Investment Fund Law Blog

InvestmentFundLawBlog

Updates and Insights on Legal Issues Facing Fund Managers and Investors

Category Archives: Investment Advisers

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Higher Qualified Client Net Worth Threshold Effective August 15, 2016

Posted in Advisory, Hedge Funds, Investment Advisers, Private Funds
3(c)(1) funds should update their offering documents to reflect $2.1 million net worth requirement. Assets under management threshold remains unchanged at $1 million. Only new client relationships entered and new investors admitted in private funds after August 15, 2016 are affected; new contributions by pre-August 15 investors are grandfathered. The Securities and Exchange Commission (the… Continue Reading

Investment Adviser Sanctioned for Inadequate Trading Away Disclosure

Posted in Advisory, Investment Advisers, Private Funds
On July 14, 2016, the Securities and Exchange Commission (SEC) announced an enforcement action against RiverFront Investment Group, LLC, a registered investment adviser serving as sub-adviser to clients in wrap fee programs established by various sponsors. The enforcement action resulted from RiverFront’s materially inadequate disclosure about changes in its trading practices and attendant transaction costs which… Continue Reading

SEC wants Registered Advisers to Adopt Written Business Continuity and Transition Plans

Posted in Advisory, Investment Advisers, Private Equity, Private Funds
In line with the Securities and Exchange Commission’s (SEC) goal to enhance regulatory safeguards in the asset management industry, the SEC yesterday released a proposed new rule and rule amendments under the Investment Advisers Act of 1940. The proposed new rule 206(4)-4 would require SEC-registered investment advisers to adopt and implement written business continuity and… Continue Reading

CFTC Asserts Broader Jurisdiction over Digital Asset Exchanges, Levies $75,000 Fine

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The CFTC’s recent enforcement against Bitfinex’s financed trading activities demonstrates the Commission’s increasing interest in virtual currency and digital assets. The U.S. Commodity Futures Trading Commission (CFTC) is further expanding its oversight of virtual currency exchanges and digital assets in general. On June 2, 2016, Bitfinex (a Hong Kong-based bitcoin and cryptocurrency exchange) settled with… Continue Reading

Four Things You Need to Know About the Mauritius-India Protocol

Posted in Advisory, Investment Advisers, Private Funds
International investors have frequently used Mauritius holding companies for their Indian investments, seeking to take advantage of the exemption under the India-Mauritius income tax treaty (the “Mauritius Treaty”) from Indian capital gains tax generally applicable on the disposition of shares of Indian companies. On May 10, 2016, the Governments of Mauritius and the Republic of… Continue Reading

SEC Issues Guidance Expanding the Private Fund and Venture Capital Fund Adviser Exemptions

Posted in Advisory, Hedge Funds, Investment Advisers, Private Equity, Private Funds
President Obama signed into law the SBIC Advisers Relief Act (as part of the Fixing America’s Surface Transportation Act of 2015—the FAST Act) on December 4, 2015.  (See also our Annual Compliance Alert)  After the enactment of the Dodd-Frank Act, advisers to Small Business Investment Companies (SBICs) were limited in their choice to one of… Continue Reading

Update Your Subscription Documents – FATCA and CRS

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The Cayman Islands Tax Information Authority advised yesterday that it will allow Cayman Islands Financial Institutions to rely on CRS due diligence procedures for new accounts opened on or after 1 January 2016 to identify specified/reportable persons for the purposes of UK FATCA and CRS reporting.  This means that, provided CRS compliant self-certification forms are… Continue Reading

Negotiating Cybersecurity Contractual Protections for Retirement Plans

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The ERISA Advisory Council recently announced that, as part of its goals for 2016, it will be focusing on cybersecurity issues affecting retirement plans and, in particular, the extent to which such issues relate to third-party administrators and vendors (TPAs) of retirement plans. By shining the spotlight on the role of TPAs in combatting cyber-related… Continue Reading

Sun Capital Court Finds that Common Industry Practices Exposed PE Funds to Pension Plan Liabilities

Posted in Advisory, Client Alert, Investment Advisers, Private Equity, Private Funds
A group of related private equity (“PE”) funds were found liable for a bankrupt portfolio company’s pension plan debts in the latest and most worrisome decision in the long-running Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund dispute. The novel decision, if upheld on appeal, will trigger a reevaluation… Continue Reading

Hedge Funds Under Microscope by SEC’s New Office of Risk and Strategy — Never-Before-Examined Hedge Funds Should be on Alert

Posted in Advisory, Hedge Funds, Investment Advisers, Private Funds
Earlier this month, the SEC announced the creation of its Office of Risk and Strategy  to operate within its Office of Compliance Inspections and Examinations (OCIE).  The new office will consolidate and streamline OCIE’s risk assessment, market surveillance, and quantitative analysis teams and provide operational risk management and organizational strategy for OCIE. Headed by Peter… Continue Reading

CA Legislation Would Require Pensions to Disclose Fees and Expenses of Alternative Investments

Posted in Advisory, Hedge Funds, Investment Advisers, Private Equity, Private Funds
In February, California State Treasurer, John Chiang along with State Assemblyman Ken Cooley sponsored Assembly Bill (AB) 2833 which, if enacted, would require private equity firms to disclose fees and expenses for public pensions or retirement systems in California. On March 17, 2016 Assemblyman Cooley submitted an amendment to the legislation that would include the… Continue Reading

