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The weekly news source for investment management legal and compliance professionals

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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Recent Stories

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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Proxy Advisory Firm Use: Roisman Suggests SEC Consider Guidance

SEC Commissioner Elad Roisman thinks the time has come for the agency to consider issuing new guidance for asset managers in their use of proxy advisory firms. The SEC’s point man on ways to improve the proxy process, the relatively new commissioner made his views known at a recent industry conference, where he also said that he is seeking answers to a lot of questions about both the use of proxies and proxy advisory firms.
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Third OCIE Cybersecurity Exam Sweep Underway

The SEC’s Office of Compliance Inspections and Examinations isn’t letting the grass grow under its feet when it comes to advisory firms and cybersecurity. Having completed two cybersecurity exam sweeps in recent years, OCIE has now begun a third – this time focusing on large branch office networks and firms that have merged with or acquired other firms.
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SEC Expects a Drop in Adviser Examinations in FY 2019

Advisory firms fearing an exam from the SEC’s Office of Compliance Inspections and Examinations this year might have cause to breathe a little easier. While there is a new cybersecurity exam underway (see story this issue), overall, the SEC is predicting a drop in the percentage of advisers it will examine in fiscal year 2019, following several years of increases.
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Get the Most Out of Exemptive Applications and No-Action Requests

Whether applying for a job, seeking to secure financing or sending the SEC an application for an exemptive order or a request for no-action relief, it is always wise to put your best foot forward. No sense damaging your chances with an application that is poorly written, disorganized or omits key information. There are steps that attorneys for advisers, funds and others can take to ensure their process gets off to a good start.
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Blass: SEC Not Ready to Make Research-Related Exemption Permanent

Those looking to the SEC to extend or make permanent a temporary exemption tied to broker-dealers unbundling research costs from execution costs did not hear the best news at a recent industry conference. That’s when agency Division of Investment Management Director Dalia Blass told attendees that the Investment Management staff is not yet prepared to recommend such a course to the Commission.
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Senate Bill Would Allow SEC to Seek Restitution Going Back 10 Years

A bipartisan bill introduced in the U.S. Senate March 14 would go at least part of the way toward redressing the Supreme Court judgment that limited disgorgement to a five-year statute of limitations. The bill would provide the SEC with the authority to seek restitution for investors harmed by fraudsters – and allow the agency to go back 10 years in pursuing such actions.
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Multiple Adviser Settlements Demonstrate Clout of SEC’s Share Class Initiative

The SEC knocked it out of the park this month, demonstrating to naysayers that its Share Class Selection Disclosure Initiative has been effective in appealing to advisory firms. The agency on March 11 announced settlements with 79 different advisory firms that chose to self-report their violations. While these firms collectively agreed to pay more than $125 million in disgorgement and interest, they also escaped having to pay civil money penalties.
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Custody Rule Reform: SEC Seeks Input on Non-DVP Practices, Digital Assets

The SEC staff, in what might be considered a prelude to reform of Advisers Act Rule 206(4)-2, the Custody Rule, on March 12 issued a public letter to the Investment Adviser Association seeking answers to questions involving a certain type of custodial practice, as well as questions related to custody of digital assets. Reform of the Rule is listed on the agency’s long-term regulatory agenda, and the letter should be a welcome sign to those calling for the SEC to move forward.
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