Category: Compliance

Subscribe to Compliance RSS Feed

SEC Offers More Guidance on Cybersecurity Best Practices and Pitfalls – Part 2 of 2

This post continues our discussion of the Risk Alert released on August 7, 2017, by the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) regarding conclusions drawn from its yearlong review of the cybersecurity practices of 75 asset management firms and funds.  The sweep, deemed OCIE’s Cybersecurity 2 Initiative, covered broker-dealer, investment adviser, and investment … Continue Reading

SEC Offers More Guidance on Cybersecurity Best Practices and Pitfalls – Part 1 of 2

On August 7, 2017, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) released a Risk Alert summarizing its conclusions from a year-long review of the cybersecurity practices of a 75 firms — including broker-dealers, investment advisers and investment companies.  The sweep, OCIE’s Cybersecurity 2 Initiative, ran from September 2015 to June 2016 and covered … Continue Reading

The Financial Choice Act Aims to Help Angel Investors

The proper treatment of angel investing groups under the Federal securities laws can be a vexing question. If it were appropriate to describe the angel investing group as a “company” as defined in Section 2(a)(8) of the Investment Company Act of 1940, and if the “company” were appropriately viewed as issuing interests or shares, then … Continue Reading

Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Conclusion)

This series of posts has examined the misguided efforts of the House Financial Services Committee to reform the existing process for issuing exemptive orders pursuant to Section 6(c) of the Investment Company Act of 1940 (the “1940 Act”). The previous posts discussed the problems with the current process and why Section 848 of the pending … Continue Reading

Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Part 4)

This series of posts examines the misguided efforts of the House Financial Services Committee to reform the existing process for issuing exemptive orders pursuant to Section 6(c) of the Investment Company Act of 1940 (the “1940 Act”). My first three posts discussed the current exemptive process and some of its significant shortcomings. This post discusses the … Continue Reading

Distribution in Guise Settlement Orders Reinforce Need for Better Compliance, Contracting, and Disclosure Practices (Part 2)

This post continues our discussion of the settlement orders that the SEC recently entered into with investment advisory firms based in Chicago (the “First Order”) and Maryland (the “Second Order”).  These cases illustrate that the SEC remains focused on mutual fund distribution issues and teach some hard lessons about the importance of compliance oversight, contracting, and … Continue Reading

Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Part 3)

This series of posts examines the misguided efforts of the House Financial Services Committee to reform the existing process for issuing exemptive orders pursuant to Section 6(c) of the Investment Company Act of 1940. Section 848 of the pending Financial Choice Act 2017 would attempt to accelerate the process of obtaining exemptive orders by forcing the SEC … Continue Reading

Distribution in Guise Settlement Orders Reinforce Need for Better Compliance, Contracting, and Disclosure Practices (Part 1)

In two back-to-back enforcement cases arising from the SEC’s now four-year old distribution sweep exam, a Chicago-based mutual fund adviser has agreed to a $4.5 million civil money penalty and a Maryland-based firm has agreed to pay disgorgement of $17.8 million plus $3.8 million in interest and a $1 million penalty.  Both cases reinforce the … Continue Reading

Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Part 2)

This series of posts examines the misguided efforts of the House Financial Services Committee to reform the existing process for issuing exemptive orders pursuant to Section 6(c) of the Investment Company Act of 1940. Section 848 of the pending Financial Choice Act 2017 would attempt to accelerate the process of obtaining exemptive orders by forcing the SEC … Continue Reading

Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Part 1)

Most observers of the Investment Company Act of 1940 (“1940 Act”) would agree that, (i) without the exemptive authority in Section 6(c), Section 17(b), and in other provisions in the 1940 Act and (ii) without the manner in which the SEC and its staff have used that authority, the 1940 Act would have become obsolete … Continue Reading

SEC Chairman Nominee Jay Clayton Provides Insight on the Future of the SEC (Part 1)

For those eager to learn what direction the SEC will take during the Trump administration, some clues surfaced during the recent nomination hearing of Jay Clayton, President Trump’s pick to head the SEC.  Clayton commented on several important issues confronting the SEC.… Continue Reading

As Fintech Platforms Grow Up, Investment Management Firms Face the ‘Problems of Tomorrow’

Read our new article in The Investment Lawyer to learn more about the legal and regulatory implications of emerging technologies, including blockchain and digital ledger technology, investing in fintech companies, robo-advisers and algorithms, and cybersecurity.… Continue Reading

Segregating Custody of Family Office Assets

Our previous post discussed how a family office registered as an investment adviser (RIA) under the Investment Advisers Act of 1940 (Advisers Act) might underestimate the scope of its custody of family assets for purposes of Rule 206(4)‑2. The problem is that the rule’s definition of custody extends to all funds and securities an RIA … Continue Reading

Custody Pitfalls for Family Offices

The staff of the Division of Investment Management (IM) recently issued a flurry of interpretive guidance regarding when advisers are deemed to have custody of their clients’ funds and securities. The guidance covers transfers among a client’s custodial accounts, standing letters of instruction to a custodian, and inadvertent custody under the client’s custodial agreement. The … Continue Reading

“Odd Lots” and Valuation Déjà Vu–Part 2

In the first part of this post, I explained how trading odd lot MBS can create the same valuation issue as trading PIPEs. I also touched on some important differences between MBS and PIPEs. In this part, I’ll examine why these differences may make the valuation of odd lot MBS more problematic than the valuation … Continue Reading

“Odd Lots” and Valuation Déjà Vu–Part 1

The SEC’s recent settlement (the “Order”) with Pacific Investment Management Company (“PIMCO”) reflects a new twist on an old issue: buying securities at bargain prices and then marking them up when calculating NAVs. The SEC first addressed this issue in 1969 in the context of what we now refer to as “PIPEs.” The first part … Continue Reading

SEC Chair’s Suggested Expansion of Executive Liability Unlikely to Occur

Apparently lost in the news of the impending departure of SEC Chair Mary Jo White is her recent suggestion to expand liability of corporate executives. In a speech on November 18, 2016, Chair White suggested a potential change in federal securities law that would hold executives accountable even if they are not involved in the … Continue Reading

SEC Staff and Chair Talk Examination Priorities (For the Time Being At Least)

Speaking at a compliance workshop sponsored by the Investment Adviser Association held in Atlanta on November 10, 2016, Bill Royer, Associate Director of the SEC examination program in the Atlanta Regional Office of the SEC laid out the priorities that he expected the SEC’s Office of Compliance Inspections and Examination (OCIE) to focus on in … Continue Reading

SEC Enforcement Staff Touts Year of Firsts and Big Data

Last week, at the Securities Enforcement Forum in Washington, DC, senior staff of the SEC’s Division of Enforcement shed light on risks that asset managers and fund boards should be aware of.  Their comments followed a record enforcement year resulting in more than $4 billion in disgorgement and penalties.  Fueled in part by data collection … Continue Reading
LexBlog