Advisers

FYI: More Share Class Selection Violations Charged

Posted on

FYI: Two more advisers settled charges with the SEC over investing client assets in mutual fund share classes that paid 12b-1 fees to the firms’ IARs, when less expensive classes were available. According to the SEC orders, one adviser incorrectly disclosed to clients that its IARs either did not receive 12b-1 fees or only selected the more expensive share classes when less expensive share classes of the same fund were unavailable. The other adviser incorrectly stated that it selected higher-cost share classes for the “long-term benefit” of clients and only where less expensive share classes of the same fund were […]

Advisers

FYI: Robos Charged with Violations

Posted on

FYI: Perhaps in an effort to emphasize that robo advisers have to adhere to the same rules as other advisers, the SEC announced settled charges with two robos yesterday, citing various violations under the anti-fraud, advertising and books and records rules. According to the SEC orders, the first case involved violations stemming from: –False disclosures that said the robo’s tax loss harvesting strategy monitored for “wash sales” when it did not, resulting in numerous wash sales occurring over the relevant period. –Retweeting on its Twitter feed positive statements made about the robo by other Twitter users, including in some cases […]

Advisers

FYI: OCIE Issues 2019 Exam Priorities

Posted on

FYI: OCIE issued its 2019 exam priorities report, listing the following areas of focus for examinations in 2019: 1. Retail investors, including seniors and those saving for retirement: –fees and expenses: disclosure of the costs of investing –conflicts of interest –senior investors and retirement accounts and products –portfolio management and trading –never-before or not recently-examined investment advisers –mutual funds and exchange traded funds –municipal advisors –broker-dealers entrusted with customer assets –microcap securities 2. Compliance and risk in registrants responsible for critical market infrastructure: –clearing agencies –entities subject to regulation systems compliance and integrity –transfer agents –national securities exchanges 3. Oversight […]

Funds

FYI: SEC Proposes “Fund of Funds” Rule

Posted on

FYI: The SEC has proposed new Investment Company Act Rule 12d1-4 intended to streamline and enhance the regulatory framework for funds that invest in other funds. In short, the rule would allow registered funds to invest in other registered funds in excess of the statutory limits set out in the Investment Company Act, subject to conditions along the lines of those imposed on existing funds of funds operating under exemptive orders. The conditions are aimed at avoiding problematic voting/control, large-scale redemptions, excessive fees and overly complex structures. Simultaneously, the SEC is proposing to rescind Rule 12d1-2 and most previously issued […]

Advisers

FYI: Risk Alert on Electronic Messaging

Posted on

FYI: OCIE has issued a Risk Alert on electronic messaging aimed at reminding IAs of their obligations in light of the increased use of various types of messaging for business-related communications. The Risk Alert does NOT address firm email, as firms now have decades of experience with that. Rather, the Risk Alert focuses on electronic messaging occurring OUTSIDE the normal firm email system and which could therefore pose greater compliance risks, such as private email, texting, IMs, personal or private messaging through social media, etc., taking place on any firm or personal devices. From the Risk Alert, it is clear […]

Advisers

FYI: 2019 Compliance Outreach Program for Municipal Advisors

Posted on

FYI: The 2019 Compliance Outreach Program for municipal advisors has been scheduled for February 7, 2019, in San Francisco, jointly sponsored by the SEC, FINRA and MSRB. The agenda will include: –Rule G-42 fiduciary duty; –New MSRB rules, including those on advertising and professional qualifications; –Considerations for underwriters and advisors, including roles, registration and supervisory obligations; –Examination and enforcement. While the program is designed for municipal advisors, many of these topics are likely to be of interest to all advisers, and certain brokers as well, covering such issues as standards of conduct, conflicts of interest and advertising. The program will […]