Advisers

FYI: More Advisers Charged with Share Class Selection Disclosure Violations

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FYI: We learned more today about the SEC’s intended handling of advisory firms both inside and outside the ambit of its 2018 Share Class Selection Disclosure Initiative. Today the SEC announced settlements with an additional 16 advisers that self-reported under the Initiative, who together were ordered to pay disgorgement and prejudgment interest totaling nearly $10 million. These 16 advisers were in addition to the 79 self-reporting advisers who settled earlier this year under the Initiative for an aggregate of over $125 million in disgorgement and prejudgment interest. So far, none of the firms that have self-reported have been ordered to […]

Advisers

FYI: States Sue to Invalidate Reg BI

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FYI: Today, eight jurisdictions – NY, CA, CT, DE, DC, ME, NM and OR – filed suit in the US District Court for the Southern District of New York asking the court (among other things) to vacate Regulation Best Interest and enjoin the SEC from implementing or enforcing it. The introductory statement in the plaintiffs’ Complaint summarizes their substantive concerns: “This lawsuit challenges a final regulation [Reg BI] issued by the Securities and Exchange Commission that undermines critical consumer protections for retail investors, increases confusion about the standards of conduct that apply when investors receive recommendations and advice from broker-dealers […]

Advisers

FYI: Significant Disclosure Guidance

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FYI: Three significant items have been posted on the SEC’s website explaining certain disclosure requirements for BDs, IAs and funds: 1) A small entity compliance guide has been posted addressing requirements for BDs and IAs under newly adopted Form CRS. The guide provides a helpful summary highlighting the drafting, filing and updating requirements for the form. While it is a summary intended to assist small firms, the guide provides a helpful, succinct explanation of requirements applicable to all BDs and IAs using Form CRS. Form CRS Relationship Summary and Amendments to Form ADV — A Small Entity Compliance Guide: https://www.sec.gov/info/smallbus/secg/form-crs-relationship-summary. […]

Advisers

FYI: Risk Alert on IA Principal and Agency Cross Trading

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FYI: OCIE issued a Risk Alert today identifying the most frequent compliance issues found in investment adviser examinations relating to principal and agency cross trading. The Risk Alert strikes a familiar theme by listing deficiencies in almost every key area of Advisers Act Section 206(3) (which governs IA principal and cross trading) and related Rule 206(3)-2 (which IAs can choose to follow when executing certain agency cross trades), such as: • failing to recognize transactions as principal transactions; • failing to make the required disclosures; • failing to obtain required client consents (or failing to obtain them in a timely […]