Advisers

FYI: The Senior Safe Act and Immunity

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FYI: The SEC, NASAA and FINRA have jointly issued a Fact Sheet about The Senior Safe Act enacted by Congress last year, to help raise awareness of the Act and to help explain how the Act’s immunity provisions work. In principal part, the Act provides qualified immunity to certain individuals and financial institutions — which could include IAs and BDs — from liability in any civil or administrative proceeding for reporting a case of potential exploitation of a senior citizen to a covered agency. The multiple-agency Fact Sheet and press release can be accessed here: https://www.sec.gov/news/press-release/2019-75. The Senior Safe Act […]

Advisers

FYI: Reg BI Set for Vote at SEC’s June 5, 2019 Meeting

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FYI: The agenda for the SEC’s open meeting on Wednesday, June 5, 2019, includes consideration of whether to adopt: • Reg. BI • Form CRS • Interpretive Guidance Addressing IA Standard of Conduct. Interestingly, the agenda also lists an item that was not specifically included in the suite of proposals originally bundled together with Reg. BI, namely, whether the Commission should publish an interpretation of the “solely incidental” prong of Section 202(a)(11)(C) of the Investment Advisers Act of 1940. Section 202(a)(11)(C) is the so-called ‘broker-dealer exception’ from the Advisers Act, which excludes from the definition of ‘investment adviser’ any BD […]

Advisers

FYI: Risk Alert Addressing Network Stored Information

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FYI: OCIE issued a Risk Alert today addressing security weaknesses found in recent IA and BD examinations relating to the storage of customer and firm information on internal and external networks (including hosted cloud storage). The Risk Alert pointed out that the majority of network storage solutions offer encryption, password protection and other security features designed to prevent unauthorized access, but firms did not always use the available security features. Three particular areas of concern were listed: • Misconfigured network storage solutions. • Inadequate oversight of vendor-provided network storage solutions. • Insufficient data classification policies and procedures. On the positive […]

Advisers

FYI: Is the SEC Wearing Its “Reasonableness Pants”?

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FYI: In a recent speech, SEC Commissioner Hester Peirce questioned whether the SEC was wearing its “reasonableness pants”* when it undertook the recent Share Class Selection Disclosure Initiative, which earlier this year resulted in 79 settled enforcement actions against advisers that voluntarily self-reported having selected for clients mutual fund share classes that carried a 12b-1 fee when a lower-cost share class for the same fund was available to the clients, ostensibly without adequate disclosure of the attendant conflicts of interest. While acknowledging that the aggregation of all those cases together helped to preserve precious SEC staff resources, Commissioner Peirce does […]

Advisers

FYI: Resources on Protecting Senior Investors

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FYI: The SEC’s Office of the Investor Advocate has issued a paper entitled “How the SEC Works to Protect Senior Investors,” describing what the SEC is doing to protect senior investors, especially in the areas of investor education, regulatory examinations and enforcement. The paper is well worth a read by anyone interested in compliance relating to seniors, as it summarizes work in the area not only by the SEC, but also by FINRA (for example, FINRA Rule 2165 on Financial Exploitation of Specified Adults) and the states (for example, the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation, […]

Advisers

FYI: Appellate Court Decides Robare Disclosure Case

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FYI: This week, the DC Circuit Court of Appeals issued its opinion in the Robare case, originally brought as an SEC administrative proceeding against an investment adviser and two principals, alleging misleading disclosure regarding a revenue sharing arrangement. While the adviser’s disclosure about the revenue sharing arrangement evolved over time, this case in part raised a question the SEC has now raised in a number of cases, that is, whether disclosure is misleading if it states an arrangement “may” result in certain payments to an adviser when in fact the arrangement is already in place and has already resulted in […]