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Tag Archives: investment adviser

SEC Staff Offers Guidance Regarding Investment Advisers and Proxy Advisory Firms

Posted in Investment Adviser Regulation

The SEC’s Division of Investment Management and Division of Corporation Finance published joint guidance on June 30, 2014 regarding investment advisers’ responsibilities in voting client proxies, and two exemptions from the federal proxy rules that are often relied upon by proxy advisory firms. The staff noted that the guidance may require investment advisers and proxy… Read More

Paying for Playing: SEC Brings First Pay-to-Play Action against an Investment Adviser

Posted in Enforcement, Investment Adviser Regulation, SEC Enforcement

The SEC has brought the first action under the “pay-to-play” rule adopted under the Investment Advisers Act.  The SEC also found that two affiliated exempt reporting advisers were operationally integrated and as such should have registered as an investment adviser. Pay-to-Play Violation.  Rule 206(4)-5 under the Investment Advisers Act provides that investment advisers (whether registered… Read More

SEC Staff: Measure Percentage Ownership by Fund, not by Complex

Posted in Fund Regulation, Investment Adviser Regulation

In its June 2014 Guidance Update, the SEC’s Division of Investment Management said that series funds are individual investment companies for purposes of compliance with certain investor protections, including the 1940 Act’s restrictions on principal transactions. Section 17(a) of the 1940 Act generally prohibits an “affiliated person” of a mutual fund, or an affiliated person… Read More

Something Old, Something New: SEC Brings Action for Prohibited Principal Transactions and Retaliation Against Whistleblower

Posted in Broker-Dealer Regulation, Investment Adviser Regulation, SEC Enforcement

Clearly signaling its intention to support whistleblowers who provide actionable evidence of wrong-doing, the SEC this week settled the first case brought under the authority granted by the Dodd-Frank Act enabling anti-retaliation enforcement actions.  The case arose after an employee of a hedge fund advisory firm reported potentially illegal activity related to improper principal transactions…. Read More

Cybersecurity: SEC Is Starting to Scrutinize Registrants’ Practices

Posted in Broker-Dealer Regulation, Cybersecurity/Privacy, Enforcement, FINRA Enforcement, Investment Adviser Regulation, SEC Enforcement

The SEC plans to examine the cybersecurity practices of over 50 registered broker-dealers and investment advisers. The SEC announced its plan in an April 15, 2014 Risk Alert, which closely follows the March 26 Cybersecurity Roundtable at which Chair Mary Jo White underscored the importance of cybersecurity to market security and customer data protection. At… Read More

New Regulatory Guidance on Use of Social Media by Investment Advisers

Posted in SEC Enforcement

Acknowledging the growing demand by consumers for information through social media, the Division of Investment Management set some ground rules on how investment advisers can use social media and publish advertisements featuring public commentary about them from social media sites. Click here to read Morrison & Foerster’s summary on the Socially Aware blog. 

A Blast from the Past: The SEC Fines Investment Adviser/Broker-Dealer for Breakpoint Violations

Posted in Broker-Dealer Regulation, Enforcement, Investment Adviser Regulation, SEC Enforcement

In a case reminiscent of the “breakpoint” enforcement actions brought 10 years ago by securities regulators, the SEC recently found that a registered investment adviser and broker-dealer overcharged clients because it improperly calculated advisory fees. According to the SEC’s settlement order, the firm offered breakpoint discounts designed to reduce advisory fees payable by clients who… Read More

Yelp for Advisers—SEC Determines That Some Online Client Reviews Are Not Prohibited Client Testimonials

Posted in SEC Enforcement

The SEC’s Division of Investment Management recently released a guidance update on the “testimonial rule” and the use of social media by investment advisers. Found in rule 206(4)-1(a)(1) under the Advisers Act, the testimonial rule prohibits investment advisers that are registered or required to be registered with the SEC from publishing any advertisement that refers… Read More

SEC Sanctions Non-U.S. Firm for Failing to Register as Broker-Dealer/Adviser

Posted in SEC Enforcement

The SEC charged a non-U.S. multi-national financial institution with a large U.S. presence with violating federal securities laws by providing brokerage and investment advisory services to U.S. clients without registering with the SEC. The company agreed to pay $196 million to settle charges that it established as many as 8,500 accounts containing an average of… Read More

A New SEC Enforcement Direction for 2014

Posted in Broker-Dealer Regulation, Enforcement, Investment Adviser Regulation, SEC Enforcement

Each year, the SEC puts on its most informative conference of the year: The SEC Speaks.  During the course of the two-day conference, held this year on February 21 and 22, the Chair and each Commissioner, as well as the most senior staff of each division of the SEC, provide their thoughts and insights into… Read More

NEP Announces Never-Before-Examined Initiative

Posted in Investment Adviser Regulation

The SEC’s Office of Compliance Inspections and Examinations (OCIE) announced this week that its National Exam Program (NEP) launched an initiative to “engage with” investment advisers that have never been examined by the SEC.  Advisers to private funds that registered after the implementation of the Dodd-Frank Act, and which are subject to the NEP’s presence… Read More

