Category: U.S. Advisor Regulation

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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

Update for September 1 Fund Subscriptions: New “Qualified Client” Standard

Effective August 15, 2016 for SEC-registered investment advisers, most funds or separate accounts that are subject to a performance fee or allocation need to raise their “qualified client” net worth threshold for new investors, new investments from existing investors, or new separate account agreements, from $2 million to $2.1 million.  Other thresholds (such as the … Continue Reading

Should Failure to Plan Constitute Fraud?

I have spoken for years about the importance of contingency planning for money market funds. So I understand why business continuity and transition planning is a great idea for investment advisers. I’m troubled, however, by the SEC’s recent proposal to require advisers to maintain such plans. My troubles lie more with their means than with … Continue Reading

SEC Staff Puts a Bow on Gifts from Christmas 2015 Legislation

Late last fall, Congress faced a serious crisis in trying to pass a comprehensive transportation bill, designated as the Fixing America’s Surface Transportation (FAST) Act.  Amendments to various Federal securities and banking laws were added to the FAST Act during the reconciliation process. These amendments had not been the subjects of serious hearings in either … Continue Reading

Will the Department of Labor (DOL) Add to the Fiduciary Murk?

A recent Majority Staff Report from the Senate Committee on Homeland Security and Governmental Affairs raises some concerns. Some of my concerns relate to the state of our federal government. (Should congressional staff spend time composing philippics against an executive department? Does the prospect of exposure of inter-agency emails have a chilling effect on communications? Why … Continue Reading

Federalism, Regulatory Assets under Management (“RAUM”), and Voluntary Registration with the SEC as an Investment Adviser — Part Three

Parts One and Two of this series identified the serious consequences of registering as an investment adviser with the SEC when you don’t have the regulatory assets under management (“RAUM”) required for registration by the Investment Advisers Act. This part discusses the problem of calculating RAUM when you manage portfolios that mix securities and derivatives. … Continue Reading

Welcoming “Finders” in from the Cold in California

As of January 1, 2016, a person defined as a “finder” will become exempt from the broker-dealer provisions of the California Securities Law of 1968, as amended. Under that law, the Commissioner of Business Oversight regulates the activities of broker-dealers. Assembly Bill No. 667, Section 25206.1 will exempt a “finder” from registration with the Commissioner … Continue Reading

Can a Family Office Client Ever Cease to be a “Client;” Can a Non-Family Third Party Ever Become a “Client” of a Family Office?

The Family Office Rule states that a family office cannot have any clients other than family clients. The term “family client” is defined in paragraph (d)(4) of the Family Office Rule to include any family member, any key employee, certain non-profit organizations, certain irrevocable and revocable trusts, and certain wholly-owned companies, all as set forth … Continue Reading

Federalism, Regulatory Assets under Management (“RAUM”), and Voluntary Registration with the SEC as an Investment Adviser — Part Two

My initial post examined the risk of miscalculating regulatory assets under management (“RAUM”) for purposes of registering with the SEC as an investment adviser. This post shows that the SEC is highly motivated to bring reasonably punitive enforcement proceedings against investment advisers that “voluntarily” register with the SEC instead of with the appropriate state.… Continue Reading

Federalism, Regulatory Assets under Management (“RAUM”), and Voluntary Registration with the SEC as an Investment Adviser — Part One

As a matter of Federalism, Congress cannot require the several states to adopt laws regulating investment advisers, but it can prohibit “small” investment advisers from registering with the SEC unless they have a sufficient amount of RAUM. For the last two decades, Congress has been slowly but continuously removing “small” investment advisers from the SEC’s … Continue Reading

SEC Division of IM Issues Guidance Update on Personal Securities Transactions

On June 26th, the Securities and Exchange Commission’s Division of Investment Management issued IM Guidance Update No. 2015-03 titled, “Personal Securities Transactions Reports by Registered Investment Advisers: Securities Held In Accounts Over Which Reporting Persons Had No Information or Control.”  As its name suggests, the update deals with the reporting exception in subsection (b)(3)(i) of … Continue Reading

Investment Advisers Act Compliance Developments in 2015

The year 2015 is shaping up to have an unusual focus on the center of that string of relationships tracing the path from end-investor to asset class — that is, the nuts and bolts of asset management “operations.”  Click here to read my recent article about key operations-oriented compliance developments for investment advisers in 2015.… Continue Reading