WASHINGTON -- The SEC has run out of patience with advisors who quietly overcharge clients for costly shares of mutual funds.

The commission has announce an amnesty program for advisors who failed to disclose the sale of high-cost mutual fund shares when a no-fee class of shares was available. Now, the leaders of the SEC's Enforcement Division are following up with a warning to the industry: come forward, or else.

Legal and compliance experts gathered at the annual SEC Speaks conference were warned to urge the firms they work with to self-report under the commission's new initiative.

"Those of you who counsel investment advisors, we hope you will counsel them to participate in the program," SEC enforcement co-director Steve Peikin said. "If not, we promise that if we find them later we will punish them more severely."

Under the self-reporting program, the SEC won’t pursue fines against firms that come forward with detail about their failure to disclose the varying fee structures of different classes of fund shares. Firms can however expect a uniform settlement agreement with the commission that include returning overpayments to clients, instead of harsh penalties, it says.

The self-reporting initiative is in response to a broad failure of advisors to inform clients about their fee structures and the most advantageous share classes, Peikin said.

It’s also a result of findings by Peikin’s division and the Office of Compliance Inspections and Examinations. Commission officials repeatedly found instances where advisors failed to secure the lowest-cost class of shares of a given fund for their clients.

"This reflects an attempt to officially deal with a problem that we're continuing to see both on the enforcement side and in OCIE," he said. "They're getting paid more and they're not disclosing the system of compensation, and we see this as a widespread problem."

Misconduct involving share classes is so pervasive, the self-reporting program seeks to incentivize advisors to come forward for fear of harsher penalties as a more efficient way to stamp out bad behavior across the industry, Peikin explained.

"The ultimate goal here is to try to reach as broad a landscape as possible in order to get money to as many harmed investors as possible in as short a period of time as possible," he said.

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SEC Chairman Jay Clayton has said he wants the commission to strengthen protections for individual investors.

Investment advisor activities are in the crosshairs at the Enforcement Division's Asset Management Unit, mirroring SEC Chairman Jay Clayton's oft-stated priority to strengthen protections for individual investors.

"We continue to dedicate a significant amount of our time and our resources to investigating potential misconduct by investment advisors to retail client accounts," said Anthony Kelly, co-chief of the Asset Management Unit. "We continue to spend a lot of time thinking about the various types of incentives that could cause advisors to drift away from the fiduciary duty they [owe] their clients and act in their own interests."

Issues around fees and expenses, financial arrangements with third parties, and orphaned accounts — instances where an advisor leaves a firm and no one is reassigned to those accounts, leaving clients paying fees for services they are not receiving — are all areas of concern, said Kelly.

And, of course, share classes. The SEC allows that, in certain cases, advisors might have a legitimate reason for advising a client to invest in a particular product or share class that happens to net them additional compensation, but it's the failure to make proper disclosures that can get the firm in trouble with the commission.

"It's the fact that the advisor didn't disclose the associated conflict of interest that gives rise to the violation," Kelly said.

Advisors who don't come forward under the share class self-reporting initiative could face higher penalties than advisors the commission took action against before that program was rolled out, Kelly warned.

And, a word of advice regarding leniency for cooperating with the investigation: "During the course of settlement discussions, quite often we'll hear from counsel that they'd like credit for cooperation," Kelly said.

"While that's all appreciated, appearing for testimony, producing documents, doing everything within the timeframe requested, it’s basically what you're legally obligated to (do)," Kelly said. "We're looking for something more."

So what does that mean for financial advisors? Kelly's team may offer credit for cooperation when the defendants can point to something that they did to help speed up the investigation or help investigators bring it to a conclusion using less resources than they otherwise would have. Additionally, the SEC wants to see proactive measures to return funds to harmed investors and to demonstrate changes that avoids repeat infractions.

"When you're thinking of ways to cooperate and earn credit," Kelly said, "please keep this in mind."