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Category Archives: Fund Regulation

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Treasury Report, Part II: Regulation of the Capital Markets

Posted in Fund Regulation

The U.S. Department of the Treasury (“Treasury Department” or “Treasury”) issued its second report (of four reports), titled “A Financial System that Creates Economic Opportunities, Capital Markets” (the “Report”). The Report was issued in response to Presidential Order 137772 setting forth the Core Principles that should guide regulation of the U.S. financial system. The Report… Read More

California Court Applies “Tracing” Requirement to ETF Shareholders Who Sue under Section 11

Posted in Fund Independent Directors, Fund Regulation

A California state court held that shareholders of exchange-traded funds (ETFs) have standing to sue under Section 11 of the Securities Act of 1933 (“1933 Act”) for an alleged prospectus misstatement only if they can trace their ETF shares back to shares that were originally sold pursuant to a materially false or misleading registration statement. … Read More

Auditor Independence No-Action Relief Extended

Posted in Fund Regulation

In a letter dated September 22, 2017, the SEC staff agreed to extend previous relief that enables registered fund groups to fulfill regulatory requirements under Regulation S-X if the accounting firm auditing the funds’ financial statements is not in compliance with Rule 2-01(c)(1)(ii)(A) of Regulation S-X (the “Loan Provision”). Rule 3520 adopted by the Public… Read More

PLI Webinar – Shadow-Boxing in 2017: An Update on Shadow Banking Reform

Posted in Events, Fund Regulation

Tuesday, September 26, 2017 12:00 p.m. – 1:00 p.m. EDT 5:00 p.m. – 6:00 p.m. BST The Financial Stability Board has been spearheading a review of “shadow banking” entities and activities since the onset of the financial crisis.  Pursuant to the FSB’s work, many regulatory reforms have been introduced at both national and international level… Read More

Replacing Familiar Benchmarks: Preparations to Phase Out the IBORs

Posted in Fund Regulation

Long a mainstay of the financial world, the floating “IBOR” rates, based on the rates of actual or purported interbank offered loans, are now being swept slowly into the dustbin of history. The quantity, in both number and size, of existing financial products based on these floating rates is enormous, with the outstanding principal amount… Read More

OCIE Provides Insight into Issues Identified in Recent Cybersecurity Sweep

Posted in Broker-Dealer Regulation, Cybersecurity/Privacy, Fund Regulation, Investment Adviser Regulation

The National Exam Program of the SEC’s Office of Compliance Inspections and Examinations (OCIE) recently published its observations from the second generation of its Cybersecurity Initiative. It reported overall improvement in firms’ cybersecurity awareness and preparedness, but said there is plenty of room for improvement. The staff noted that many firms have failed to adopt procedures reasonably… Read More

Howey Got Here: SEC Issues Guidance on Token Offerings

Posted in Fund Regulation

The Howey test lives on—now in a lesson in what not to do when it comes to token offerings. Token offerings, also known as “initial token offerings,” “token launches,” “token sales,” “initial coin offerings,” or “ICOs,” represent a new capital-raising method being explored by many emerging companies; venture, hedge, and private equity funds; large and well-established corporations;… Read More

2017 Independent Counsel Roundtable

Posted in Events, Fund Independent Directors, Fund Regulation

Monday, July 24, 2017 Investment Company Institute 1401 H St. NW David Silver Conference Room Suite 1200 Washington, DC 20005 IDC and ICI will host the annual Independent Counsel Roundtable, an informal discussion on the issues most important to the independent director community. The following topics will be on the agenda—litigation, governance, data security, business… Read More

FINRA Permits Related Performance Information in Institutional Communications for Registered Closed-End Funds

Posted in Fund Regulation

Introduction In an interpretive guidance letter issued to a registered closed-end fund on June 9, 2017, FINRA permitted the use of “related performance information” in communications that are distributed solely to institutional investors. For purposes of the interpretive letter, “related performance information” is the actual performance of separate or private accounts or funds: that have… Read More

Is it Time to Streamline Financial Regulation?

Posted in Broker-Dealer Regulation, Fund Regulation, Investment Adviser Regulation

A March 13, 2017 presidential order requiring a comprehensive plan to reorganize the executive branch could be the first step toward streamlining the financial regulatory structure. The Executive Order requires the Director of the Office of Management and Budget to propose a plan within a year to reorganize government functions and eliminate unnecessary agencies, agency… Read More

SEC Staff Discusses Investment Company Reporting Modernization and Asset Management Industry Trends at SEC Speaks in 2017 Conference

Posted in Fund Regulation, Investment Adviser Regulation

On February 24, 2017, the U.S. Securities and Exchange Commission’s Division of Investment Management (the “Staff”) participated in a panel at the Practising Law Institute’s SEC Speaks in 2017 conference.  As part of the discussion, the Staff provided an update on the current initiatives relating to investment companies, as well as the Staff’s priorities for… Read More

One Step Forward, Two Steps Back?

