Advisers

FYI: Risk Alert Issued Addressing Supervision Initiative

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FYI: OCIE has issued a Risk Alert addressing the results of its Supervision Initiative, which in 2017 assessed the oversight practices of more than 50 SEC-registered IAs that previously employed, or currently employ, individuals with a history of disciplinary events. The Initiative focused on advisers’ compliance programs and supervisory oversight, disclosures and conflicts of interest on a firm-wide basis, although particular emphasis was placed on previously-disciplined individuals. According to the Risk Alert, nearly all of the examined IAs received deficiency letters, the vast majority of which related to compliance issues, but many related to disclosure issues, including undisclosed conflicts of […]

Advisers

FYI: Adviser Breached Fiduciary Duty to Client with Senile Dementia

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FYI: The SEC has brought a settled enforcement action against three respondents — an adviser, its principal and its founder — for breach of fiduciary duty to a client with senile dementia. According to the SEC’s order, the respondents recommended to their client that she change her trust agreement in a manner that would benefit the respondents. Recommending this change was viewed as entailing a financial conflict of interest for the respondents, yet the respondents sought to obtain the client’s consent to the amendment when they knew or should have known that she could not provide truly informed consent because […]

Advisers

FYI: Mutual Fund Waiver Initiative Results Announced by FINRA

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FYI: FINRA announced (press release: http://www.finra.org/newsroom/2019/finra-announces-final-results-mutual-fund-waiver-initiative) that it has settled with 56 broker-dealer firms in its Mutual Fund Waiver Initiative, obtaining a total of $89 million in restitution for nearly 110,000 charitable and retirement accounts. The Mutual Fund Waiver Initiative was a multi-year initiative started in 2015 with settlements with firms that self-reported failures to consider applicable mutual fund share class sales charge waivers for charitable and retirement plan accounts. This was followed by additional self-reported failures, which led FINRA to launch a sweep exam looking at this area. In the end, FINRA sanctioned 56 firms for failing to waive […]

Funds

FYI: FAQs Posted for Funds Reporting on New Forms N-PORT, N-CEN

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FYI: The Division of Investment Management has posted updated FAQs with guidance on investment company reports required under the Investment Company Reporting Modernization Rules adopted in October 2016 and revised in December 2017 and January 2019. The FAQs address questions in the following categories: • Compliance Dates and General Filing Obligations • Form N-PORT • Regulation S-X • Form N-CEN. Not surprisingly, the FAQs reveal that funds may be running into unanticipated technical and interpretive issues in preparing their reports stemming from, for example, delays of the compliance dates, differences in methodologies (such as in valuation), funds/classes that have terminated, […]