The website Lexology posted a piece from law firm Eversheds Sutherland, entitled, "Regulators have bank deposit sweep programs in their sights." They tell us, "The US Securities and Exchange Commission (SEC) is at the initial stages of another initiative involving concerns about adviser disclosures and conflicts related to bank deposit sweep programs (BDSPs). A recent speech by Stephanie Avakian, Co-Director of the Division of Enforcement, indicates where the SEC is heading." They quote what we also quoted in our Nov. 12 Link of the Day, "SEC Warns on Cash Sweeps," where Avakian says, "We are also looking at cash sweep arrangements. Cash in advisory accounts is often automatically swept into a money market mutual fund or a bank deposit sweep program. A dually-registered adviser or an adviser with an affiliated broker-dealer may have a financial interest, a conflict, in recommending one cash investment over another. For example, some money market mutual funds carry 12b-1 fees or make revenue sharing payments that may be shared with a dually-registered adviser or an adviser's affiliated broker-dealer, while other money market funds do not carry those fees. Advisers recommending or choosing between different money market funds must make full and fair disclosure of these types of conflicts to their clients. The Commission has brought enforcement actions in the past where advisers have failed to make appropriate disclosure." The article adds, "In various exams and based on Ms. Avakian's speech, the SEC examination and enforcement staff has expressed concerns about BDSPs, including the following: value of FDIC insurance, requirement that clients must monitor FDIC accounts, rates of return, incomplete FDIC coverage, liquidity concerns [and] inappropriate charging of advisory fees."

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