Advisers

FYI: SEC Personnel Changes

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FYI: Dalia Blass has been named Director of the SEC’s Division of Investment Management. Although she is returning to the SEC from the private sector, she has more than a decade of prior experience in the Division of Investment Management, include serving as Assistant Chief Counsel. Blass announcement: https://www.sec.gov/news/press-release/2017-153 Nominations have also been made to fill the open seats on the Commission. Former congressional aide Hester Peirce has been nominated to fill the open Republican seat. Columbia University law professor Robert Jackson has been nominated to fill the open Democratic seat. If these nominees are confirmed by the Senate, the […]

Advisers

FYI: Information Update on Form ADV

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FYI: The SEC Division of Investment Management issued an IM Information Update addressing glitches that could occur with the significant ADV form amendments coming into effect on October 1, 2017. You may recall that, as a result of amendments adopted last year, extensive new information is required to be reported on Form ADV by all advisers filing ADV amendments on or after the compliance date of October 1. This new information includes, for example, information about an adviser’s separately managed accounts and related information correlated to the end of the adviser’s last fiscal year. However, if an adviser determines that […]

Advisers

FYI: OCIE Publishes Observations from More Cybersecurity Exams

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FYI: OCIE has published a Risk Alert summarizing observations from its second cybersecurity initiative, which looked at cybersecurity preparedness at 75 more SEC-registered broker-dealers and investment advisers/funds. This second initiative built on OCIE’s first cybersecurity initiative conducted in 2014-2015, but included more validation and testing of firm controls and procedures. In general, OCIE observed an increase in cybersecurity preparedness since 2014, although continued weaknesses were cited in various areas, including: • policies and procedures not being reasonably tailored to the firm; • policies and procedures not being enforced or not reflecting actual practice; • software security patches not being installed; […]

Advisers

FYI: Unregistered Adviser Integrated with Registered Adviser

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FYI: The SEC settled an administrative proceeding against an unregistered adviser to private funds that was found ineligible to rely on the exempt reporting adviser exemption because it and its affiliated SEC-registered investment adviser (an adviser to individuals) were under common control and operationally integrated. The SEC’s settlement order cited various factors for finding the two advisers integrated: they were both owned by the same owner, shared the same employees, operated in the same office, shared the same technology systems and failed to maintain policies and procedures addressing registration or exemption from registration as an investment adviser. Violations alleged included, […]

Funds

FYI: FAQs on Upcoming Fund Reporting Changes

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FYI: The SEC Division of Investment Management has issued FAQs on the upcoming changes imposed by the investment company reporting modernization reforms adopted in October 2016. These FAQs will join the list of “must-read” items for funds subject to the new reporting requirements, which impact key areas such as portfolio reporting (will now be monthly on Form N-PORT), annual reporting (on new Form N-CEN), financial statement reporting (amendments to Reg. S-X, including derivatives reporting) and securities lending disclosures (on registration Form N-1A and shareholder report Form N-CSR). Note that the compliance date for some of these changes (such as Reg. […]

Advisers

FYI: New SEC Guiding Principles

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FYI: In a speech last week, new SEC Chairman Jay Clayton outlined the principles that will guide his administration. They include: Principle #1: The SEC’s mission is our touchstone. Principle #2: Our analysis starts and ends with the long-term interests of the Main Street investor. Principle #3: The SEC’s historic approach to regulation is sound. Principle #4: Regulatory actions drive change, and change can have lasting effects. Principle #5: As markets evolve, so must the SEC. Principle #6: Effective rulemaking does not end with rule adoption. Principle #7: The costs of a rule now often include the cost of demonstrating […]

Advisers

FYI: Fund Sub-Adviser Retained Without Shareholder Vote

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FYI: Under a no-action letter issued this week, a fund will be allowed to retain an interim sub-adviser during an additional 60 days when, despite diligent efforts, the fund was unable to garner the requisite shareholder proxies to approve the sub-adviser during the 150-day period allowed under Investment Company Act Rule 15a-4. During the additional 60-day period, the adviser will be required to bear all proxy solicitation expenses and to waive a portion of its advisory fee equal to the fee payable to the sub-adviser under the interim sub-advisory agreement. No-action letter: https://www.sec.gov/divisions/investment/noaction/2017/nuveen-fund-advisors-15a-062017.htm. * * *

Advisers

FYI: Updates to FAQs on Form ADV

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FYI: The Division of Investment Management has posted new or revised FAQs on the following items of Form ADV, many of which relate to ADV amendments being implemented starting October 1, 2017: Form ADV: Item 1.I (several questions relating to reporting social media) Form ADV: Item 1.J (new question relating to outsourced CCOs) Form ADV: Item 1.O (relating to advisers with over $1 billion in balance sheet assets) Form ADV: Item 5.D (relating to reporting categories of clients) Form ADV: Item 5.K (relating to new Item 5.K. reporting separately managed account clients) Form ADV: Item 7.B (relating to Schedule D […]

Advisers

FYI: Standards of Conduct for IAs and BDs

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FYI: SEC Chairman Jay Clayton issued a public statement requesting comment on issues surrounding what standards of conduct should apply to investment advisers and broker-dealers, turning attention once again to the many difficult issues in this arena that have been under review for over a decade. According to the Chairman’s statement, the SEC’s consideration this time will include “constructive engagement” with the Department of Labor as it continues its analysis of similar issues from its own perspective. It is unclear what “constructive engagement” between the SEC and DOL will mean in practice, but the Chairman expressed his belief that clarity […]

Advisers

FYI: Ransomware Risk Alert Issued

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FYI: The SEC’s Office of Compliance Inspections and Examinations (OCIE) has issued a cybersecurity Risk Alert in the wake of the recent ransomware attacks around the globe. The Alert recounts the results of 75 recent examinations of industry firms relative to cybersecurity, noting that a wide range of practices were observed. BDs in general appeared to be more prepared than advisers and funds in each of the areas of cyber risk assessment, penetration testing and system maintenance. Noting that it is not possible to anticipate and prevent all types of cyber events, the Alert emphasizes the importance of appropriate planning, […]