Posted in Broker-Dealer Regulation, Fund Regulation, Investment Adviser Regulation

Market participants who are not enamored by the current state of federal securities regulation may have been heartened by the new administration’s January 30, 2017 “two for one” order.  The order contemplated that, for each new rule issued by an executive department or agency, two regulations would need to be identified for elimination. The order… Read More

The Future of Investment Management Regulation: What to Expect in 2017

Posted in Broker-Dealer Regulation, Fund Regulation, Investment Adviser Regulation

In this fast-changing regulatory environment, the long-term consequences – both intended and unintended – of the recent White House remain uncertain, but looking into our crystal ball, we certain trends emerging.  These trends may lead to long-term shifts in how the Securities and Exchange Commission approaches regulation and enforcement, but, at least in the short-term,… Read More

7th Annual Financial Services, Regulatory and Compliance Conference

Posted in Broker-Dealer Regulation, Cybersecurity/Privacy, Events, Fund Regulation

Wednesday, March 8, 2017 Morning Sessions: 8:45 a.m. – 12:30 p.m. EST Afternoon Sessions: 1:30 p.m. – 5:15 p.m. EST The Ritz-Carlton Charlotte 201 East Trade Street Charlotte, NC 28202 Please join Morrison & Foerster attorneys as we offer our insights regarding the future of financial services regulation. The morning sessions will focus on consumer… Read More

Mutual Funds Come Clean: Brokers Can Set Fund Share Sales Charges

Posted in Broker-Dealer Regulation, Fund Regulation

The staff of the SEC’s Division of Investment Management effectively allowed brokers to determine the commissions they will charge their customers who buy “Clean Shares” of mutual funds. In a “no-action” letter dated January 11, 2017, the staff said that it concurs with the view that the restrictions of Section 22(d) of the Investment Company… Read More

Uncertain Seas: European Financial and Regulatory Developments into 2017

Posted in Broker-Dealer Regulation, Fund Regulation, Investment Adviser Regulation

“There are greater storms in politics than you will ever find at sea. Piracy, broadsides, blood on the decks. You will find them all in politics.”  —David Lloyd George, British Prime Minister, 1916-1922 “The greater the difficulty the more glory in surmounting it. Skillful pilots gain their reputation from storms and tempests” —Epictetus Lloyd George… Read More

A Case of Appendicitis: SEC Staff Guidance on Sales Load Variation Disclosures Sends Funds Scrambling

Posted in Fund Regulation

A recent Guidance Update published by the SEC’s Division of Investment Management has sent funds scrambling to beef up prospectus disclosures to accommodate changes to fees charged by financial intermediaries before the Department of Labor’s “conflicts of interest” rule kicks in on April 10, 2017. Read our client alert.

Staff Guidance on Rule 144A Related Issues

Posted in Fund Regulation

On December 8, 2016, the staff of the Division of Corporation Finance provided additional guidance in the form of Compliance and Disclosure Interpretations (“C&DIs”) related to the types of securities that may be counted toward the Rule 144A $100 million threshold.  For example, the C&DIs confirm that securities purchased and held on margin may be… Read More

Big Regulatory Changes in Store for Funds and Advisers? No One Knows for Certain, but Here’s Our Best Guess

Posted in Broker-Dealer Regulation, Fund Regulation, Investment Adviser Regulation

While no one knows for sure what the future holds for investment management regulation, the tea leaves indicate that we may expect a slowdown on new regulations, some pullback on parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), and an abundance of uncertainty. Here, we provide some observations for investment companies,… Read More

CFTC Approves Final Rule Amendments to CPO Financial Report Regulations

Posted in Fund Regulation, Investment Adviser Regulation

On November 21, 2016, the U.S. Commodity Futures Trading Commission (CFTC) approved final rule amendments to its regulations that allow commodity pool operators (CPOs) to use certain additional alternative generally accepted accounting principles, practices or standards in preparing financial statements for non-U.S. commodity pools and that exempt commodity pools from the audit requirement for Annual… Read More

U.S. District Court: Fund Trustees Cannot Rely on Attorney-Client Privilege in Section 36(b) Case

Posted in Fund Regulation, Investment Adviser Regulation

A federal district court has ordered mutual fund trustees to produce privileged documents to a plaintiff who sued an investment adviser accused of charging excessive investment advisory fees. The November 21, 2016 order may pave the way for plaintiffs in “excessive fee” cases to brush aside the attorney-client privilege and learn what independent trustees discussed… Read More

Morrison & Foerster Sponsorship: Structured Products Europe Conference 2016

Posted in Events, Fund Regulation

Thursday, November 17, 2016 8:30 a.m.  – 6:00 p.m. The May Fair Hotel Stratton Street London, United Kingdom W1J 8LT The 12th annual Structured Products Europe conference will bring together top UK and European senior executives from investment banks, regulators, private bankers, issuers, index providers, asset managers, IFAs, pension funds and insurance companies. The conference… Read More