With six weeks to go in its mutual fund share class self-reporting initiative, the SEC is offering guidance on how advisors can receive favorable settlement terms if they overcharged clients.

But, the lenient terms offered under the Share Class Disclosure Initiative will not be available beyond June 12.

That's the cut-off date for self-reporting under the SEC's initiative — a mechanism to address a pervasive pattern of abuse and return excessive 12b-1 fees to clients.

"It appears that many investment advisors are working diligently to evaluate whether they can take advantage of the initiative," Dabney O'Riordan, co-chief of the Asset Management Unit at the SEC's Division of Enforcement, says in a statement.

"The initiative provides a framework to quickly and efficiently resolve these issues with self-reporting advisors and return money to their clients," O'Riordan says of the new set of frequently asked questions.

Much of the new guidance details eligibility for the program, which offers a set of uniform settlement terms for advisors who self-report that they sold clients high-cost fund shares when comparable, lower-fee shares were available.

For starters, the Share Class Disclosure Initiative only applies to RIAs, the SEC states. Dually registered advisors and brokers can participate in the program, but only if they were acting as an investment advisor when making the mutual fund recommendation.

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The SEC is alarmed about conflicts of interest stemming from the 12b-1 fees that advisors can collect from any sort of pooled investment products, including money market funds, and that the self-reporting program "does not differentiate between types of funds."

And, that June 12 deadline is a hard cut-off for participation in its program.

"We do not anticipate extending the June 12, 2018 deadline by which an investment adviser must notify the division of its intent to participate in the SCSD Initiative," the SEC says.

Some advisors have questioned whether they can avoid civil monetary penalties under the program if they address their share class issues through the examination process in their dealings with the SEC's Office of Compliance Inspections and Examinations. Though OCIE and the Enforcement Division work closely together, winning favorable terms through the disclosure initiative requires advisors to come forward to enforcement, according to the commission.

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"If an advisor has been or is being examined, the only way to ensure the [Enforcement] Division will recommend the favorable settlement terms ... is for the advisor to self-report in the manner described in the announcement" of the initiative, the SEC says. "Any interactions the advisor had with OCIE do not constitute self-reporting under the SCSD Initiative. Division staff will exercise its discretion in determining whether to recommend enforcement action to the commission."

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As a general matter, the SEC's terms of settlement will be uniform. Agency officials have stressed that the purpose of the initiative is to address a widespread abuse and return money to investors, without much regard for the specific contours of the bad behavior.

"The division does not plan to recommend fundamentally different settlement terms with any self-reporting advisor based on 'the severity and scope' of the conduct," the SEC says.

In determining the amount of money that advisors who self-report through the share-class initiative will be required to repay to clients, the SEC says that it will consider whether the advisors used the receipt of 12b-1 fees to offset their overall annual management fees. In a scenario in which an advisor "applied a portion of the 12b-1 fees it received to reduce the annual management fee so that the client was ultimately charged a management fee less than 1%," the Enforcement Division "may recommend an offset to the disgorgement to the commission."

The SEC's set of frequently asked questions comes in the final weeks of an initiative that commission officials describe as a one-time-only offer.

Steven Peikin, the co-director of the SEC's Enforcement Division, put the choice starkly at a recent conference. Addressing an audience of compliance attorneys, he urged them to "counsel [advisors] to participate in the program."

"If not," Peikin said, "we promise that if we find them later we will punish them more severely."