e-journal

SEC intensifies scrutiny of fee-based accounts and reverse churning

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Purpose – To explain the SEC’s focus on the appropriate use of fee-based accounts and disciplinary
efforts to identify and prevent ‘‘reverse churning.’’
Design/methodology/approach – Describes the quantitative analytics used in the SEC’s Risk Analysis
Examinations (RAEs) to identify reverse churning and other problematic behaviors, explains why the
inappropriate use of fee-based or ‘‘wrap fee’’ accounts and ‘‘double charging’’ can be unfair to
investment clients, summarizes prior NASD and FINRA guidance and enforcement regarding fee-based
account supervision, and recommends account monitoring actions that firms should take to ferret out
reverse churning.
Findings – The SEC’s continuing interest in reverse churning and double-charging, and its use of new
examination and investigation tools, together suggest that the future will see more investigations and
enforcement actions against firms who place clients in a fee-based or ‘‘wrap-fee’’ account without
having adequate supervisory procedures to determine and monitor whether such accounts are
appropriate for those clients.
Practical implications – Monitoring accounts to ferret out reverse churning has proven difficult for firms
in the past, since spotting inactivity might be more challenging than detecting excessive trades (known
as ‘‘churning’’). However, it seems that the SEC and its staff are enhancing their ability to identify and
address these violations.
Originality/value – Practical advice from experienced financial services lawyers.

Keywords United States, Securities and Exchange Commission (SEC), Double charging, Fee-based accounts, Reverse churning, Wrap fees

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Informasi Detail

Judul Seri

JOURNAL OF INVESTMENT COMPLIANCE

No. Panggil

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Penerbit

: Bingham McCutchen., 2014

Deskripsi Fisik

JOURNAL OF INVESTMENT COMPLIANCE VOL. 15 NO. 1 2014, pp. 48-51

Bahasa

English

ISBN/ISSN

15285812

Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

AKUNTANSI

Info Detail Spesifik

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Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

Lampiran Berkas

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