Category Archives: SEC

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New ADV Rule

Today, the SEC announced the adoption of amendments to several rules under the Investment Advisers Act of 1940 and to Form ADV, the investment adviser registration and reporting form. Although there is a long lead-in time to get in compliance with the new rules and Form ADV, advisers should consider beginning work now to ensure compliance … Continue Reading

SEC Scrutinizes Severance Agreements for Compliance With Dodd-Frank

Recent SEC Fines On Aug. 16, 2016, the U.S. Securities and Exchange Commission (SEC) announced that it had issued its second fine in as many weeks concerning a company’s use of severance agreements that contain confidentiality and/or covenant-not-to-sue or release provisions that allegedly violate SEC whistleblower Rules. These recent SEC charges arise from SEC Rules, … Continue Reading

FINRA Sends Targeted Exam Letter Concerning the Sale of Non-Traded Business Development Companies

FINRA recently sent a sweep letter (or targeted exam letter) to select broker dealers, inquiring about those firms’ sale of non-traded Business Development Companies (BDCs).  BDCs are SEC-registered investment companies (usually closed-end funds) that pool investor funds in a debt or equity portfolio (typically of small- or medium-sized companies), with the objective of generating income … Continue Reading

SEC Share Class Sweep of Registered Investment Advisers Appears to be Underway

On July 13, 2016, the SEC’s Office of Compliance Inspections and Examinations (OCIE) announced its 2016 Share Class Initiative (the Initiative). The Initiative is focused on addressing the perceived risk that registered investment advisers may be providing conflicted advice to their clients when recommending investments in mutual fund share classes.  For example, OCIE staff is … Continue Reading

SEC IM Guidance Update – Investment Company Business Continuity Plans

In connection with the Press Release announcing a Rule Proposal regarding adoption of written business continuity and transition plans by SEC-registered investment advisers (see our blog post on the topic), the Division of Investment Management also distributed a Guidance Update (No. 2016-04) discussing BCPs for registered investment companies (RICs).  RICs have been expected to address … Continue Reading

New SEC Rule Proposal – Written Business Continuity and Transition Plans for Registered Advisers

Earlier this week, the SEC issued a Press Release announcing a Rule Proposal that would require SEC-registered investment advisers to adopt written business continuity and transition plans (BCP) as part of their compliance program.  The comment period on the Rule Proposal is expected to close in September.  Under the proposed rule, an adviser’s written BCP … Continue Reading

SEC Raises Net Worth Threshold for ‘Qualified Client’ Status to $2.1 Million Effective Aug. 15, 2016

As it previously signaled it would do, on June 14, 2016, the SEC issued an Order (available here) increasing the net worth threshold for qualification as a “qualified client” under Rule 205-3 under the Advisers Act from $2 million to $2.1 million (the SEC did not adjust the assets under management of the adviser threshold, … Continue Reading

SEC Issues No-Action Letter on Custody Rule

On April 25, 2016, the SEC issued a no-action letter to the Investment Advisers Association clarifying its views on the application of Rule 206(4)-2 under the Advisers Act (the Custody Rule) to situations involving a sub-adviser in an investment advisory program for which a related person qualified custodian is the primary adviser and the primary … Continue Reading

SEC Seeks Additional Resources for Examination and Enforcement in FY 2017 Budget Request

The Securities and Exchange Commission (SEC) recently presented the President’s Fiscal Year 2017 budget request for the SEC to Congress.  Among the notable requests, the SEC seeks significant additional resources for increased examination coverage, primarily of investment advisers and investment companies but also related to broker dealers, crowdfunding portals, and other entities.  The SEC also seeks … Continue Reading

SEC Continues its Focus on Advisory Fees

The SEC recently brought a settled enforcement action against an SEC-registered investment adviser and its CEO/CCO that represents a continued focus on the calculation of advisory fees. On March 2, 2016, the SEC charged Marco Investment Management, LLC (the Adviser), and its CEO/CCO, Steven Marco (Marco), with charging certain clients advisory fees that were calculated in … Continue Reading

SEC Announces National Compliance Outreach Seminar for Investment Adviser, Investment Company Personnel

On March 9, the SEC announced that it would be holding a Compliance Outreach Program for investment adviser and investment company senior officers on April 19, 2016, at the SEC’s headquarters in Washington, D.C. (the press release is available here).  Registration opened on Tuesday (March 8), and closes on March 29, 2016 (the registration form … Continue Reading

SEC Acts to Enhance Oversight of Funds and Advisers

During recent months the SEC has made a number of announcements regarding its efforts to enhance and expand its oversight and inspections of registered investment companies and investment advisers. Of significance in this regard was the announcement of plans to hire additional examiners and reassign some existing examiners to expand the staff available for inspections of … Continue Reading

