to be a focus of the SEC even as the initiative ends because the SEC sees overcharging fees, or not disclosing enough information about fees, as having a direct impact on retail investors,” Berry said.

Should firms just move most of their C-share clients to A shares to be proactive?

There is no one-size-fits-all share class, Berry said. In fact, cases are brought as part of the SEC’s share-class initiative where the issue was that there were alternative no-fee classes that may have been more appropriate.

“My advice is that firms should make sure their disclosures are sufficient and that they are taking their clients’ best interests into account when they recommend different classes of shares. To put it another way, any time a firm recommends a higher fee class to a client, they should make sure that they have good reasons for it and that they are upfront with the clients about why they are recommending those shares,” he added.

The Division’s protection of retail investors includes “stripping wrongdoers of their ill-gotten gains and returning funds to victims as quickly as possible,” the agency said.