SEC Authorizes Transfer of Remaining Distribution Funds and Terminates Select Money Management Order

Key Takeaways

• The Securities and Exchange Commission (SEC) has approved the final accounting and termination of the distribution fund related to a 2019 enforcement action against Select Money Management, Inc.
• This order authorizes the transfer of any remaining or future infeasible funds to the U.S.
• Treasury, effectively closing the administrative proceeding.

Deep Dive

This regulatory update marks the formal conclusion of an enforcement matter initiated under the SEC's Share Class Selection Disclosure Initiative. The original 2019 Order was a result of the firm's self-reporting disclosure failures regarding conflicts of interest related to 12b-1 fees and the selection of higher-cost share classes. For compliance teams, this serves as a reminder of the importance of transparent disclosure regarding fee structures and potential conflicts of interest.

The primary focus of this specific order is the administrative resolution of the Distribution Fund. The Respondent was previously required to administer a fund totaling USD $61,558.42 for the purpose of disgorgement and prejudgment interest. While the firm successfully disbursed 773 payments to recipients, a residual amount of USD $830.09 remained in the fund due to interest earned and de minimis amounts.

The SEC has now approved the final accounting submitted by the Respondent. The order mandates that any remaining funds or future returned funds that are deemed infeasible to return to investors must be transferred to the U.S. Department of the Treasury. This effectively terminates the Distribution Fund, relieving the Respondent of further administration duties regarding this specific fund.

For compliance professionals, particularly those in investment advisory roles, the key takeaway is the importance of rigorous record-keeping and accurate fund administration during remediation processes. The risk implication here involves the potential for regulatory scrutiny if conflicts of interest—specifically those involving 12b-1 fees—are not properly disclosed to clients. Organizations should ensure that their share class selection processes are documented and that any identified discrepancies are addressed through proactive self-reporting, as seen in this case.

Source: Securities and Exchange Commission