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The weekly news source for investment management legal and compliance professionals

SEC Adviser Fiduciary Interpretation: Review Disclosures, Contracts and More

Now that the dust is settling following the SEC’s adoption of its Standards of Care Package, advisers and broker-dealers are looking over the parts that affect them the most. For advisers, the Commission’s interpretation and clarification of their fiduciary duty may be the first thing they look at. While the interpretation does not appear to contain any earthshaking changes, it does make some, while clarifying what it sees as important. Advisers would be wise to review the interpretation to get a better handle on what the agency wants to see.
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Association Calls for Changes in Fund Proxy Voting and Communication

The Investment Company Institute, in its third comment letter to the SEC regarding changes involving proxies and proxy voting, called for the agency to forego requiring shareholder approval for certain topics, and creating a new way for funds to achieve a majority vote for others. At the same time, the ICI, which represents regulated funds, urged the SEC to require intermediaries to provide their fund shareholder lists to funds.
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Recent Stories

SEC Moves Custody Rule Reform to the Fast Track

The SEC plans to propose amendments that will reform the Custody Rule within the next 12 months. The rule’s reform will join agency plans to take other actions within that same time period, including changes to the Advertising Rule, long identified within the asset management community as needing reform, the Cash Solicitation Rule, the use of derivatives by investment companies, and fund of funds arrangements.
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Commissioner Calls for More SEC Cryptocurrency Guidance

The SEC needs to do more to regulate the burgeoning cryptocurrency industry, in part by providing guidance to issuers, advisers, funds and broker-dealers so they can stay in the proper compliance lanes in regard to matters like custody, portfolio holdings, electronic platform obligations, and more. That is the view of agency Commissioner Hester Peirce, who, in a recent speech, said that the SEC, which some feared might go too far in regulating digital currencies, instead has demonstrated "its unwillingness to take meaningful action at all."
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OCIE Director on Anti-Money Laundering, Cybersecurity, Customer Funds

What do SEC examinations involving anti-money laundering, cybersecurity and protection of customer funds have in common? Examination efforts in these areas are examples of the agency protecting retail investors. So said SEC Office of Compliance Inspections and Examinations Director Peter Driscoll, who recently addressed the SIFMA Operations Conference in Boca Raton, FL.
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SEC Scrutiny of Privacy Policies and Procedures Makes Implementation Essential

With SEC examiners increasing their scrutiny of how advisory firms protect privacy, now is the time for chief compliance officers to ensure that privacy policies and procedures not only exist, but are robustly implemented. The result will not only be an advisory firm with high confidence that private information is protected, but that its firm’s privacy practices will pass muster the next time examiners come to visit.
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Adviser Waives New ALJ Hearing Despite Lucia Ruling, Settles Charges

An advisory firm and its founder, despite an Appeals Court ordering a rehearing with a different administrative law judge of a previous ALJ decision, on May 16 settled charges with the agency that it engaged in fraudulent trade allocations and misused soft dollars. The firm owner was permanently barred from the securities industry and agreed to pay disgorgement of $669,965.
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Associations Support FSOC Financial Institution Evaluation Changes

Asset management associations this month issued letters of strong support for proposed guidance from the Financial Stability Oversight Council (FSOC) that would alter the way the Council evaluates non-bank financial institutions – a group that includes investment advisers, investment companies and broker-dealers – in terms of their systemic risk to the country’s financial stability.
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Put Best Practices in Place to Ensure Branch Office Compliance

Branch office compliance practices have long been high on the SEC’s radar. Its Office of Compliance Inspections and Examinations has listed branch offices among its priorities for several years running and issued a risk alert to let advisers know what its examiners found. But ensuring compliance at branch offices, particularly new branch offices following an acquisition, takes considerable time and effort.
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OCIE Director: CCOs Not Ultimately Responsible for Success of Compliance Programs

It’s the reassurance that many chief compliance officers want to hear. While SEC officials have provided that reassurance before, they really can’t go overboard in confirming the following: CCOs, while key professionals for compliance success, do not bear the ultimate responsibility if a compliance program fails. Many will be pleased to know that a top SEC official recently reinforced this message.
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Associations Challenge Redemption Limit in Proposed Fund of Funds Rule

The Investment Company Institute, the Investment Advisers Association, the ecurities Industry and Financial Markets Association’s Asset Management Group and others in the asset management industry are not happy with a key element in the SEC’s proposed Fund of Funds Arrangements Rule. They want the agency to remove the 3 percent cap on acquired fund redemptions.
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