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The weekly news source for investment management legal and compliance professionals

SEC Withdraws Two No-Action Letters Regarding Use of Proxy Advisory Firms

The SEC on September 13 did something unexpected: It pulled two 2004 Division of Investment Management no-action letters concerning advisers’ use of proxy advisory firms in preparation for a planned November roundtable on the subject. What made the move unusual was not that the agency decided to supersede the letters, but that it did so by actually removing them, rather than simply issuing new guidance indicating a change of course.
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Advertising with Blended Back-Tested and Actual Results Draws SEC Attention

The SEC for several years has made it clear that it does not like the use of hypothetical and/or back-tested performance results in advertising. A recent settlement not only shows that the agency’s Division of Enforcement has not changed its view, but that it may file enforcement actions against advisers that blend back-tested performance results with actual results.
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Recent Stories

Cryptocurrency: SEC Takes Action Against Hedge Fund Manager

It was only a matter of time before it happened. The SEC on September 11 took what it called its “first-ever enforcement action” against a hedge fund manager marketing digital assets. The firm had raised more than $3.6 million for such investments over a four-month period – but the agency charged that it did so using misrepresentations and registration failures.
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2018 Shows Continued Investment Adviser Growth

The investment advisory industry is riding the surf of the economic upturn, with record numbers of advisers, investment advisory jobs and assets under management than ever before. The number of clients took a slight dip this year, while private equity funds increased their popularity over hedge funds.
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Federal Court Dismisses Challenge to SEC Disgorgement Authority

Following the June 2017 Supreme Court Kokesh settlement that subjected SEC disgorgement orders to a five-year statute of limitations, it was perhaps inevitable that there would be legal challenges to the agency’s authority to order disgorgement at all as part of an administrative settlement. Late last month a federal district court judge rejected such a challenge.
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The CAT Takes a Step Forward and a Step Back

The SEC is finding that its progress in creating a comprehensive electronic blueprint of securities transactions, the Consolidated Audit Trail (CAT), is proving as difficult as getting real cats to do what you want. It issued a statement that demonstrates the forward-and-back nature of this project: the arrival of a detailed master plan, but the delay of three key deadlines by a year.
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SEC Keeps its Eye Out for Cherry-Picking as Another Adviser Settles

It’s always easier for enforcers to go after the low-hanging fruit, and in the case of the SEC, that fruit happens to be cherries. The agency on August 17 took another step in its ongoing crackdown against cherry-picking, reaching separate settlements with an advisory firm and an investment adviser representative who worked for it.
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SEC Cleans Up Disclosure Requirements

In an attempt to simplify and update its disclosure requirements, the SEC on August 17 adopted amendments to existing requirements that it said have become duplicative, overlapping, outdated or superseded by new requirements.
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Industry Representatives Seek Changes to SEC’s Proposed Standards of Care

Harmonize rules for investment advisers and broker-dealers. Impose federal licensing and education requirements on advisory firms. Require advisers to provide clients with account statements. Codify advisory firms’ fiduciary duty in a rule. If these possibilities from the SEC’s standards of care package proposed in April give you concern, you can take solace knowing that some major industry heavy hitters share them, and have some other concerns, as well.
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Advisers Bullish About Future Business Prospects

Nearly 80 percent of advisers expect to grow their workforces over the next 12 months. Fifty-seven percent with individual clients think their assets under management will grow over the next three years, while 59 percent with institutional clients expect the same.
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