A Focus on Expense Allocations - Wells Fargo Prime Services

Ingrid Pierce discusses expense allocations on page nine of the Wells Fargo Prime Services, Business Consulting Group's Industry and Regulatory Update Quarterly, dated July 2017.
"There has for some time been regulatory focus on both the manner in which fees and expenses incurred by investment advisers are allocated and the level of disclosure provided to investors regarding the nature and allocation of such expenses and potential conflicts of interest relating thereto. We have seen the majority of investment advisers pay close attention to this issue and develop detailed policies, procedures and internal controls to review and manage what has become an increasingly complex area. However, it remains a challenge in the industry and one that is not going to get easier to manage without significant infrastructure or external support.

The U.S. Securities and Exchange Commission has brought several cases against US investment advisers for alleged violations of the U.S. Advisers Act and has long expressed its concern regarding the proper allocation of expenses and in particular disclosure of conflicts of interest when entering into arrangements with affiliates that benefit them at the expense of fund clients. Private equity advisers have also been receiving a lot of attention of late, on the theory that in certain circumstances investors do not have sufficient transparency into how fees and expenses are charged to portfolio companies or the funds. Regulatory actions have concentrated on one or more of the following overlapping areas: undisclosed fees and expenses received by the adviser; shifting or misallocating expenses and failing adequately to disclose conflicts of interests arising from fee and expense issues..."


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This report is originated, owned and edited by Wells Fargo Prime Services, Business Consulting Group and is provided for general informational purposes. Walkers involvement was as a guest contributor and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. ©2017 Wells Fargo. All Rights Reserved.


Ingrid Pierce Global Managing PartnerT +1 345 814 4667ingrid.pierce@walkersglobal.com