Advisers

FYI: DOL Proposes to Delay Fiduciary Rule

Posted on

FYI: Today, the DOL issued a “proposed rule” to extend for 60 days – from April 10, 2017, to June 9, 2017 – the applicability date of its rule defining who is a “fiduciary” under ERISA and related Tax Code provisions, as well as the applicability date of related prohibited transaction exemptions including the Best Interest Contract Exemption. Comments will be accepted for 15 days on the proposed extension and for 45 days on other issues related to the rule that are referenced in the proposal. DOL Proposal: https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-04096.pdf *  *  *

Advisers

FYI: Hyperlink Rules Adopted / In-Line XBRL Rules Proposed

Posted on

FYI: At its meeting today, the SEC took two significant actions: — Amendments were ADOPTED requiring registration statements or reports subject to the exhibit requirements under Item 601 of Regulation S-K to include a hyperlink to each exhibit listed in the exhibit index of these filings. This will impact registration statements filed by registered investment companies (among others). The new rules will require that “active” hyperlinks be provided in exhibit lists, instead of the current practice of providing “dead” cross-references to exhibits incorporated by reference from prior filings. Hyperlinking is aimed at eliminating the time-consuming and often frustrating search required […]

Advisers

FYI: More SEC Guidance on Robo-Advisers

Posted on

FYI: Today, the SEC Division of Investment Management issued an IM Guidance Update addressing the “unique” challenges and opportunities presented by the robo-adviser business model that often provides clients with online advisory services based on algorithmic programs and includes limited, or no, interaction with a human adviser. Three key areas were addressed in the Update, which are important not only for robo-advisers but other advisers as well, given their common fiduciary and disclosure obligations: Disclosures 1) Robos should ensure that their disclosures are sufficient and effective to explain the robo’s business practices and risks, including disclosures in 10 areas specifically […]

Advisers

FYI: New SEC Guidance on Custody Rule

Posted on

FYI: Yesterday, the SEC Division of Investment Management provided new guidance on the Advisers Act custody rule addressing when a client’s written instructions to a custodian authorizing the adviser to transfer funds or securities out of the client’s account constitutes “custody” under the rule. This latest guidance appears in three forms: 1) A no-action letter issued to the Investment Adviser Association, which addresses the common arrangement known as an SLOA (standing letter of authorization) and similar arrangements that grant the adviser limited power to disburse funds to third parties designated by the client. After signing an SLOA, clients typically instruct […]

Advisers

FYI: FAQs on Mutual Fund Fee Structures

Posted on

FYI: On February 15, 2017, the SEC Division of Investment Management posted FAQs further clarifying the December 2016 IM Guidance Update on mutual fund fee structures and the January 2017 Capital Group interpretative letter paving the way for so-called “Clean Shares.” In general, the FAQs rationalize and streamline the N-1A and Rule 497 filing procedures funds may use in order to implement new fee structures under this guidance. These FAQs appear to be yet another step facilitating the evolution of mutual fund fee structures prompted initially by the DOL fiduciary rule and now viewed as beneficial to addressing other significant […]

Advisers

FYI: Adviser Enforcement – Misleading Performance and Gifts Violations

Posted on

FYI: The SEC has settled an enforcement action against an investment adviser arising largely out of two areas: misleading performance and gifts/Code of Ethics violations. The performance issues arose out of performance materials the adviser disseminated containing a chart that purported to show the “value added” by the adviser’s investment manager recommendations. The chart was found misleading because the performance figures used did not in fact represent the performance of the adviser’s historical investment manager recommendations, and instead were both hypothetical and backtested. According to the SEC order, the figures were not based on the historical performance of the holdings […]

Advisers

FYI: OCIE Issues Top-5 Compliance Topics List for IAs

Posted on

FYI: On February 7, 2017, OCIE issued a Risk Alert listing the five most frequent compliance topics identified in OCIE examinations of investment advisers. The list included noncompliance with the following: • Compliance Rule • Regulatory Filings Rules • Custody Rule • Code of Ethics Rule • Books and Records Rule The list was compiled on the basis of deficiencies found in more than 1,000 IA examinations over the last two years. Instead of providing fresh insights or examples of deficiencies under these topic areas, the Risk Alert largely cites back to prior Risk Alerts addressing deficiencies, or to the […]

Advisers

FYI: Adviser and Fund Reporting Guide Issued

Posted on

FYI: The Financial Services Group of Dechert, a major law firm, has issued an alert for investment advisers and funds regarding various US reporting obligations entitled “Reminder: Certain U.S. Reporting and Compliance Obligations for Investment Advisers and Funds” (January 2017). This is a useful guide as to what types of reporting requirements apply to advisers and funds, along with pertinent information such as reporting deadlines. The alert can be found on Dechert’s website under the Publications section. *  *  *  

Advisers

FYI: Enforcement for Overbilling / Custody

Posted on

FYI: The SEC has brought and settled an enforcement proceeding against Morgan Stanley Smith Barney (MSSB) for violations in 3 areas: (1) overbilling advisory clients, (2) custody rule violations for failing to have a surprise exam done on certain accounts over which it had custody, and (3) books and records violations. According to the SEC’s order, the overbilling violations occurred primarily due to coding and other errors in its billing systems and processes. The custody rule violations appear to have occurred largely from failures in recordkeeping and communications with outside accountants relating to legacy accounts that were brought over from […]

Advisers

FYI: OCIE’s 2017 Examination Priorities

Posted on

FYI: On January 17, 2017, OCIE announced its 2017 examination priorities. Among the noteworthy areas listed were: Retail Investors: • Robo-advice. • Wrap fee programs. • ETFs. • Never-before examined advisers. • Recidivist reps and their employers. • Multi-branch advisers. • Share class selection. Seniors: • ReTIRE Initiative. • Public pension advisers. • Senior investors, including efforts to identify senior financial exploitation. Market-wide Risks: • Money market funds. • Cybersecurity, including compliance procedures and controls, and testing. • AML. Other: • Muni advisors. • Transfer agents. • Private fund advisers, especially conflicts. The announcement also states that the SEC has […]