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: More Share Class Selection Violations Charged

Posted on

FYI: Two more advisers settled charges with the SEC over investing client assets in mutual fund share classes that paid 12b-1 fees to the firms’ IARs, when less expensive classes were available. According to the SEC orders, one adviser incorrectly disclosed to clients that its IARs either did not receive 12b-1 fees or only selected the more expensive share classes when less expensive share classes of the same fund were unavailable. The other adviser incorrectly stated that it selected higher-cost share classes for the “long-term benefit” of clients and only where less expensive share classes of the same fund were […]

Advisers

FYI: OCIE Issues 2019 Exam Priorities

Posted on

FYI: OCIE issued its 2019 exam priorities report, listing the following areas of focus for examinations in 2019: 1. Retail investors, including seniors and those saving for retirement: –fees and expenses: disclosure of the costs of investing –conflicts of interest –senior investors and retirement accounts and products –portfolio management and trading –never-before or not recently-examined investment advisers –mutual funds and exchange traded funds –municipal advisors –broker-dealers entrusted with customer assets –microcap securities 2. Compliance and risk in registrants responsible for critical market infrastructure: –clearing agencies –entities subject to regulation systems compliance and integrity –transfer agents –national securities exchanges 3. Oversight […]

Funds

FYI: SEC Proposes “Fund of Funds” Rule

Posted on

FYI: The SEC has proposed new Investment Company Act Rule 12d1-4 intended to streamline and enhance the regulatory framework for funds that invest in other funds. In short, the rule would allow registered funds to invest in other registered funds in excess of the statutory limits set out in the Investment Company Act, subject to conditions along the lines of those imposed on existing funds of funds operating under exemptive orders. The conditions are aimed at avoiding problematic voting/control, large-scale redemptions, excessive fees and overly complex structures. Simultaneously, the SEC is proposing to rescind Rule 12d1-2 and most previously issued […]

Funds

FYI: FAQs Issued Addressing New Fund Reporting Requirements

Posted on

FYI: The Division of Investment Management has posted 40 FAQs in response to questions about the new fund reporting requirements, such as Form N-PORT, Form N-CEN, liquidity program reporting, derivatives reporting, securities lending disclosures and Reg S-X financial statement changes. Every fund would be wise to review the FAQs now and as updated in the future, for guidance pertinent to their filing situation given that these changes can be complex, technical and potentially confusing, especially as to the compliance dates and filing deadlines, which in some cases have already phased in and in other cases have been delayed by amendment. […]

Advisers

FYI: OCIE Risk-Based Exam Initiatives for Investment Companies

Posted on

FYI: OCIE has issued a Risk Alert announcing a series of exam initiatives focused on certain mutual funds and ETFs, their advisers and their boards, targeting circumstances in which retail investors could be disadvantaged and reviewing whether registrants have met their regulatory and other legal obligations. Funds in one or more of the following categories will be the focus of the initiatives: — Index funds that track custom-built indexes; — Smaller ETFs and/or ETFs with little secondary market trading volume; — Mutual funds with higher allocations to certain securitized assets (e.g., securitized auto loans, student loans, credit card receivables or […]

Advisers

FYI: SEC Enforcement Annual Report for FY18

Posted on

FYI: Enforcement’s 2018 Annual Report (for FY ending September 30, 2018) reflects the Division’s current guiding principles: Principle 1: Focus on the Main Street Investor (rolling out, for example, the Share Class Selection Disclosure Initiative, under which the report indicates “scores” of IAs participated, which “will result in charges against them”). Principle 2: Focus on Individual Accountability (for example, continuing to bring cases against CEOs and CFOs, as well as accountants, auditors and other gatekeepers). Principle 3: Keep Pace with Technological Change (for example, enforcing against fraudulent ICOs and blockchain offerings, as well as continuing to use proprietary data analytics […]

Advisers

FYI: Themes Currently Guiding SEC Division of Investment Management

Posted on

FYI: In a speech to the ICI this week, the Director of the SEC’s Division of Investment Management outlined themes that are currently guiding the work of the Division, among them: — Improving the investor experience. This includes not only the on-going effort to improve the quality and usefulness of disclosure, but also how to facilitate modernizing the content, design and delivery of information provided to investors. — Modernizing key areas of the fund regulatory framework. One area specifically mentioned was the regulation of funds using derivatives. From the Director’s remarks, it is clear that the dialog about how to […]

Advisers

FYI: No-Action Letter Allows Fund Boards to Rely on CCO Certifications

Posted on

FYI: The SEC’s Division of Investment Management has issued a no-action letter indicating that fund Boards can rely on quarterly written CCO certifications that transactions entered into in reliance on certain Exemptive Rules were effected in compliance with fund procedures, instead of the Boards having to make that determination themselves. According to the no-action letter, this is consistent with the Commission’s approach in adopting Rule 38a-1 and allows Boards to avoid duplicating certain functions commonly performed by or under the supervision of the CCO. Although this does not change the Board’s oversight role with respect to a fund’s overall compliance […]

Advisers

FYI: Info on SCSD Initiative

Posted on

FYI: So far, we don’t know much about the outcome of the SEC’s Share Class Selection Disclosure (SCSD) Initiative, which allowed advisers to voluntarily self-report if they failed to make required disclosures relating to the selection of mutual fund share classes that paid the adviser or its affiliates 12b-1 fees when a lower-cost share class for the same fund was available to the adviser’s clients. For example, we don’t know how many firms self-reported by the June 12, 2018 deadline, or how many funds, clients or fees were involved in self-reported cases. However, in a speech this week, Co-Director of […]