Merrill Lynch, Pierce, Fenner and Smith ("Merrill") has elected to participate in the Securities and Exchange Commission's ("SEC") Mutual Fund Share Class Selection Disclosure Initiative ("SCSD Initiative"). The SCSD Initiative is a voluntary program in which investment advisers could self-report to the SEC's Division of Enforcement regarding the adequacy of their disclosures concerning mutual fund share class selection and fees received pursuant to Rule 12b-1 under the Investment Company Act of 1940. According to the SEC, over 90 other investment advisers have also participated in the SCSD Initiative to date.
Pursuant to the SCSD Initiative, Merrill recently entered into a settlement with the SEC (PDF). The settlement included the issuance of an Order that, among other things, requires Merrill to pay disgorgement and prejudgment interest totaling $325,376. The Order provides that Merrill does not admit the associated finding or a violation of securities laws. The SEC did not impose a fine or civil penalty based on our self-reporting of this matter. Merrill also agreed to distribute the disgorgement and pre-judgement interest to affected clients. These refunds are expected to be distributed to eligible current and former advisory clients, with the exception of de minimis refunds, no later than October, 2020. "De minimis refunds" refers to refunds of 12b-1 fees paid by accounts that are now closed and no longer maintain a relationship with Merrill, when the amount of the 12b-1 fees to be refunded, plus interest, is less than $10.
Affected clients do not need to do anything to receive their payments. Current clients who are eligible to participate will receive a credit of their payment in their existing Merrill account. Former clients who are eligible to participate, other than those who would have received a "de minimis refund," will receive a check at their last known address in Merrill's records.