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Tag Archives: Investment Advisers Act

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

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

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

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

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

House Passes Bill to Restore Registration Exemption for Private Equity Fund Advisers

Posted in Investment Adviser Regulation

The United States House of Representatives passed a bill on December 4, 2013, that would restore an exemption from registration to advisers of certain private equity funds that limit leverage, an attempt to undo another Dodd-Frank Act provision that some claim hurts the economy. H.R. 1105, the Small Business Capital Access and Job Preservation Act,… 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 Won’t Object To Aggregation of Certain Client Investments in Private Funds

Posted in Investment Adviser Regulation

In a Guidance Update published this week, the SEC’s Division of Investment Management said that it would not object if related investment advisors registered jointly with the SEC and operating a single advisory business aggregate investments made by certain investors for purposes of determining if those investors are “qualified clients.” The question comes up in… Read More

SEC Targets More Firms for Custody Rule Violations

Posted in Investment Adviser Regulation, SEC Enforcement

On October 28, 2013, the SEC sanctioned three registered investment advisers for, among other things, violating Rule 206(4)-2 under the Advisers Act (the “Custody Rule”).  The settled actions follow a National Exam Program risk alert issued last spring addressing the staff’s concerns about advisers’ apparent lack of understanding when they have custody of client assets… Read More

SEC Sanctions Three More Investment Advisers for Compliance Violations

Posted in Investment Adviser Regulation, SEC Enforcement

The SEC’s Compliance Program Initiative bore more enforcement fruit. SEC today sanctioned three investment advisory firms for repeatedly ignoring compliance problems. The Initiative targets firms that fail to address compliance deficiencies that the SEC brings to their attention. The enforcement actions underscore the importance of conducting annual compliance reviews, as required by Rule 206(4)-7 under the Investment… Read More

SEC Sanctions Investment Adviser for Pushing Class A Shares When Investors Qualified to Buy Institutional Class Shares

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

The Securities and Exchange Commission sanctioned an investment adviser and its owner for failing to seek best execution and breaching their fiduciary duty in selecting mutual fund share classes for three advisory clients. This case is one of several arising out of the staff’s investigation into governance and disclosure practices related to a “turnkey” mutual… Read More