Advisers

FYI: The Senior Safe Act and Immunity

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FYI: The SEC, NASAA and FINRA have jointly issued a Fact Sheet about The Senior Safe Act enacted by Congress last year, to help raise awareness of the Act and to help explain how the Act’s immunity provisions work. In principal part, the Act provides qualified immunity to certain individuals and financial institutions — which could include IAs and BDs — from liability in any civil or administrative proceeding for reporting a case of potential exploitation of a senior citizen to a covered agency. The multiple-agency Fact Sheet and press release can be accessed here: https://www.sec.gov/news/press-release/2019-75. The Senior Safe Act […]

Advisers

FYI: Is the SEC Wearing Its “Reasonableness Pants”?

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FYI: In a recent speech, SEC Commissioner Hester Peirce questioned whether the SEC was wearing its “reasonableness pants”* when it undertook the recent Share Class Selection Disclosure Initiative, which earlier this year resulted in 79 settled enforcement actions against advisers that voluntarily self-reported having selected for clients mutual fund share classes that carried a 12b-1 fee when a lower-cost share class for the same fund was available to the clients, ostensibly without adequate disclosure of the attendant conflicts of interest. While acknowledging that the aggregation of all those cases together helped to preserve precious SEC staff resources, Commissioner Peirce does […]

Advisers

FYI: Resources on Protecting Senior Investors

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FYI: The SEC’s Office of the Investor Advocate has issued a paper entitled “How the SEC Works to Protect Senior Investors,” describing what the SEC is doing to protect senior investors, especially in the areas of investor education, regulatory examinations and enforcement. The paper is well worth a read by anyone interested in compliance relating to seniors, as it summarizes work in the area not only by the SEC, but also by FINRA (for example, FINRA Rule 2165 on Financial Exploitation of Specified Adults) and the states (for example, the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation, […]

Funds

FYI: New Rule 485(a) Automatic Effectiveness Practices

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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 […]

Funds

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

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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

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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

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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

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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

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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

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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 […]