Today, the Securities and Exchange Commission announced it had finalized reforms under the Investment Advisers Act to modernize rules that govern investment adviser advertisements and payments to solicitors. The amendments create a single rule that replaces the current advertising and cash solicitation rules. The final rule is designed to comprehensively and efficiently regulate investment advisers’ marketing communications.
The Commodity Futures Trading Commission at its open meeting on Tuesday, October 6, unanimously approved a final rule adopting amendments to Form CPO-PQR for commodity pool operators (CPOs).
The amendments to Form CPO-PQR (1) eliminate existing Schedules B and C of the form, except for the Pool Schedule of Investments; (2) amend the information requirements and instructions to request Legal Entity Identifiers (LEIs) for commodity pool operators and their operated pools that have them, and to delete questions regarding pool auditors and marketers; and (3) make certain other changes due to the rescission of Schedules B and C, including the elimination of all existing reporting thresholds. Click here for the full press release.
An expanded universe of individuals and entities will be able to participate as “accredited investors” in securities offerings as a result of recent SEC rulemaking.
- The SEC has expanded its definition of “Accredited Investor” to additional individuals and entities, including individuals with certain professional certifications and knowledgeable employees of private funds.
- The amendments may provide additional regulatory certainty for issuers, investors and counsel.
On August 26, 2020, the Securities and Exchange Commission (the SEC) adopted amendments to the definition of “accredited investor” in Rule 501(a) of Regulation D under the Securities Act of 1933 (the Amendments). The Amendments, which will become effective 60 days after they are published in the Federal Register, expand the pool of individuals and entities that qualify as accredited investors. The definition of accredited investor is relevant, among other things, to the operation of Rule 506 of Regulation D, which is a safe harbor under Section 4(a)(2) of the Securities Act. Rule 506 is the most commonly-used exemption for private offerings, accounting for the vast majority of the trillions of dollars raised through unregistered offerings every year. Unregistered, private offerings of securities have supplanted public offerings as the dominant form of capital-raising in the United States. Since regulatory requirements are much greater for offerings that include non-accredited investors, an overwhelming majority of Rule 506 offerings are offered only to accredited investors.
Read this article and additional Pillsbury publications at Pillsbury Insights.
More of this will be covered at an ALI CLE webinar, sponsored by Pillsbury, later this month that focuses on Regulation D Offerings and Private Placements. To find out more about this webinar and to register, please visit https://www.ali-cle.org/course/Regulation-D-Offerings-Private-Placements-2020-VCCP0922
We urge our clients to consult Pillsbury’s comprehensive COVID-19 Resource Center for information regarding Responding to a Global Crisis, Business Interruption, Cybersecurity, Employer Concerns and other general matters related to the COVID-19 pandemic. We also recommend the following specific measures to mitigate risks of business interruption and regulatory noncompliance resulting from the COVID-19 pandemic.
Registered and Exempt Reporting Firms:
The deadline for the annual update of Form ADV is approaching. We have previously notified you regarding filing obligations that were due between January 1 and March 1. Below is a recommended compliance and filing deadline table addressing registered firms’ obligations for the remainder of the calendar year. Let us know if you need any assistance.
In response to the coronavirus pandemic, see the Pillsbury articles and webinar regarding our recommendations. If you have not already, at this point you should:
- Review and/or activate your business continuity plan
- Review your vendor relationships and assess any stressors
- Shore up cybersecurity protections and be vigilant regarding heightened risks
- Assemble a response team for immediate, intermediate and long-term plans
Please contact us with any of your needs.
Read this article and additional Pillsbury publications at Pillsbury Insights.
The California Consumer Privacy Act (CCPA), a broad statute which imposes new data privacy obligations on certain companies that do business in California, will become effective on January 1, 2020. Fund managers and other investment advisers (“Advisers”) and certain of their affiliates that are currently subject to data privacy laws pursuant to the Gramm-Leach-Bliley Act (GLBA) or the UK General Data Protection Regulation (GDPR) may have additional obligations to consider and prepare for as the CCPA compliance deadline approaches.
Recommendations for employers before new law goes into effect on January 1, 2020
While acknowledging the challenges in applying the securities laws to digital assets, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), in a joint statement on July 8, 2019, reaffirm that those rules equally apply to digital assets, and promise they will continue to engage the industry in finding solutions.
Read the full public statement HERE.
SEC Risk Alert regarding safety of customer records and cloud vendor diligence.
As part of its cybersecurity sweep, the SEC has examined risks related to the storage of customer records and information by investment advisers on cloud-based storage platforms and issued a Risk Alert, “Safeguarding Customer Records and Information in Network Storage – Use of Third Party Security Features.” The sweep focused on vendor due diligence and oversight and registered advisers’ monitoring of data and customer information safety. Among other information, OCIE sought vendor contracts (including service level agreements); vendor reviews; risks assessments of cloud service providers, including data encryption, data loss prevention, books & records exposure, identity and access management; and policies and procedures and their alignment to technology standards.
The Risk Alert identified as the main compliance issues related to cloud-based storage (i) Misconfigured network storage solutions (inadequately configured security settings to protect against unauthorized access; lack of policies and procedures addressing the security configuration); (ii) Inadequate oversight of vendor-provided network storage solutions (lack of, or inadequate, policies, procedures, contractual provisions that security settings on vendor-provided network storage solutions were configured in accordance with the firm’s standards); and (iii) Insufficient data classification policies and procedures (firms’ policies and procedures did not identify the different types of data stored electronically by the firm and the appropriate controls for each type of data).
The Risk Alert encourages investment advisers to review their practices, policies, and procedures with respect to the electronic storage of customer information and to consider any necessary improvements, and to actively oversee vendors. The SEC included helpful recommendations for cyber/cloud risk management, including the implementation of policies and procedures designed to support the initial installation, on-going maintenance, and regular review of the network storage solution; guidelines for security controls and baseline security configuration standards to ensure that each network solution is configured properly; and vendor management policies and procedures that include, among other things, regular implementation of software patches and hardware updates followed by reviews to ensure that those patches and updates did not unintentionally change, weaken, or otherwise modify the security configuration.
Please contact your counsel at Pillsbury’s Investment Funds Group if you need help with reviewing and enhancing your cloud storage and related policies.