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The weekly news source for investment management legal and compliance professionals

Chief Compliance Officers: Know When and How to Resign

Few chief compliance officers want to resign for any reason other than accepting a better offer at another firm. The reality, however, is that CCOs may find themselves in positions where, for compliance reasons and to protect their own career credibility, they have little choice but to consider resignation. The key is recognizing when those times arise and knowing how to extricate themselves from their errant firms safely.
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Associations and Firms Want SEC/DOL Coordination on Standard of Conduct

More than 90 comments have been received by the SEC to date in response to agency chairman Jay Clayton’s June 1 call for comments in regard to standards of conduct for investment advisers and broker-dealers. Among the trends emerging from the comments received to date is that the SEC, in coordination with the Department of Labor, create a separate standard of conduct for broker-dealers.
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DOL Proposes Delaying Fiduciary Rule Exemptions to July 2019

It seems compliance with various aspects of the Department of Labor’s Fiduciary Rule keep getting pushed back. In the latest case, the DOL on August 9 issued a notice of administrative action, stating that it plans to delay the compliance date for three Fiduciary Rule exemptions, including the Best Interest Contract Exemption, from January 2018 to July 2019.
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OCIE Finds Increased Cybersecurity But Wants More

The SEC’s Office of Compliance Inspections and Evaluations on August 7 made public its observations from its most recent round of cybersecurity exams – and what it found is encouraging only to a point. The message delivered by OCIE in its National Exam Program risk alert was this: Advisory firms, broker-dealers and investment companies have made strides in providing cybersecurity, but there is still a long way to go.
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Revenue Sharing in Exchange for Investments May Be a Conflict

Perception counts. Consider a third-party broker-dealer offering an adviser compensation in exchange for investing client dollars in certain mutual funds available on the broker’s platform. The SEC is likely to perceive that compensation as a conflict of interest. It’s not so much whether the adviser follows through and makes those favored investments – it’s that the financial incentive to make them exists.
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Real Estate Investment Strategies in Offering Docs Must be Clear and Followed

If your private fund’s offering documents state that your fund will invest only in real estate, be aware that those are not just words. Stepping outside the parameters of your fund’s stated investment strategy may lead to trouble, both for the fund and for the fund manager. This is also true with unclear and/or inconsistent investment strategy wording between your private placement memorandum and other fund documents. Language, it turns out, matters.
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SEC Scrutinizes PE Fund Manager Adherence to Operating Documents

Private equity fund managers may not be as used to SEC oversight as are other advisers. They would be wise, then, to regard a recent agency settlement as a lesson learned: The SEC will scrutinize books and records to make sure fund managers are operating within the limits of their operating documents. Those that are not may find themselves facing an enforcement action.
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Protect Your Firm and Clients Against MNPI Risks in Bank Loan Investments

Some advisers are expressing interest in investing fund or other client assets in bank loans. Such loans may pay higher yields than other fixed income investments – but they also may carry higher risks, including exposure to material non-public information and potential insider trading issues. If you choose to invest in these loans, know the risks and the best practices to keep your clients and your firm safe.
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