Investment Fund Law Blog

InvestmentFundLawBlog

Updates and Insights on Legal Issues Facing Fund Managers and Investors

Category Archives: Investment Advisers

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SEC Proposes Rules to Modernize Reporting by Investment Advisers and Investment Companies

Posted in Advisory, Investment Advisers, Private Funds, Registered Investment Companies
The Securities and Exchange Commission (SEC) today proposed rules, forms and amendments to modernize and enhance the reporting and disclosure of information by investment advisers and investment companies. Investment advisers. The investment adviser proposed rules would amend the investment adviser registration and reporting form (Form ADV), and Investment Advisers Act Rule 204-2. On Form ADV,… Continue Reading

Have you filed your BE-10? Deadline is approaching

Posted in Client Alert, Investment Advisers, Private Equity, Private Funds
Mandatory reporting required by the Bureau of Economic Analysis on Form BE-10 – 2014 Benchmark Survey of U.S. Direct Investment Abroad Investment managers, general partners, hedge funds and private equity funds are among those that may have to file What is BE-10? BE-10 is a benchmark survey of U.S. direct investment abroad, conducted once every… Continue Reading

HEDGE FUND TITANS FALL AT HELM OF SEC CHARGES FOR IMPROPER EXPENSE ALLOCATIONS

Posted in Advisory, Investment Advisers, Private Funds
The expense provisions of many private fund governing documents are becoming longer and more detailed for good reason – increased Securities and Exchange Commission (SEC) scrutiny and prosecution relating to expense allocation and disclosure. On April 29th, the SEC announced charges against Alpha Titans LLC, a hedge fund advisory firm, its principal, Timothy P. McCormack… Continue Reading

Cybersecurity Guidance Issued by the SEC’s Division of Investment Management

Posted in Advisory, Investment Advisers, Registered Investment Companies
The Division of Investment Management (the “Division”) of the Securities and Exchange Commission issued a cybersecurity guidance identifying cybersecurity of registered investment companies (“funds”) and registered investment advisers (“advisers”) as an important issue. Recognizing the rapidly changing nature of cyber threats and consequently, the necessity for funds and advisers to protect sensitive information including information… Continue Reading

INVESTMENT ADVISER CONFLICTS OF INTEREST – BlackRock Censured; Compliance Officer Personally Liable

Posted in Advisory, Investment Advisers, Private Funds
On April 20, 2015, the Securities and Exchange Commission (“SEC”) issued an order against an investment advisory firm and its former chief compliance officer, for violating Sections 206(2) and 206(4) and rule 206(4)-7 of the Investment Advisers Act and rule 38a-1 of the Investment Company Act. The SEC charged BlackRock Advisors LLC with breaching its… Continue Reading

Department of Labor Ups Fiduciary Responsibility in ERISA Proposal

Posted in Advisory, Investment Advisers, Private Funds
On April 14, 2015, the Department of Labor issued its much anticipated re-proposal of regulations defining and expanding the persons who are treated as ERISA fiduciaries.  Under the proposal, subject to certain exceptions, all persons who  provide investment advice or recommendations for a fee to an employer-sponsored  retirement plan, plan fiduciary, plan participant, IRA or… Continue Reading

SEC Updates Personal Gift and Entertainment Guidance for Fund Advisory

Posted in Investment Advisers, Registered Investment Companies
In a February 2015 Guidance Update, the Securities and Exchange Commission’s Division of Investment Management (“SEC”), provided guidance on the acceptance of gifts or entertainment by fund advisory personnel under Section 17(e)(1) of the Investment Company Act of 1940 (the “Act”). Section 17(e)(1) provides that any affiliated person of a registered investment company, or any… Continue Reading

Breaking All the Rules – Wealth Management Group Under Cease and Desist Order

Posted in Advisory, Investment Advisers, Registered Investment Companies
The Securities and Exchange Commission (“SEC”) issued a cease-and-desist order on February 19, 2015 against SEC-registered Logical Wealth Management, Inc. and owner, Daniel J. Gopen, (together, “Respondents”).  The list of violations the SEC found the Respondents committed is extensive and includes improper registration, compliance, and recordkeeping. The SEC found the Respondents exaggerated their assets under… Continue Reading

Reminder: Required annual Form ADV amendment by March 31, 2015

Posted in Advisory, Investment Advisers, Private Funds
We want to remind you of your firm’s annual investment adviser registration amendment (Form ADV annual amendment) which must be filed on the IARD system on or before March 31, 2015.  This deadline applies to all SEC and State registered advisers as well as Exempt Reporting Advisers (ERAs) with a December 31, 2014 fiscal year… Continue Reading

2015 Securities and Exchange Commission Examination Priorities

Posted in Broker-Dealers, Investment Advisers
The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) recently released its annual examination priorities.  In 2015, OCIE will focus on three primary “themes” involving broker-dealers, investment advisers and transfer agents: Retail Investors – OCIE will look at important matters for retail investors and investors preparing for retirement including whether the products,… Continue Reading

Reminder – March 2, 2015 – Annual CFTC Exemption Affirmation Deadline

Posted in Broker-Dealers, Investment Advisers
Certain Commodity Futures Trading Commission (CFTC) exemptions require annual affirmation, including CPO exemptions under Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), and 4.13(a)(5) and CTA exemptions under Regulation 4.14(a)(8). If you rely on one of these exemptions, you must affirm the annual claim of exemption by March 2, 2015 using the NFA Exemptions website. http://www.nfa.futures.org/NFA-electronic-filings/exemptions.html… Continue Reading

Cybersecurity Alert – SEC Provides Information on Policy and Safeguards from Cyber Threats

