Dodd-Frank Act and FSOC

Welcome back for Part 4, the final installment in our discussion of the SEC’s April 18, 2018 fiduciary rulemaking proposal (the “Proposal”). We will summarize the SEC’s proposed Regulation Best Interest (“Regulation BI”), which seeks to create a “best interest” fiduciary duty standard for broker‑dealer relationships with retail customers. We will then delve into some of the specific requirements and open questions surrounding the regulation.

Continue Reading The SEC’s Fiduciary Rule Proposal — Implications for Investment Advisers (Part 4)

Welcome back for Part 3 of our discussion of the SEC’s April 18, 2018, fiduciary rulemaking proposal (the “Proposal”). Here, we dive into the SEC’s proposed Form CRS Relationship Summary and its proposed amendments to Form ADV. We also discuss the proposed rulemaking to restrict broker‑dealers’ use of the term “adviser” and variations thereof.

Continue Reading The SEC’s Fiduciary Rule Proposal — Implications for Investment Advisers (Part 3)

This post continues our discussion of the SEC’s April 18, 2018, fiduciary rulemaking proposal (the “Proposal”). Here we address the Proposed Interpretation Regarding Standard of Conduct for Investment Advisers and Request for Comment on Enhancing Investment Adviser Regulation portion of the Proposal which would, in sum, (i) restate advisers’ fiduciary duties under the Advisers Act and (ii) impose a variety of new requirements on advisers similar to those applicable to broker-dealers.

Continue Reading The SEC’s Fiduciary Rule Proposal — Implications for Investment Advisers (Part 2)

On April 18, 2018, the SEC held an open meeting where it approved the long‑awaited and much-discussed fiduciary rulemaking proposal package. The proposal primarily recommends disclosure- and principles and procedures-based rules, and has garnered three main criticisms: (1) it would establish a “best interest” standard without defining the term; (2) while intending to provide clarity, it would likely generate litigation around the scope of the restated investment adviser fiduciary duty; and (3) it fails to cover how a new “relationship summary” disclosure would function in the robo-adviser context. Part one of this series provides a high‑level overview of the recent history behind the proposal and summarizes its key provisions. Forthcoming posts will discuss the proposal in greater detail and suggest key takeaways for investment advisers.
Continue Reading The SEC’s Fiduciary Rule Proposal – Implications for Investment Advisers (Part 1)

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 Financial Choice Act of 2017 would make matters much worse. This concluding post considers the possibility that Section 848 may not accomplish anything and then discusses other possible reforms to the exemptive process that may prove more fruitful.
Continue Reading Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Conclusion)

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 changes to the process proposed in Section 848 of the pending Financial Choice Act of 2017 and why these proposed changes would undermine investor protections provided by the 1940 Act. It is difficult to overstate what bad public policy Section 848 represents.


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. Section 848 of the pending Financial Choice Act 2017 would attempt to accelerate the process of obtaining exemptive orders by forcing the SEC to grant or deny an exemptive application within a fixed time frame. My first post discussed the current process of obtaining an exemptive order. This post examines a problem overlooked by proposed Section 848, perhaps due to the Committee’s limited understanding of the exemptive process.
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 to grant or deny an exemptive application within a fixed time frame. My prior post discussed the current process of obtaining an exemptive order. This post examines the problem at which Section 848 appears to be aimed. A later post will explain why it misses its mark.
Continue Reading Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Part 2)

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 insofar as it would not have been possible to adapt it to some of the most popular financial products developed during the last 40 years.  It is also true that the process for obtaining exemptive orders is far from perfect and has proven to be frustrating on more than one occasion. Presumably, these frustrations motivated a proposed “reform” to the exemptive application process as part of the pending Financial Choice Act 2017.  Specifically, Section 848 would attempt to accelerate the process of obtaining exemptions by forcing the SEC to grant or deny an exemptive application within a fixed time frame.  This proposal: (a) does not reflect a sophisticated understanding of the process it seeks to change and, therefore, (b) fails to identify the actual problems with the process, so that Section 848 would almost certainly (c) result in superficial changes at best and at worst seriously undermine the protections the 1940 Act provides to shareholders of investment companies.  This series of posts will consider each of these points, before recommending more appropriate changes to the processes of obtaining exemptions.
Continue Reading Section 848 of the Financial Choice Act 2017: Unwise at any Speed (Part 1)

This post continues our summary of the testimony of Jay Clayton, President Trump’s pick to head the SEC, at his recent nomination hearing before the Senate.  Clayton commented on several important issues confronting the SEC.
Continue Reading SEC Chairman Nominee Jay Clayton Provides Insight on the Future of the SEC (Part 2)