SEC Compliance Outreach Program Reinforces Familiar Themes

Posted in Fund Regulation, Investment Adviser Regulation

Last week, key members of the SEC’s staff reinforced their expectation that CCOs and other gatekeepers should help the SEC with its core mission of protecting investors, promoting fair, orderly and efficient markets and facilitating capital formation. Based on the presentation materials from the national Compliance Outreach Program for Investment Advisers and Investment Company Senior… Read More

SEC Sanctions Adviser for Failing to Inform ERISA Clients of Improper Investment Allocation

Posted in Investment Adviser Regulation

The Securities and Exchange Commission sanctioned an investment adviser for allowing some of its ERISA plan clients to invest in private placements, even though the issuer specifically restricted investments by ERISA plans.  In a January 27, 2014 order instituting administrative and cease-and-desist proceedings, the SEC alleged that the adviser violated its error correction policies by… Read More

Another Bestseller: The SEC’s Examination Priorities for 2014

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

Following closely on the heels of FINRA’s publication of its examination priorities for 2014 (see our recent client alert), OCIE’s National Exam Program (NEP) released a summary of its 2014 priorities. OCIE’s priorities represent a cross-divisional effort at the SEC and reflect the staff’s assessment of information including: data from reports filed with the SEC;… Read More

SEC: Adviser Violated Advisers Act by Charging Performance Fees to Non-Qualified Clients

Posted in Investment Adviser Regulation, SEC Enforcement

A recent SEC enforcement action illustrates the challenge of complying with changing regulations, particularly for newly registered advisers. The SEC found that the adviser violated the prohibition against charging performance fees to “non-qualified” clients. Section 205(a)(1) of the Advisers Act generally prohibits registered investment advisers, and advisers required to register, from charging performance-based fees; that… Read More

A View of EB-5 Program Issues from a Top SEC Enforcement Official

Posted in Broker-Dealer Regulation, Enforcement, Investment Adviser Regulation, SEC Enforcement

As participation in the U.S. Citizen and Immigration Services (USCIS) Immigrant Investor Program or “EB-5 program” grows, regulatory interest is showing a commensurate uptick.  On November 20, 2013, Associate Director Stephen Cohen of the SEC’s Division of Enforcement spoke to a meeting sponsored by the Federal Bar Association about the securities law issues implicated by… Read More

SEC’s Recent Actions Against Two Investment Advisers Raise Important Lessons for All Investment Advisers

Posted in Investment Adviser Regulation, SEC Enforcement

Recently announced cases against two registered investment advisers and certain of their executives serve as timely reminders of where the SEC is focusing its attention. Although the SEC’s actions are based on alleged intentional violations or disregard of certain regulations, they impart important lessons for law-abiding registered investment advisers. Advisers should be aware of the… Read More

SEC Grants Rare Exemptive Relief from Pay-to-Play “Time-Out” Provision

Posted in Investment Adviser Regulation

In what appears to be a case of first impression, the SEC recently granted exemptive relief from the “time-out” provision of the pay-to-play rule, which prohibits a registered investment adviser from providing investment advisory services for compensation to a government entity within two years after an adviser or any of its covered associates contributes money… Read More

“Guaranteed!” “Protected!” Blog Entry on Fund Names

Posted in Fund Regulation, SEC Enforcement

The SEC’s Division of Investment Management is cracking down on funds that use names that suggest safety or protection from loss. In Guidance Update No. 2013-12, the staff stated that fund names suggesting safety or protection from loss may contribute to investor misunderstanding of investment risks.  The staff said that it recently requested that some… Read More

No-Action Relief Allows Business Development Companies to Hold Shares of Affiliated Advisers

Posted in Fund Regulation, Investment Adviser Regulation

In two recent no-action letters, the SEC staff expanded the ability of business development companies (BDCs) to invest in registered investment advisers.  Although Section 12(d)(3) of the Investment Company Act of 1940 generally prohibits a registered investment company – including a closed end fund that elects to be treated as a BDC – from acquiring… Read More

Uniform Fiduciary Standard Still a Priority, But No Timeline Yet

Posted in Broker-Dealer Regulation, Investment Adviser Regulation

Both the SEC and FINRA believe that the question of whether a uniform fiduciary standard should be imposed on broker-dealers and investment advisers needs to be resolved.  The problem is, neither one seems to have a view about when that might happen. On Wall Street reported that SEC Chair Mary Jo White told the delegates… Read More

MFDF Updates Best Practices – Fund Directors Should Be Independent and Fully Informed

Posted in Fund Independent Directors

The Mutual Fund Directors Forum updated its best practices recommendations for mutual fund directors. The October 13 report, Practical Guidance for Mutual Fund Directors – Board Governance and Review of Investment Advisory Agreements, reflects legal developments affecting fund directors over the 10 years since the MFDF’s first report was released. The report affirms many widely… Read More