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 to Examine Advisers and Brokers for Cybersecurity Preparedness

Posted in Broker-Dealers, Investment Advisers
The U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) previously announced that its 2014 Examination Priorities included a focus on technology, including cybersecurity preparedness.  In connection with that statement of examination priority, OCIE recently issued a Risk Alert to provide additional information concerning its initiative to assess cybersecurity preparedness in the … Continue Reading

New Custody Compliance Tasks for California Registered Advisers Effective April 1

Posted in Advisory, Investment Advisers, Private Funds
Written by: Ildiko Duckor The California Commissioner of Business Oversight (“Commissioner”) recently amended California’s custody rule 10 C.C.R. Section 260.237 (the “New Custody Rule”).  The New Custody Rule will be effective on April 1, 2014. All investment advisers licensed or required to be licensed in California must comply with the New Custody Rule.  California Exempt … Continue Reading

The CFTC and Japan’s FSA Sign Cross-Border Agreement

Posted in Investment Advisers, Private Funds
On March 10, 2014, the U.S. Commodity Futures Trading Commission and the Financial Services Agency of Japan signed a Memorandum of Cooperation which expresses the agencies’ intent to work together to supervise and oversee regulated entities that operate on a cross-border basis in Japan and the United States.  The agencies intend to cooperate in the … Continue Reading

The CFTC and Japan’s FSA Sign Cross-Border Agreement

Posted in Investment Advisers, Private Funds
Written by:  Jessica M. Brown and Michael G. Wu On March 10, 2014, the U.S. Commodity Futures Trading Commission and the Financial Services Agency of Japan signed a Memorandum of Cooperation which expresses the agencies’ intent to work together to supervise and oversee regulated entities that operate on a cross-border basis in Japan and the … Continue Reading

SEC Risk Alert: Selecting Alternative Investments and Their Managers

Posted in Investment Advisers, Private Funds
Written by:  Jay B. Gould and Jessica M. Brown The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations released a “Risk Alert” on January 28, 2014, which focuses on the due diligence investment advisers perform in alternative investments[1] and managers for their clients. After observing an increasing trend in advisers recommending alternative investments … Continue Reading

Reminder- March 3rd Deadline for Annual CFTC Exemption Affirmation

Posted in Investment Advisers, Private Funds
The annual affirmation process started on December 3, 2013. Advisers who relied on an exemption or exclusion from CPO registration under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or an exemption from CTA registration under 4.14(a)(8) and filed a notice with the NFA must affirm the exemption or exclusion annually within 60 days after the … Continue Reading

California’s New LLC Law: Next Steps for California LLCs

Posted in Advisory, Investment Advisers, Private Funds
If your management company or fund was formed as a California limited liability company, you need to review your Operating Agreement to determine whether amendments need to be made. On January 1, 2014, California’s Beverly-Killea Limited Liability Company Act (Old Act) was superseded by the California Revised Uniform Limited Liability Company Act (New Act). The … Continue Reading

#TweetedIntoTrouble

Posted in Investment Advisers
Written by:  Jessica M. Brown The Securities and Exchange Commission charged a registered investment adviser and its principal for making false claims over social media regarding their inflated performance claims with respect to a mutual fund managed by the adviser. Through a Twitter account and a widely circulated newsletter, Mark A. Grimaldi and Navigator Money … Continue Reading

SEC-Registered Investment Adviser Agrees to $21 Million Penalty for Illegal Cross Trades and a Coding Error

Posted in Investment Advisers
Written by:  Jessica M. Brown The Securities and Exchange Commission (“SEC”) and the United States Department of Labor (“DOL”) announced sanctions today against Western Asset Management Company (“Western Asset”), a subsidiary of Legg Mason.  Western Asset is an SEC-registered investment adviser and reported $442.7 billion in assets under management as of September 30, 2013. The … Continue Reading

Amended TIC Form B – Information for U.S. Investment Advisers

Posted in Investment Advisers, Private Funds
Written by: Jessica M. Brown As a result of recent amendments made by the U.S. Department of Treasury to the Treasury International Capital Form B (“Form B”), private funds and investment advisers may be required to file Form B.  Form B requires a fund manager or investment adviser to report certain information concerning “claims” and … Continue Reading

2014 Examination Priorities Published by the SEC

Posted in Broker-Dealers, Investment Advisers, Private Equity, Private Funds
Today, the Securities and Exchange Commission published its 2014 priorities for its National Examination Program (“NEP”).  These priorities cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents.  Similar to the 2013 priorities, the … Continue Reading

ANNUAL COMPLIANCE OBLIGATIONS–WHAT YOU NEED TO KNOW

Posted in Advisory, Investment Advisers, Private Funds
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 Trading Commission (the “CFTC”) should be aware … Continue Reading