SEC and FINRA Name EB-5 as a Priority in 2016

Earlier this month, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) each published their 2016 exam priorities letters. Each agency publishes an exam priority letter annually in which they identify topics of examination focus for the coming year, recurring challenges faced by firms, and perceived areas of heightened risk to … Continue Reading

Study Shows Dramatic Rise in the SEC’s Use of its Administrative Court for Enforcement Actions

The NYU Pollack Center for Law and Business and Cornerstone Research recently released a study entitled “SEC Enforcement Activity Against Public Company Defendants,” which analyzed enforcement trends between 2010 and 2015.  The study contains some interesting data points related to SEC enforcement, concerning both public and non-public entities, and particularly relating to the SEC’s use … Continue Reading

SEC’s Office of Compliance Inspections and Examinations Releases Annual Examination Priorities

On Jan. 11, 2016, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) issued its annual Examinations Priorities for 2016 (Exam Priorities), which is available for download here. In the Exam Priorities, OCIE notes that its priorities focus on the same three thematic areas as in 2015 (which we … Continue Reading

FINRA and MSRB Propose New Pay-to-Play Restrictions on Broker-Dealer Solicitors and Municipal Advisors; Rules Will Trigger SEC Investment Advisor Third-Party Solicitation Ban

On Dec. 16, 2015, the Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB) simultaneously filed with the Securities and Exchange Commission (SEC) rule proposals that will have broad and substantial impacts on the political giving of broker-dealers, investment advisers and municipal advisors and their ability to engage in business with governmental entities … Continue Reading

First Circuit Offers Rebuke to SEC in Vacating Sanctions Order

The U.S. Court of Appeals for the First Circuit recently overturned an order by the U.S. Securities and Exchange Commission (Commission) in which the Commission had imposed sanctions against two former banking executives for violations of the federal securities laws.  In so doing, the First Circuit offered a stern rebuke to the Commission and its … Continue Reading

How the SEC Proposed New Derivatives Rules Affect Registered Funds and Business Development Companies

On Dec. 11, 2015, the SEC proposed new derivatives rules for registered funds and business development companies. The proposed rules set limits on portfolio exposure and the requirement that funds maintain derivative risk management programs. It is important to evaluate these proposed limits against existing “stress testing” clearing and portfolio margining models. Derivative traders have 90 … Continue Reading

SEC Charges Attorneys Across the Country for Acting as Unlicensed Securities Brokers

Last week, the U.S. Securities and Exchange Commission (SEC) announced a series of enforcement actions against lawyers across the country, charging them with offering EB-5 investments and receiving compensation while not registered to act as brokers. According to the SEC, the attorneys and firms involved in these matters assisted in the facilitation of investment sales … Continue Reading

OCIE Issues Risk Alert on Use of Outsourced Chief Compliance Officers

Earlier this week, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) issued a new Risk Alert (available here) related to the use of outsourced chief compliance officers (CCOs) by SEC-registered investment advisers and investment companies (Registrants). The Risk Alert shares staff observations of Registrants who outsource their … Continue Reading

SEC Permits Companies to Sell Securities Through Crowdfunding

The SEC has adopted new rules which would permit companies to offer and sell securities through online crowdfunding. Crowdfunding is a method of raising capital by monetary contributions from a large number of people, usually through the Internet. The new rules will allow small businesses and entrepreneurs to more easily raise capital, and will permit average citizens … Continue Reading

SEC Enforcement Actions Up in 2015

The SEC has announced its enforcement results for fiscal year 2015, which ended in September.  Enforcement filings for 2015 were up nearly 7% over the previous year.  The SEC filed 807 enforcement actions in 2015 (up from 755), with penalties and disgorgements totaling approximately $4.2 billion (up from $4.16 billion).  In its press release announcing … Continue Reading

States Challenge New SEC Rules on Small Public Offerings

Two states – Massachusetts and Montana – have filed suit against the U.S. Securities and Exchange Commission (SEC), challenging the validity of the SEC’s “Regulation A+”  rules on the grounds that the new rules will reduce the states’ powers to review securities offerings before they are sold to the public.  So-called “Regulation A” previously permitted … Continue Reading

SEC Approves New Rule Requiring BrokerCheck Link on Websites

The SEC has approved a proposal to amend FINRA Rule 2210, which governs “Communications with the Public.” The new rule will require Internet hyperlinks to FINRA’s BrokerCheck database on websites maintained by broker-dealers, their branch offices, and their registered representatives. BrokerCheck is a searchable database that contains the employment, registration, and disciplinary histories of all … Continue Reading
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