Advisers

FYI: Mutual Fund Waiver Initiative Results Announced by FINRA

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FYI: FINRA announced (press release: http://www.finra.org/newsroom/2019/finra-announces-final-results-mutual-fund-waiver-initiative) that it has settled with 56 broker-dealer firms in its Mutual Fund Waiver Initiative, obtaining a total of $89 million in restitution for nearly 110,000 charitable and retirement accounts. The Mutual Fund Waiver Initiative was a multi-year initiative started in 2015 with settlements with firms that self-reported failures to consider applicable mutual fund share class sales charge waivers for charitable and retirement plan accounts. This was followed by additional self-reported failures, which led FINRA to launch a sweep exam looking at this area. In the end, FINRA sanctioned 56 firms for failing to waive […]

Funds

FYI: FAQs Posted for Funds Reporting on New Forms N-PORT, N-CEN

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FYI: The Division of Investment Management has posted updated FAQs with guidance on investment company reports required under the Investment Company Reporting Modernization Rules adopted in October 2016 and revised in December 2017 and January 2019. The FAQs address questions in the following categories: • Compliance Dates and General Filing Obligations • Form N-PORT • Regulation S-X • Form N-CEN. Not surprisingly, the FAQs reveal that funds may be running into unanticipated technical and interpretive issues in preparing their reports stemming from, for example, delays of the compliance dates, differences in methodologies (such as in valuation), funds/classes that have terminated, […]

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 […]