Canada Imposes Chaperone Requirement for Investment Sub-Advisers

Posted in Guest Post, Investment Advisers
This guest post from Blake, Cassels & Graydon LLP, co-authored by Ross McKee, Partner, Blake, Cassels & Graydon LLP, is reprinted here with permission.  INTRODUCTION The Canadian Securities Administrators have proposed a new uniform Canadian registration exemption for investment sub-advisers, as part of a package of proposed amendments to Canadian registration rules. The proposed exemption … Continue Reading

SEC Charges London-based Hedge Fund Adviser with Valuation Failures

Posted in Investment Advisers, Private Funds
Written by: Jay B. Gould On December 12, 2013, the Securities and Exchange Commission (SEC) charged a London-based hedge fund adviser and its former U.S.-based holding company with internal controls failures that led to the overvaluation of a fund’s assets and inflated fee revenue for the firms.  The investigation came out of the SEC’s Aberrational … Continue Reading

Prosecution Deferred May Still Be Prosecution

Posted in Investment Advisers, Private Funds
Written by: Jay B. Gould, Michael G. Wu and Jessica M. Brown In January, 2010, the Securities and Exchange Commission (“SEC”) announced its Enforcement Cooperation Initiative (“Initiative”), which provided the SEC with the ability to offer certain individuals or entities immunity or other preferential treatment in exchange for information about illegal activities and/or cooperation with … Continue Reading

SEC Sanctions Three Advisers for Custody Rule Violations

Posted in Investment Advisers, Private Funds
Written by:  Jay B. Gould and Jessica M. Brown On October 28, 2013, the Securities and Exchange Commission (“SEC”)  brought enforcement actions and imposed sanctions on three different registered advisers and their principals for violations of Rule 206(4)-2 under the Investment Advisers Act of 1940 (the “Custody Rule”).  The circumstances that gave rise to each … Continue Reading

Reminder: 2014 IARD Account Renewal Obligations For Investment Advisers

Posted in Advisory, Investment Advisers
This is a reminder that the 2014 IARD account renewal obligation for investment 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 11, 2013 – Preliminary Renewal Statements … Continue Reading

SEC Issues Proposal on Crowdfunding

Posted in Investment Advisers, Private Funds
Written by: Jay B. Gould On October 23, 2013, the Securities and Exchange Commission (“SEC”) voted unanimously to propose rules under the JOBS Act to permit companies to offer and sell securities through crowdfunding. Crowdfunding describes an evolving method of raising capital that has been used outside of the securities arena to raise funds through … Continue Reading

Stop Violating the Advisers Act Again, and Again

Posted in Investment Advisers
Written by:  Jay B. Gould On October 23, 2013, the Securities and Exchange Commission (“SEC”) brought charges against three different investment advisory firms for recidivist behavior.  The enforcement actions came out of the SEC’s Compliance Program Initiative, which targets firms that have been previously warned by SEC examiners about compliance deficiencies, but failed to effectively … Continue Reading

New Quarterly Filing Requirement for CTAs

Posted in Investment Advisers
Written by: Michael G. Wu The National Futures Association (“NFA”) recently implemented a new quarterly reporting requirement for commodity trading advisors (“CTAs”).  Under NFA Compliance Rule 2-46, CTAs must file on a quarterly basis NFA Form PR, which consists of the Commodity Futures Trading Commission’s Form CTA-PR together with additional information relating to the trading … Continue Reading

Keeping it in the Fraudulent Family

Posted in Investment Advisers
Written by: Jay B. Gould In a case that gives the term “family values” an entirely new meaning, the Securities and Exchange Commission (“SEC”) recently charged a father and son in Lexington, S.C., with operating a fraudulent investment program designed to illegally profit from the deaths of terminally ill individuals.   On September 20, 2013, … Continue Reading

23 Firms Caught in SEC Short Selling Enforcement Snare

Posted in Investment Advisers, Private Funds
Written by:  Jay B. Gould On September 17, 2013, the Securities and Exchange Commission (“SEC”) announced enforcement actions against 23 firms for short selling violations as the agency increases its focus on preventing firms from improperly participating in public stock offerings after selling short those same stocks.  The enforcement actions are being settled by 22 … Continue Reading

Recent Regulation FD Enforcement Action Provides Lessons for Closed-End Funds

Posted in Investment Advisers, Private Funds
Written by:  Kimberly V. Mann The Security and Exchange Commission’s recent enforcement action against Lawrence D. Polizzotto serves as a reminder to all issuers that Regulation FD enforcement is alive and well. The Polizzotto Case Polizzotto, the former vice president of investor relations at First Solar, Inc. (and, ironically, a member of the company’s Disclosure … Continue Reading

SEC Risk Alert: Disaster Preparedness for Investment Advisers

Posted in Investment Advisers
Written by:  Jay B. Gould and Jessica Brown In response to the devastating effect of Hurricane Sandy which temporarily crippled U.S. equity and options markets in October 2012, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert on business continuity and disaster recovery planning for investment advisers. In the … Continue Reading