See why ACA Insight is the leading newsletter on regulatory compliance. Sign up for a free 1-week trial.

The weekly news source for investment management legal and compliance professionals

Fees and Expenses: OCIE Wants Advisers to Focus on the Nuts and Bolts

Sometimes it’s the basic things that get overlooked, like fees and expenses. When that happens in the asset management community, problems occur and examiners notice – which may be why the SEC’s Office of Compliance Inspections and Examinations this month issued a Risk Alert offering an "Overview of the Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations of Investment Advisers." Chief compliance officers would be wise to pay attention.
Continue Reading

Discovery of Fraudulent Registration Offers No Relief from Rule Compliance

One might think that an advisory firm charged with misstating its assets under management in order to register with the SEC could take some solace in believing that it never had to comply with agency rules. After all, such an adviser might think, the Custody Rule, the Books and Records Rule, the Advertising Rule and other rules apply only to SEC registrants. But such an assumption would be a mistake.
Continue Reading

Recent Stories

Exam Referrals to Enforcement: How Much Should Advisers Worry?

It’s every advisory firm’s nightmare. SEC examiners visit, find some deficiencies and suggest some corrective actions, which the adviser makes. Some months later, the advisory firm learns that it is the subject of a Division of Enforcement investigation, based on a referral from the exam team.
Continue Reading

New Share Class Settlements May Increase Self-Reporting Pressure on Advisers

Is it a coincidence? With just under two months before the SEC’s Share Class Selection Distribution initiative’s self-reporting deadline, the agency on April 6 announced new share-class settlements with three advisory firms containing civil money penalties that collectively total almost $2 million. The SEC used the occasion to issue a press release that "strongly encourage[s]" advisers to participate and avoid such fines themselves.
Continue Reading

Cyber Threats Grow as Advisers, Companies and Governments Seek Defenses

The threat to advisers, broker-dealers and other financial institutions from cyber assaults is likely to get worse as hackers become more sophisticated and their goals expand. Companies look at new best practices as both federal and state governments retroactively play catch up, but if what experts say is true, things may get worse before they get better – if they get better at all.
Continue Reading

Restricted Lists: Update, Monitor and Avoid Common Errors

Many advisory firms maintain "restricted lists:" compiled names of companies and securities with which they do not allow trading. These lists protect an advisory firm from a number of dangers – but advisers with such lists need to ensure they are properly updated, monitored and that they avoid mistakes that may cause problems down the road.
Continue Reading

Self-Report or Not: Consider What’s at Stake

The SEC’s recent share class initiative – in which the agency promises not to charge civil money penalties to advisers that voluntarily report that they placed clients in certain share classes when less expensive classes were available – has cast a spotlight on the question of whether self-reporting is a good idea.
Continue Reading

F-Squared Founder Ordered to Pay More than $13 Million

The F-Squared Investments saga seems to open or close a new chapter every few months since 2014, when the SEC first brought charges against the advisory firm for allegedly making false and misleading statements about its investment strategy algorithm. The latest development occurred March 22, when a federal judge ordered that F-Squared founder and former CEO Howard Present personally pay $13 million, including a $1.58 million civil money penalty, following his loss at trial this past October.
Continue Reading

DOL Fiduciary Rule Tossed Out by Appellate Court

Things are beginning to look pretty gloomy for the Department of Labor’s Fiduciary Rule. A U.S. Court of Appeals for the 5th Circuit three-judge panel this month struck down the entire Rule, describing it as "backdoor regulation." With the SEC now working on its own fiduciary regulations that may prove dominant in this area, the DOL is now faced with the question of whether the appellate court ruling is worth appealing.
Continue Reading

SEC Moving Forward on Exchange-Traded Funds Rule

The SEC under chairman Jay Clayton has a relatively short list of regulatory priorities for 2018, and one that appears to be on the high-priority track is proposing an Exchange-Traded Funds Rule. Division of Investment Management director Dalia Blass, who spoke on the need for such a rule at a recent conference, is clearly an advocate of getting such a rule adopted.
Continue Reading

SEC Reverses Itself and Votes Against Public Reporting of Liquidity Classifications

In something of a turnaround, the Commission on March 14 voted, 3 to 2, to change a previously adopted liquidity classification requirement. Under the proposed amendments, funds will no longer need to publicly report the classification buckets their securities fall into. Instead, they will simply need to provide a qualitative narrative describing how their liquidity risk management programs are working.
Continue Reading

The SEC’s Cherry-Picking Crackdown: What’s Behind It

What’s behind the SEC’s crackdown on cherry-picking at advisory firms, other than the agency’s desire to stamp out this violation wherever and whenever it’s found? Certainly there are other improper actions that the Division of Enforcement has made clear it will pursue, among them share class selection or Rule 105 violations. Cherry-picking cases, however, seem to be in a case by themselves.
Continue Reading