RegAlert2023-02-02
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SEC Division of Investment Management staff letter: Differential Advisory Fee Waivers
The staff of the Division of Investment Management reminds mutual funds, their boards of directors/trustees, and legal counsel that long-term or permanent differential advisory fee waivers across share classes may constitute prohibited cross-subsidization under section 18 of the Investment Company Act of 1940 and Rule 18f-3. Boards are advised to conduct a facts-and-circumstances determination to document whether such waivers result in cross-subsidization, ensuring that shareholders in waived classes pay fees at the investing fund level that, when combined with waived fees, equal or exceed the fees paid by other classes. Funds with existing waivers should evaluate the effectiveness of their monitoring steps and consider whether alternative fee arrangements or shareholder disclosures are necessary.
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Feb. 2, 2023
February 2, 2023
The staff of the Division of Investment Management (“Staff”) wishes to remind mutual funds, their boards of directors/trustees (“Boards”) and their legal counsel about the implications under the Investment Company Act of 1940 (“Act”) of fee waiver and expense reimbursement arrangements that result in different advisory fees being charged to different share classes of the same fund (“differential advisory fee waivers”).[1] In particular, the Staff is highlighting section 18 of the Act and Rule 18f-3 thereunder.
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Source: Securities and Exchange Commission — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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