Registered Firms: Annual Compliance Obligations—What You Need To Know

Posted in Client Alert, Hedge Funds, Investment Advisers, Private Funds, Registered Investment Companies
At the end of this month, the annual updating amendments for investment advisers’ Form ADV will be due. The following are some of the important annual compliance obligations investment advisers either registered with the Securities and Exchange Commission (the “SEC”) or with a particular state (“Investment Adviser”) and commodity pool operators (“CPOs”) or commodity trading… Continue Reading

SEC Division of Investment Management Director David Grim’s Remarks to PLI Investment Management Institute 2016

Posted in Investment Advisers, Private Funds
In commemorating the 75th anniversary of the Investment Company Act and Investment Advisers Act, David Grim discussed his views about the past, present and future of the investment management industry.  He selected four topics which in his opinion best illustrate the adaptability which the authors gave the 1940 laws governing the asset management industry. Those… Continue Reading

The CCO – the SEC’s Target or Ally in Enforcement and Examinations?

Posted in Advisory, Investment Advisers, Private Funds
(This article was published in the first February 2016 issue of “The Review of Securities and Commodities Regulation” and is reprinted here with permission.) The last half of 2015 has been characterized by a lot of debate and press attention on the role of the Chief Compliance Officer (“CCO”) at investment advisers. It has attracted… Continue Reading

SEC Reveals Wide-Ranging 2016 Examination Priorities

Posted in Advisory, Broker-Dealers, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds, Registered Investment Companies
On January 11, the Office of Compliance Inspections and Examinations (OCIE) of the SEC announced its 2016 Examination Priorities (“Priorities”). To promote compliance, prevent fraud and identify market risk, OCIE examines investment advisers, investment companies, broker-dealers, municipal advisors, transfer agents, clearing agencies, and other regulated entities. In 2016, OCIE will continue to rely on the… Continue Reading

Spoofing Is No Joke: Prosecutors Clamp Down on High-Frequency Traders

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Funds, Registered Investment Companies
On November 3, 2015, an Illinois federal jury convicted Michael Coscia, a high-frequency commodities trader, of six counts of commodities fraud and six counts of spoofing—entering a buy or sell order with the intent to cancel before the order’s execution.1 Coscia’s conviction was the first under the criminal anti-spoofing provisions added to the Commodity Exchange… Continue Reading

CFTC Issued Preliminary Report on Swap Dealer De Minimis Exception

Posted in Broker-Dealers, Investment Advisers, Private Funds
On November 18, 2015, the staff from the U.S. Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealer and Intermediary Oversight issued a swap dealer de minimis exception preliminary report (“Preliminary Report”). The Preliminary Report was issued pursuant to the SEC and CFTC joint regulation defining the term “swap dealer” and providing for a de… Continue Reading

Changes in the IRS Partnership Audit Rules – Action You Need to Take Now

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
Congress has replaced the TEFRA partnership audit rules with a new regime that redistributes the burdens of the audit process between partnerships and partners on the one hand and the IRS on the other, and also eliminates many rights that individual partners might previously have had in the audit process.  Even more troubling, these new rules… Continue Reading

SEC Charges Founder and Bitcoin Mining Companies with Fraud

Posted in Investment Advisers
On December 1, 2015, the Securities and Exchange Commission (SEC) charged GAW Miners, LLC (“GAW Miners”), ZenMiner, LLC (“ZenMiner”) and Homero Joshua Garza (“Garza”) the managing member of both GAW Miners and ZenMiner (together the, “Defendants”) with fraud under (i) Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and (ii) Section 17(a)… Continue Reading

SEC Risk Alert: Outsourced Chief Compliance Officers

Posted in Advisory, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) released a “Risk Alert” on November 9, 2015, the purpose of which is to raise awareness of compliance issues observed in connection with the examination of registered investment advisers and investment companies that outsource their Chief Compliance Officers (“CCO”) to unaffiliated third… Continue Reading

The Dos and Don’ts of an SEC Examination

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The regulatory environment for SEC-registered advisers has become more complex as the result of a more aggressive and interconnected Securities and Exchange Commission (SEC). The connecting hub within the SEC is the Office of Compliance Inspection and Examination (OCIE), which serves as the “eyes and ears” of the SEC. The OCIE often is the first line… Continue Reading

SEC Finally Adopts “Regulation Crowdfunding”

Posted in Broker-Dealers, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The SEC’s final crowdfunding rules, which are largely consistent with the proposed rules, provide broader access to capital for startups and small businesses, though concerns over cumbersome disclosure and regulatory requirements persist. On October 30, 2015, the Securities and Exchange Commission (SEC) voted to adopt final rules implementing Title III of the Jumpstart Our Business… Continue Reading

More Investment Advisers on the Hook for Failure to Disclose Conflicts of Interest

Posted in Investment Advisers, Private Equity, Private Funds
On November 3, 2015, the Securities and Exchange Commission (SEC) announced that Fenway Partners, LLC (Fenway Partners), a private equity fund adviser, agreed to pay more than $10 million to settle charges that it failed to disclose conflicts of interest to a fund client and omitted material facts to investors. SEC Findings Fenway Partner’s current… Continue Reading

Reminder: 2016 IARD Account Renewal Obligations For Investment Advisers

Posted in Client Alert, Investment Advisers
This is a reminder that the 2016 IARD account renewal obligation for investment advisers (including exempt reporting advisers) starts this November. An investment adviser must ensure that its IARD account is adequately funded to cover payment of all applicable registration renewal fees and notice filing fees. Key Dates in the Renewal Process: November 16, 2015… Continue Reading