Advisers

FYI: Investment Company LRM (Liquidity Risk Management) FAQs Issued

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FYI: The SEC Division of Investment Management has issued FAQs addressing issues under the investment company LRM (Liquidity Risk Management) program rules that require funds to classify their holdings by liquidity and report their position-level liquidity classifications on Form N-PORT. Even though prior SEC action delayed the Form N-PORT reporting date for larger funds (see my FYI post dated December 8, 2017), those funds are still required to adopt liquidity programs and maintain in their records the information that is required to be included in Form N-PORT beginning no later than July 30, 2018. As such, the FAQs will be […]

Advisers

FYI: Senate Confirms SEC Commissioners

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FYI: On Thursday, the US Senate confirmed the nominations of Hester Peirce (Republican) and Robert J. Jackson, Jr. (Democrat) to be SEC commissioners, which brings the SEC to its full complement of five commissioners for the first time since 2015. The new commissioners will join Chairman Jay Clayton (Republican) and Commissioners Kara Stein (Democrat) and Michael Piwowar (Republican) who are already serving on the Commission. SEC Public Statement: https://www.sec.gov/news/public-statement/statement-clayton-piwowar-stein-122217-2. * * *

Advisers

FYI: Email Supervision Failures

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FYI: FINRA fined Raymond James Financial Services, Inc. (RJFS), $2 million for failing to maintain reasonably designed supervisory systems and procedures for reviewing emails. In addition to the fine, RJFS has agreed to conduct a risk-based retrospective review to detect potential violations evidenced in past emails. In this settled action, FINRA’s findings included: During the relevant 9-year review period, RJFS’s email review system was flawed in significant respects, allowing millions of emails to evade meaningful review and creating the unreasonable risk that certain misconduct by firm personnel could go undetected by the firm. The “lexicon” words and phrases used to […]

Advisers

FYI: Current IM Initiatives

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FYI: The new Director of the SEC’s Division of Investment Management, Dalia Blass, spoke at a conference recently outlining two initiatives currently underway in the Division: 1) Investor experience – This initiative entails taking a fresh look at the investor experience, including what and how disclosure is made to investors, considering technological advances and investor preferences. 2) Board outreach – This initiative is aimed at reviewing and reevaluating what fund boards are asked to do, with the aim of allowing them to focus on areas where their judgment and experience uniquely equip them to provide oversight. In connection with these […]

Advisers

FYI: SEC Delays Fund N-PORT Reporting Requirements

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FYI: The SEC took action today to essentially delay for 9 months the pending requirement for investment companies to file new Form N-PORT. Among other things, this delay will give the Commission more time to uplift the functionality and security protocols surrounding the EDGAR system in order to better protect the sensitive, non-public information called for in Form N-PORT. Under SEC rules as originally adopted in 2016, larger funds would have been required to submit reports on Form N-PORT no later than July 30, 2018. However, under the temporary final rule adopted today, larger funds will instead be required to […]

Brokers

FYI: FINRA Report on Exam Findings

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FYI: FINRA has issued a report summarizing findings from recent broker-dealer examinations, focused on the following areas because of their potential impact or the frequency with which they occur: –cybersecurity –outside business activities (OBAs) and private securities transactions –product suitability –best execution –market access controls –alternative investments in IRAs –net capital and credit risk assessments –order capacity (agency, principal, riskless principal, etc.) –Reg. SHO (short selling), and –TRACE reporting of fixed income securities. Deficiencies observed in these areas typically resulted when: Firms or their personnel did not adequately understand the rules governing these areas or their responsibilities under those rules; […]

Advisers

FYI: SEC Enforcement Report and Priorities

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FYI: Yesterday, the SEC’s Division of Enforcement issued a report summarizing its activity during FY 2017 (ended September 30, 2017) and the Division’s current priorities. Data show that SEC enforcement actions in 2017 were somewhat down from the number of enforcement actions brought in 2016. Total penalties ordered were also down. In 2017, cases against advisers/funds constituted about 18% of the total cases brought; cases against broker-dealers about 12%. According to the report, decision making in the Division is currently guided by 5 core principles: 1.  Focus on the Main Street investor.  This does not mean a shift away from policing […]

Advisers

FYI: New Direction of the SEC

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FYI: Three recent events indicate that the SEC is embarking in a new direction: 1) SEC Commissioner Michael Piwowar gave a speech recently indicating that the SEC is “charting a new course” so different from the past few years that he called it “SEC 180.” Passed are the days of the “Dodd-Frank Death March” (quoting him), the 78 months following the enactment of the Dodd-Frank Act during which the SEC’s policy agenda was dominated by the regulatory mandates in the Act, to the exclusion of other important policy initiatives. Also over, according to the Commissioner, is the so-called “broken windows” […]

Advisers

FYI: 28(e) Soft Dollar Relief

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FYI: In addition to the no-action letters issued by the SEC’s Division of Investment Management aimed at facilitating MiFID II reforms coming into effect in the EU in early 2018 (mentioned in my FYI post from yesterday), the SEC’s Division of Trading and Markets has also issued a no-action letter with a similar aim. In a letter issued to SIFMA’s Asset Management Group, the Division said in substance that a money manager may pay for research through the use of a MiFID II RPA (research payment account) in reliance on the Section 28(e) safe harbor, so long as all the […]

Advisers

FYI: No-Action Relief Regarding Research Payments

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FYI: The SEC Division of Investment Management has issued two no-action letters providing relief in light of certain MiFID II regulatory reforms coming into effect in the EU on January 3, 2018, impacting financial firms that are – or that have affiliates that are — subject to EU and US regulation. The first letter was issued to SIFMA and assures broker-dealers that they can continue to rely on the Section 202(a)(11)(C) exclusion from the definition of “investment adviser” in the Advisers Act (for services performed solely incidental to a broker-dealer business so long as no “special compensation” is received), even […]