SEC eyes VA funds of funds

The SEC is looking at possible problems involving revenue sharing payments made by funds of funds.
JUN 25, 2007
By  Bloomberg
The Securities and Exchange Commission is looking at possible problems involving revenue sharing payments made by funds of funds. “Recently the commission has received inquiries about some arrangements that raise questions about the nature of the services being provided in return for revenue sharing payments,” said Andrew J. "Buddy" Donohue, director of the Division of Investment Management at the SEC. He spoke in Washington today at the annual compliance and regulatory affairs conference sponsored by the National Association for Variable Annuities. The SEC is eying variable annuities that may offer a fund of funds managed by an affiliate of the insurer. Funds of funds are mutual funds that invest in other mutual funds or hedge funds to diversify risk. “I am curious about the extent in which revenue sharing payments from the adviser of a bottom-tier fund to the insurance company or other affiliate of the adviser to the fund of funds would represent payments for services rendered rather than kickbacks for purchase of shares of the bottom-tier funds,” Mr. Donohue said. That could be a violation of securities anti-fraud law, he said. A fund of fund’s investment adviser has fiduciary duties to select the best investments for the fund of funds, he noted. “The division is considering these issues,” Mr. Donohue said, inviting the variable product industry to make comments on the “appropriate regulatory treatment” for such revenue sharing.

Latest News

FINRA suspends Centaurus broker who piled clients into REITS, BDCs
FINRA suspends Centaurus broker who piled clients into REITS, BDCs

Most firms place a limit on advisors’ sales of alternative investments to clients in the neighborhood of 10% a customer’s net worth.

Advisor moves: LPL Financial, Osaic, Raymond James all welcome new teams
Advisor moves: LPL Financial, Osaic, Raymond James all welcome new teams

Those jumping ship include women advisors and breakaways.

Mariner announces an acquisition double, adding $1.7B to its AUA
Mariner announces an acquisition double, adding $1.7B to its AUA

Firms in New York and Arizona are the latest additions to the mega-RIA.

Michigan insurance agent to stand trial after charges of insurance fraud
Michigan insurance agent to stand trial after charges of insurance fraud

The agent, Todd Bernstein, 67, has been charged with four counts of insurance fraud linked to allegedly switching clients from one set of annuities to another.

NY Appeals court tosses $500M civil fraud penalty against Trump; upholds injunctive relief
NY Appeals court tosses $500M civil fraud penalty against Trump; upholds injunctive relief

“While harm certainly occurred, it was not the cataclysmic harm that can justify a nearly half billion-dollar award to the State,” Justice Peter Moulton wrote, while Trump will face limits in his ability to do business in New York.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.