Investment Fund Law Blog

InvestmentFundLawBlog

Updates and Insights on Legal Issues Facing Fund Managers and Investors

Category Archives: Investment Advisers

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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

SEC Adopts Final Crowfunding Regulation

Posted in Advisory, Broker-Dealers, Hedge Funds, Investment Advisers, Private Equity, Private Funds
On October 30, 2015, the Securities and Exchange Commission (SEC) adopted Regulation Crowdfunding. The final rule permits companies to offer and sell securities through crowdfunding. The “Regulation Crowdfunding Exemption” is created under Section 4(a)(6), Title III of the JOBS Act. The key features of the final rules Permit individuals to purchase securities in crowdfunding offerings… Continue Reading

AIFMD Development – No “Passport” in Sight for the US

Posted in Advisory, Investment Advisers, Private Funds
In the summer the European Securities and Markets Authority (ESMA) published its advice and opinion on the proposal to extend the marketing passport to non-EU alternative investment fund managers (AIFM) and non-EU funds.  The passport would enable non-EU AIFMs to market their funds across the EU under the single AIFMD regime, rather than seeking investors… Continue Reading

SEC Charges Investment Adviser for Failure to Disclose Change in Investment Strategy

Posted in Investment Advisers, Private Funds
Strategy shifts now the focus, the SEC extracts another pound of flesh from a fund adviser. In a recently settled administrative proceeding, UBS agreed to return $8.2 million of advisory fees to investors, compensate investors for $4.9 million of investment losses and pay $4.4 million in interest and penalties to the SEC for allegedly failing to… Continue Reading

Warning to Fund Counsel – When It Comes to Conflicts, Leave Nothing Undisclosed

Posted in Advisory, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The SEC, again, makes it clear:  all aspects of fee, expense and other arrangements must be disclosed accurately and in detail before commitments are accepted. The SEC recently announced a settlement with three investment advisor affiliates of The Blackstone Group (the Advisors) that were accused of breaching their fiduciary duty to funds they manage or… Continue Reading

Filing Deadline for Form BE-180 Is November 1, 2015

Posted in Advisory, Broker-Dealers, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds, Registered Investment Companies
U.S. Investment advisers, other financial services providers, and pooled investment vehicles – private and public funds – involved in certain cross-border transactions must file. Background The U.S. Department of Commerce’s Bureau of Economic Analysis (“BEA”) is conducting its next five-year “Benchmark Survey of U.S. Financial Services Providers and Foreign Persons” on Form BE-180. The survey… Continue Reading

FinCEN Proposes to Regulate Investment Advisers under the Bank Secrecy Act

Posted in Advisory, Client Alert, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking on August 25, 2015 which, among other things, would add SEC-registered investment advisers to the “financial institutions” regulated under the Bank Secrecy Act (BSA). This represents another step by the U.S. government to expand the professions and industries deemed anti-money… Continue Reading

FinCEN Proposes New AML Regulations for Investment Advisers

Posted in Advisory, Hedge Funds, Investment Advisers, Private Equity, Private Funds
In a release issued today, the Financial Crimes Enforcement Network (FinCEN) has proposed anti-money laundering (AML) regulations for investment advisers. The proposed rule requires investment advisers registered or required to be registered with the Securities and Exchange Commission (SEC) to establish AML programs and report suspicious activity to FinCEN pursuant to the Bank Secrecy Act… Continue Reading

PILLSBURY PARTNER QUOTED IN FUNDFIRE

Posted in Hedge Funds, Investment Advisers, Private Equity, Private Funds
Kimberly Mann, co-head of Pillsbury’s Investment Funds and Investment Management Group, was interviewed and quoted at length in an article published in FundFire this week. The article explored whether regulators should permit asset managers to settle cases without admitting culpability. In response to that question, Ms. Mann, who has expertise in investment advisor regulatory and… Continue Reading

Advisers Get Ready – New AML Requirements May Be on the Way

Posted in Advisory, Hedge Funds, Investment Advisers, Private Equity, Private Funds
The U.S. Treasury Department’s Financial Crimes Enforcement Network will soon propose new rules that may require investment advisers to establish and implement written anti-money laundering programs designed to prevent advisory clients from using advisers to launder funds or perpetrate other criminal activities. The rules also may require advisers to report suspicious client activity. The new… Continue Reading

Proposed Regulations Target Management Fee Waivers

Posted in Client Alert, Investment Advisers, Private Equity, Private Funds
In the Federal Register for July 23, 2015, the Treasury Department published proposed regulations regarding the circumstances under which partnership allocations and distributions will be treated as disguised payments for services. These proposed regulations are aimed at attempts by investment fund managers to convert ordinary, management fee income into tax-favored long-term capital gains through the… Continue Reading

Proposed Treasury Regulations May End Private Equity Management Fee Waivers

Posted in Investment Advisers, Private Equity, Private Funds
It has been a common practice of private equity firms to convert their right to receive management fees from the funds they manage into the right to receive profits and distributions from the funds through management fee waiver arrangements.  As a result of these arrangements, the firms achieve a lower tax rate because the profits… Continue Reading

Consultant or Employee? Fund Managers Should Re-Examine the Status of their Consultants in Light of the DOL’s New Interpretation

Posted in Client Alert, Investment Advisers, Private Equity, Private Funds
On July 15, 2015, the Wage and Hour Division of the U.S. Department of Labor (DOL) issued Administrator’s Interpretation No. 2015-1, adopting a very expansive interpretation of the definition of employees under the Fair Labor Standards Act (FLSA) under which many workers currently treated as independent contractors will need to be reclassified as employees. The… Continue Reading

REMINDER: FBAR FinCEN Report 114 Filing Deadline

Posted in Broker-Dealers, Investment Advisers, Private Funds, Registered Investment Companies
A U.S. person with a financial interest in or signature authority over a foreign bank, securities (including brokerage account, margin account, mutual fund, trust) or other financial account in another country that has an aggregate value exceeding $10,000 at any time during the 2014 calendar year must file FinCEN Report 114 by June 30, 2015.… Continue Reading