In a previous post we covered the April 14, 2020 statement from the SEC’s Division of Investment Management encouraging registered funds to assess and, as appropriate, update their prospectus risk disclosures in light of the COVID-19 pandemic. Now, Dalia Blass, Director of the Division, has joined with the Chairman of the SEC, the PCAOB Chairman and others at the SEC to release a joint public statement discussing how Emerging Market Investments Entail Significant Disclosure, Financial Reporting and Other Risks; Remedies are Limited (the “Statement”).

The Statement highlights challenges that the SEC and the PCAOB continue to observe in emerging markets. Corporate data flow in emerging markets can be significantly limited for political and other reasons, which can impact the valuation and risk assessment of emerging market companies. The Statement reminds investment advisers and registered and private funds of their disclosure obligations generally, and posits key disclosure and other considerations around emerging market investments.
Continue Reading Emerging Markets Risks: Disclosure Considerations for Funds and Advisers

The SEC’s Division of Investment Management has posted Coronavirus (COVID-19) Response FAQs (the “FAQs”), which have been updated through April 14, 2020. The FAQs summarize and provide links to various forms of relief granted by the SEC and the Division to registered investment companies and investment advisers. A list of the questions addressed is provided below.
Continue Reading SEC Provides a Consolidated Reference for COVID-19 Relief for Investment Companies and Advisers

On June 5, 2019, the U.S. Securities and Exchange Commission (“SEC”) adopted a package of rules and interpretations relating to the standards of conduct for broker-dealers and investment advisers, including a new “best interest” rule for broker-dealers. The package was adopted by a 3-1 vote, with Commissioner Robert J. Jackson Jr. as the lone dissenter. Chairman Jay Clayton, who supported the package, stated that the SEC was not adopting a uniform fiduciary rule for broker-dealers and investment advisers. Instead, Chairman Clayton explained that “Regulation Best Interest incorporates fiduciary principles, but is appropriately tailored to the broker-dealer relationship model and will preserve retail investor access and choice.” Chairman Clayton, as well as the SEC’s press release, emphasized that Regulation Best Interest cannot be satisfied by disclosure alone, but rather through compliance with each of the rule’s four substantive obligations.

The actions taken on June 5 include the following:


Continue Reading SEC Adopts Package of Reforms Aimed at Raising the Standard of Conduct for Brokers and Clarifying an Investment Adviser’s Fiduciary Duty

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 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)

Shortly after my post on the SEC’s recent settlement with Apollo Global Management went up, the SEC released a settlement with another private equity fund manager: W.L. Ross & Co. LLC (“WLR”). Like the Apollo case, the SEC sanctioned WLR for failing to fully disclose how it was collecting its fees. But WLR paid a lower penalty than Apollo, perhaps due to its greater perceived cooperation with the SEC.
Continue Reading More Sanctions from Private Equity Fees: W.L. Ross

Four affiliates of Apollo Global Management settled with the SEC by paying $52.7 million (disgorgement of $37.5 million, prejudgment interest of $2.7 million, and a civil money penalty of $12.5 million) and were issued a cease-and-desist order. There were several bases of alleged misconduct.
Continue Reading Apollo Global Management Settles with the SEC