Advisers

FYI: Appellate Court Decides Robare Disclosure Case

Posted on

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 […]

Advisers

FYI: Risk Alert on Privacy Practices for IAs and BDs; Also, BD Outreach Announced

Posted on

FYI: OCIE issued a Risk Alert listing examples of the most common deficiencies or weaknesses identified in IA and BD examinations under the Reg. S-P privacy rules, more specifically the privacy notice requirements and the Safeguards Rule, which requires registrants to adopt written policies and procedures that address administrative, technical and physical safeguards for the protection of customer records and information. As has become an increasingly common feature of OCIE Risk Alerts, the deficiencies listed in the Alert cover almost every aspect of the relevant rule requirements. For example, firms were found: • not providing required privacy and opt-out notices, […]

Funds

FYI: New Rule 485(a) Automatic Effectiveness Practices

Posted on

FYI: The Division of Investment Management’s Office of Disclosure Review and Accounting is urging funds filing registration statements under the automatic effectiveness rules (Rule 485(a)) to follow certain new practices when making filings that raise complex issues or issues of first impression not easily resolved because of a lack of precedent, such as novel investment strategies, fee structures and/or operational policies (for example, significant changes to policies related to purchases and redemptions by investors). Although most filings that seek automatic effectiveness under Rule 485(a) do not raise these types of unique or novel issues, the staff is urging registrants with […]

Advisers

FYI: SEC Seeks IA Custody Information

Posted on

FYI: The SEC’s Division of Investment Management is requesting information on industry practices in certain areas to help it consider whether and how further amendments to the Advisers Act Custody Rule should be made. This request is further evidence that the SEC is still struggling to understand all the nuances of the Custody Rule and its application in a variety of IA operations. The request sets out a series of questions seeking information about custody and related practices in two areas of particular concern: 1) Non-DVP Assets. Non-DVP assets are securities or other assets that do not settle on a […]

Advisers

FYI: 79 Settlements Announced under SCSD Initiative

Posted on

FYI: Today, the SEC issued settled enforcement orders against 79 IAs that collectively will return $125 million to investors under the Division of Enforcement’s 2018 Share Class Selection Disclosure Initiative. The initiative aimed to incentivize IAs to self-report violations resulting from undisclosed conflicts of interest in the selection or recommendation of mutual fund share classes that paid the IAs, their BD affiliates and/or their reps a 12b-1 fee, when less expensive share classes were available. According to the SEC’s announcement, participation in the initiative allowed IAs to avoid financial penalties if they timely self-reported undisclosed conflicts of interest, agreed to […]

Funds

FYI: In-Person Fund Board Vote No-Action Relief

Posted on

FYI: The SEC’s Division of Investment Management has issued a no-action letter to the Independent Directors Council (IDC), indicating that fund Board voting will no longer be required to be in-person in certain circumstances where current law would otherwise require that it be so. This appears to be one step in the effort to modernize and improve the regulations governing funds and their Boards in order to better allow Boards to dedicate their time and attention to areas where director oversight is most valuable. Currently, in-person Board voting is generally required when the Board votes to approve or renew certain […]

Advisers

FYI: Last-Minute Changes to N-PORT Filing Schedule

Posted on

FYI: Yesterday the SEC adopted an Interim Final Rule changing the filing schedule for Form N-PORT, the new Investment Company Act form on which registered funds will report their portfolio holdings in a structured data format. Under Rule 30b1-9 as now amended, funds will be required to file Form N-PORT for each month in a fiscal quarter not later than 60 days after the end of that fiscal quarter. Under the rule as originally adopted in 2016 and scheduled to be phased in this year, funds would have been required to file each monthly report no later than 30 days […]

Advisers

FYI: Financial Services Industry Cyber Survey Results

Posted on

FYI: Results of the 2018 NSCP/ACA Aponix Cyber Survey have been released, showing practices, trends and experiences from over 200 responding firms regarding cybersecurity compliance. Among the areas surveyed were cybersecurity governance, vendor management, technical controls, budgets and breach response. These types of surveys are a great way to get ideas about what firms of all types and sizes are doing to address compliance challenges and to benchmark against others in the industry. Particularly interesting highlights from this survey included: –Regulatory cyber exams have increased among respondents since last year….the SEC by 21%, FINRA by 30% and the NFA by […]

Advisers

FYI: FINRA Launches 529 Plan Share Class Initiative

Posted on

FYI: Perhaps taking a page from the SEC’s playbook, FINRA has launched its first-ever self-reporting initiative for member BDs. Under the initiative, BDs are encouraged to review their supervisory systems and procedures governing 529 plan share-class recommendations and self-report to FINRA any supervisory violations found, along with a plan to remediate harmed customers. In response, according to FINRA’s news release, FINRA’s Department of Enforcement will recommend that FINRA accept a settlement that includes restitution for the impact on affected customers and a censure, but no fine. Although FINRA’s initiative is only aimed at share class recommendations made for customers’ 529 […]

Advisers

FYI: FINRA Issues 2019 Examinations Priorities

Posted on

FYI: FINRA has issued its 2019 Annual Risk Monitoring and Examination Priorities Letter, outlining areas of emphasis for FINRA’s risk monitoring and examination program for broker-dealers in the coming year. Among the most interesting areas identified were: NEW AREAS OF FOCUS • Online distribution platforms (especially firms/platforms involved in the online distribution of privately placed securities). • Regulatory technology (aiming to understand how firms are using RegTech tools to address risks, challenges or regulatory concerns in areas such as supervision and governance, third-party vendor management, safeguarding customer data and cybersecurity). • Senior investors (specifically looking at heightened supervision imposed by […]