Posted in Advisory, Broker-Dealers, Investment Advisers
On February 3, 2015, the Securities and Exchange Commission (“SEC”) released two publications addressing cybersecurity at advisory and brokerage firms. The first publication, a Risk Alert, relays the findings from the examinations of more than 100 investment advisers and broker-dealers and focuses on how they: (i) establish cybersecurity policies, procedures and oversee the processes; (ii)… Continue Reading

2015 SEC Examination Priorities

Posted in Broker-Dealers, Investment Advisers, Private Equity, Private Funds
The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) recently released its Examination Priorities for 2015.  The priorities represent certain practices and products that OCIE believes present a potentially higher risk to investors and/or the integrity of the US capital markets.  In 2015, OCIE’s priorities focus on issues involving investment advisers, broker-dealers and transfer agents… Continue Reading

2015 Annual Compliance Obligations for Registered Firms – What You Need to Know

Posted in Advisory, Client Alert, Investment Advisers, Private Equity, Private Funds
Annual Compliance Obligations—What You Need To Know As the new year is upon us, there are some 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 Advisors (“CTAs”) registered with the Commodity Futures… Continue Reading

Client Alert: The Second Circuit Raises the Bar for Insider Trading Convictions

Posted in Advisory, Broker-Dealers, China Funds, Investment Advisers, Private Equity, Private Funds, Registered Investment Companies, Uncategorized
By William M. Sullivan, Jr. and Jay B. Gould Under the Second Circuit’s new ruling, prosecutors have two large hurdles they must clear to convict under securities laws. First, they must prove that a defendant knew that the source of inside information disclosed tips in exchange for a personal benefit. Second, the definition of “personal… Continue Reading

CFTC Enters Consent Order for Permanent Injunction Against AlphaMetrix Group

Posted in Investment Advisers, Private Funds, Registered Investment Companies
The U.S. Commodity Futures Trading Commission (CFTC) announced that on December 16, 2014, the U.S. District Court for the Northern District of Illinois entered a Consent Order for permanent injunction against AlphaMetrix, LLC (AlphaMetrix), a Chicago-based Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA), and its parent company AlphaMetrix Group, LLC (AlphaMetrix Group). The… Continue Reading

Servicing Clients Across Borders Carries Special Risks

Posted in Advisory, Broker-Dealers, Investment Advisers, Private Funds
On November 25, 2014, the Securities and Exchange Commission (the “SEC”) brought charges against a Swiss-based bank that should serve as notice to all non-U.S. banks that maintain relationships with clients who have moved to the U.S., as well as U.S.-based banks that provide services to clients who have relocated to other countries.  The SEC… Continue Reading

Reminder: 2015 IARD Account Renewal Obligations For Investment Advisers

Posted in Advisory, Investment Advisers
This is a reminder that the 2015 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 10, 2014… Continue Reading

SEC Brings Custody Rule Enforcement

Posted in Advisory, Investment Advisers, Private Funds
On October 29, 2014, the Securities and Exchange Commission (“SEC”) announced an administrative enforcement action against an investment advisory firm and three top officials for violating rule 206(4)-2 under the Investment Advisers Act of 1940 (“Advisers Act”), the “custody rule,” that requires firms to follow certain procedures when they control or have (or are deemed… Continue Reading

When Sharing Isn’t Caring – SEC Charges Private Equity Fund Adviser for Sharing Expenses Between Two Portfolio Companies

Posted in Investment Advisers, Private Equity
On September 22, 2014, the Securities and Exchange Commission (the “SEC”) charged private equity fund adviser, Lincolnshire Management, Inc. (“Lincolnshire”), with misallocating expenses shared between two portfolio companies. Lincolnshire integrated two portfolio companies that were each owned by a different Lincolnshire private equity fund. Lincolnshire owed a fiduciary duty to each fund and such fiduciary… Continue Reading

SEC Enforcement Against Short Sellers Continues

Posted in Investment Advisers, Private Equity
On September 16, 2014, the Securities and Exchange Commission (“SEC”) announced the latest sanctions in a continuing enforcement initiative against certain hedge fund advisers and private equity firms that have participated in an offering of a stock after short selling it during a restricted period in contravention of SEC rules. The SEC last year announced… Continue Reading

CIOs Spur Revenue Generation Through Smart Cybersecurity

Posted in Guest Post, Investment Advisers
This article was originally published in The Wall Street Journal‘s CIO Journal on September 11, 2014. Today as companies increasingly realize the value of strong cybersecurity, those CIOs who successfully implement an effective cybersecurity system should be viewed as a critical part of the revenue generation effort. An effective CIO who maintains a robust cyber… Continue Reading

CFTC Exemptive Relief Harmonizes Regulations 4.7(b) and 4.13(a)(3) with Rule 506(c) of Reg. D and Rule 144A

Posted in Advisory, Investment Advisers, Private Funds
In a press release yesterday, the CFTC issued an exemptive letter, CFTC Letter No. 14-116, providing relief from certain provisions of CFTC Regulations 4.7(b) and 4.13(a)(3) that restrict marketing to the public.  The exemptive relief was issued to make CFTC Regulations 4.7(b) and 4.13(a)(3) consistent with SEC Rule 506(c) of Reg. D and Rule 144A,… Continue Reading

Advisory Alert! – Repatriation of Funds Out of China

Posted in Advisory, China Funds, Guest Post, Investment Advisers
China imposes controls on the inflow and outflow of foreign exchange. Given the involvement of State Administration of Foreign Exchange and various other governmental agencies in the process, repatriating funds from China can be a trap for the unwary. Foreign investors should familiarize themselves with the approval requirements and procedures. Read more: Advisory – Aug… Continue Reading