Advisers

FYI: It’s Soup! SEC Proposes “Fiduciary” Rule (or Not)

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FYI: Late today, the SEC voted (4 to 1, with Commissioner Stein voting ‘no’) to propose new rules and requirements that would apply to investment advisers and broker-dealers when serving retail investors. This proposal comes after nearly two decades of considering this issue, close to 8 years after the Dodd-Frank Act specifically authorized the SEC to adopt a fiduciary rule and some 2 years after the DOL beat the SEC to the punch and adopted its own DOL Fiduciary Rule applicable to retirement advice. (Note that the DOL rule is in limbo now, having been vacated by a U.S. Court […]

Advisers

FYI: SEC National Compliance Outreach for IA/IC

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FYI: Yesterday the SEC held its 2018 Compliance Outreach Program National Seminar for investment advisers and investment company senior officers. Among the many interesting points discussed by program panelists were the following, which I had not heard before (or at least not in this way): • Adviser Advertising. In the near or mid-term, the SEC staff is “looking at” a number of items, including the adviser advertising rule (Rule 206(4)-1) (in particular the “anti-testimonial” provision) and the “cash solicitation” rule (Rule 206(4)-3). Of course, this does not mean that changes will be made regarding these rules. These items are reportedly […]

Advisers

FYI: Adviser Fee Risk Alert

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FYI: The SEC’s OCIE has issued a Risk Alert addressing the most frequent advisory fee and expense compliance issues identified in examinations of advisers, specifically highlighting the following problems: • Incorrect valuations basing fee calculations, such as using a different valuation method or process than disclosed or required by agreement. • Billing in advance or with improper frequency, inconsistent with disclosures or agreements. • Applying incorrect fee rate, including wrong rate, double-billing or charging a performance fee in improper situations. • Omitting rebates and applying discounts incorrectly, such as not aggregating accounts when required for discount purposes, not reducing the […]

Advisers

FYI: Here We Go Again – SEC Fiduciary Rule?

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FYI: The SEC has scheduled an open meeting for Wednesday, April 18, 2018, to consider the following: • whether to propose new and amended rules and forms to require registered investment advisers and registered broker-dealers to provide a brief relationship summary to retail investors. • whether to propose a rule to establish a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. • whether to propose a Commission interpretation of the standard of conduct for investment advisers. […]

Advisers

FYI: 3 New Share Class Selection Cases, 1 Including ADV Item 2 “Material Change” Violation

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FYI: The SEC has brought and settled 3 more cases against investment advisers for fiduciary, disclosure and compliance violations resulting from their mutual fund share class selection practices. Although the circumstances varied somewhat among the cases, the adviser in all 3 was charged for having invested clients in various fund share classes that paid the adviser or its affiliates 12b-1 fees when lower-cost classes were available, and for having failed to provide adequate disclosure about the conflicts of interest arising from those payments. These are the first share class enforcement cases made public since February 2018, when the SEC’s Enforcement […]

Advisers

FYI: Current Issues in the Division of Investment Management

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FYI: In a recent speech, Dalia Blass, the Director of the SEC’s Division of Investment Management, spoke about a number of items of import to funds, including: • The Analytics Office in the Division has developed an internal tool called MAGIC (Monitoring and Analytics GUI for Investment Companies), which allows the Staff to pull together a number of data sets from registrants and other sources — such as performance, flow, holdings and other information – and look at it holistically to analyze questions such as how does a fund’s portfolio compare to its strategy and whether its holdings are aligned […]

Advisers

FYI: SEC Proposes Modifications to the Liquidity Rule Requirements for Funds

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FYI: Today the SEC voted to propose modifications to the liquidity classification and related disclosure elements of Rule 22e-4, the rule that requires investment companies to adopt, implement and disclose liquidity risk management programs. The proposal today comes on the heels of the Interim Final Rule adopted by the SEC on February 21, 2018 (discussed in my last blog post), in which the deadline for compliance with the liquidity classification and classification-related elements of the liquidity rule was extended by 6 months. That 6-month delay will give the Commission time to seek comment on today’s proposal and to take any […]

Advisers

FYI: Fund Liquidity Program Classification Requirement Delayed

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FYI: A Press Release was circulated late today announcing that the SEC had voted to extend by 6 months the deadline by which open-end funds must comply with certain elements of the Commission’s liquidity risk management (LRM) program rule, specifically the classification and classification-related elements of the rule. The LRM program rule was adopted in October 2016 and compliance implementation was originally required on a phased in basis in 2018 and 2019. According to the Press Release, today’s Commission vote means that the compliance date for implementation of the classification and classification-related elements of the LRM program rule is now June […]

Advisers

FYI: Massachusetts Brings Administrative Action Over DOL Rule Violations

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FYI: Today brought another interesting example of states trying to enforce fiduciary standards against financial advisers before federal regulators finalize their own fiduciary rules. The Commonwealth of Massachusetts filed an Administrative Complaint against Scottrade, Inc., for conduct that allegedly violated the DOL’s Fiduciary Rule. The complaint seeks various remedies, including disgorgement and fines, among others. The Commonwealth’s argument seems to go something like this, based on allegations in the complaint: –Scottrade is a “fiduciary” under the DOL Fiduciary Rule, subject to the “impartial conduct standards” portion of the rule that went into effect in June 2017. (Other portions of the […]

Advisers

FYI: Compliance Outreach National Seminar for IC/IA to be Held April 12, 2018

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FYI: The next Compliance Outreach National Seminar for investment companies and investment advisers will be held on Thursday, April 12, 2018, at the SEC’s headquarters building in Washington DC, jointly sponsored by Office of Compliance Inspections and Examinations (OCIE), Division of Investment Management (IM) and the Asset Management Unit (AMU) of the Division of Enforcement. National seminars are normally held every other year, and this will be the first national seminar since April 2016. The agenda for this year’s seminar will include a discussion of OCIE, IM and AMU program priorities in 2018, issues related to fees and expenses, portfolio […]