Investment advisors, and particularly hybrid RIAs, are still attempting to conceal mutual fund share class violations—specifically 12b-1 charges—that result in higher investor costs, the Securities and Exchange Commission said in its recently released 2018 enforcement report.

While “scores” of investment advisors and brokers participated in the SEC’s voluntary program allowing advisors to self-report the fact that they sold investors more expensive mutual fund shares and received higher fees as a result, many advisors ignored the program, according to the SEC’s report. The voluntary disclosure program, which will result in charges and investor restitution against advisors who self-reported, ended June 12.

The commission has also brought more than 15 enforcement cases against advisors for share class disclosure failures and has continued to make such disclosure a priority in its exams and public statements.

“But despite these efforts, disclosure failures persist,” the SEC said.

The Enforcement Division had close to a dozen ongoing investigations relating to failure to disclose 12b-1 charges and share class violations back in February, the report said.

Advisors still not in compliance who haven’t been contacted by the agency should not take regulators’ silence as a sign they have escaped detection and enforcement. On average, share class violation investigations take nearly two years to complete, the SEC said.

It is thought that many of the violations involve hybrid RIAs that started out with a commission and trail fee structure and have been converting their business to a fee-based or fee-only format. In the process, many accounts remain in an undefined status.

Those advisors caught up in violations, now that the voluntary self-reporting deadline has passed, are subject to antifraud charges, an agreement to pay disgorgement to harmed investors and a penalty. Penalties are generally not being sought against advisors who self-reported, the SEC said.

The SEC’s focus on share class enforcement has two goals: (1) ensuring that these conflicts are adequately disclosed to investors; and (2) getting money back into the pockets of investors as quickly and efficiently as possible.

Big picture, the commission brought 821 actions (490 of which were “stand alone” actions) and obtained judgments and orders totaling more than $3.9 billion in disgorgement and penalties, according to the annual report. Significantly, the SEC returned $794 million to harmed investors, suspended trading in the securities of 280 companies, and obtained nearly 550 bars and suspensions. “By these raw metrics, our overall results improved compared to FY 2017,” according to the SEC.

In fact, the Enforcement Division’s crackdown on wrongdoing against retail investors accounted for half of the stand-alone enforcement actions brought by the agency in 2018. RIA violations accounted for a full 22% of these enforcement actions, while broker-dealer misconduct accounted for 13%, securities offerings for 25%, issuer reporting/accounting and auditing for 16%, insider trading for 10% and market manipulation for 7%.

The data analytics produced by groups throughout the commission are playing an ever-bigger role in “lead generation” for enforcement cases, the SEC said. In addition to the 2018 launch of the Retail Strategy Task Force, the SEC’s Enforcement Division also announced a second initiative this past year designed to focus on misconduct that occurs in the interactions between investment professionals and their clients, according to the report.

Over the past fiscal year, the Enforcement Division investigated and recommended to the commission hundreds of cases alleging misconduct perpetrated against retail investors. Many of those cases were simultaneously resolved, resulting in meaningful and prompt relief. The rest are being pursued through litigation.