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The weekly news source for investment management legal and compliance professionals

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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Recent Stories

Think Twice Before Providing Deficiency Letters to Clients

A new client, or one of many years, phones you with a request: I understand your advisory firm was recently examined, would you please send me a copy of the deficiency letter? Consider carefully before fulfilling that request – doing so may cause you more problems than it is worth.
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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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Technology in the Coming Years: What Advisory Firms Should Expect

Technology has altered the world for investment advisers. The rise of auto-advisers, the ever-increasing need for cybersecurity, the overwhelming prevalence of various forms of social media, cryptocurrencies and more have shaped a business and compliance reality that many advisers might not have predicted a decade or more ago. Given that each new step in high tech appears to exponentially bolster the arrival and impact of the subsequent one, what should advisers expect in the next decade, and how should they prepare for it?
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Private Fund Name-Sharing in Certain Foreign Countries Raises Concerns

Hedge funds or private equity funds organized and offered by banking entities and affiliated advisers in certain foreign countries may not, under current law, be allowed to share the same name or even a variation of the same name with that bank or adviser. This may cause a problem, because countries like China or Taiwan have local regulations that may require the use of the same name. Some in the industry are asking for relief to deal with this issue.
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Proprietary Algorithms May Promise Profits But Bring the SEC

Advisory firms offering clients and investors big profits through the use of homegrown, supposedly surefire algorithms had better think twice. It is unlikely that any scientific formula can beat the market or regularly prevent losses – and advisers that use algorithms to lure investors and keep existing clients may find they get neither profits nor loss prevention, but instead find themselves facing SEC enforcement and fines.
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Regulation S-P: OCIE Puts Advisers and Broker-Dealers on Notice

At least some advisers and broker-dealers are not complying with privacy notice and safeguard policy requirements under Regulation S-P, and the SEC’s Office of Compliance Inspections and Examinations, in an April 16 Risk Alert, lets all advisers and brokers know that examiners are keeping a sharp eye out for such violations. In short, it is saying: You’ve been warned, so don’t complain if you get cited for such violations during an exam.
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SEC’s Enforcement Powers Likely Widened by Lorenzo Ruling

The SEC, battered by Supreme Court rulings in recent months that made it change how it appoints administrative law judges and placed a time limit on disgorgement, scored a big win with the high court’s recent Opinion in the Lorenzo v. Securities and Exchange Commission case. Under the ruling, the SEC, as well as private parties, will likely be able to bring fraud charges in more cases and assess more sanctions.
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