Advisors hoping that the Securities and Exchange Commission’s Share Class Selection Disclosure (SCSD) Initiative marked the end of regulators’ diligent trolling of their fee and revenue arrangements may be in for a shock.

The SEC is hailing the initiative as a success. After all, it successfully collected $125 million from 80 registered investment advisors that self-reported 12(b)1 fees, which mutual funds pay to advisors to incent mutual fund marketing.

But instead of the SCSS initiative being the conclusion of the SEC’s investigation, it may be the beginning of a robust spate of legal complaints and a possible new initiative—this time zeroing in on RIA revenue-sharing activity, industry attorneys said.

Raising the most concerns about what comes next is the agency’s complaint against Commonwealth, which charges the $85 billion Boston-based independent broker-dealer/RIA with allegedly violating their fiduciary duty to clients by accepting and failing to adequately disclose some $177 million in revenue-sharing payments.

The payments were received from its clearing broker-dealer National Financial Services NFS, LLC, an affiliate of Fidelity Investments, which Commonwealth has required most of its advisors to use for trades since at least 2007.

“Regardless of the outcome of this case, revenue sharing-related inquiries are likely to be front and center in SEC exams – and enforcement cases – for the foreseeable future,” Investment Advisor Association General Counsel Gail Bernstein said in a column sent out tens of thousands of RIAs late last week. IAA is a not-for-profit trade group that represents SEC-registered investment advisors that cumulatively manage more than $25 trillion in assets.

“Advisors would do well to take a close look at their processes for identifying and disclosing the conflicts associated with those arrangements, including with respect to updating and ensuring consistency among the relevant disclosures,” Bernstein added.

In its request for a jury trial in federal district court in Massachusetts, the SEC said:

“These revenue-sharing amounts that Commonwealth received from NFS were sufficient to create meaningful incentives to invest clients' assets in share classes and mutual funds that were more expensive for clients, and more profitable for Commonwealth. Thus, Commonwealth had actual, not merely 'potential,' conflicts.”

Commonwealth spokeswoman Jacquelyn Marchand told Financial Advisor magazine the firm denies the allegations. “While the enforcement action proposed by the Securities and Exchange Commission is a pending legal matter, Commonwealth Financial Network vehemently denies the allegations and believes they are categorically without merit. We are confident we have operated both appropriately and justly and will vigorously defend our actions in this matter,” Marchand said.

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