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The weekly news source for investment management legal and compliance professionals

Expect Kavanaugh to Stay in Line with Supreme Court Securities Rulings

Should federal appeals court Judge Brett Kavanaugh be confirmed as a Supreme Court justice, as many commentators think likely, don’t expect him to rock the boat when it comes to rulings involving the nation’s securities laws. The high court has a long history of deciding securities law cases fairly narrowly, and Kavanaugh is unlikely to push the court one way or the other, legal and securities experts say.
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Third-Party Agreements: Ensure Clients Don’t Get Burned by Conflicts of Interest

Advisers may see agreements with other advisory firms as a way to enhance revenue. While such third-party agreements may on their face bring in additional dollars, advisers should also take precautions that they don’t create conflicts of interest with clients. When that happens, the agreements may bring in more than additional revenue – they may bring in SEC examiners and investigators.
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Recent Stories

SEC Adopts Liquidity Classification Changes, Proposes Standard ETF Exemption

The SEC on June 28 took some major steps toward fulfilling its agenda, and in ways that will ease work for advisers and funds. Among them were adopting the changes it proposed this past March to the classification requirements of the Liquidity Risk Management Rule, and a proposal that would allow certain exchange-traded funds to operate without first having to obtain a fund-specific exemptive order.
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Check Out Audit Team Members before Retaining Firm

It is essential that accounting firms hired to perform audits – and their individual audit team members – have credibility, and that asset managers that hire such firms know they can rely on their work. Failure on the part of advisory firms and other financial institutions to ensure that those performing the audit are up to snuff may result in serious consequences.
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Inadvertent Custody: New FAQs Attempt to Clarify Enforcement

Sometimes a regulator articulates a new legal standard a bit too broadly, causing confusion among the regulated, and then seeks to clarify what it meant – only to cause still more confusion. Such may be the case with the Custody Rule and the SEC staff, which earlier this month issued two FAQs regarding the relatively new concept of "inadvertent custody."
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OIG Zeroes In on External Experts and EDGAR in its Latest SEC Report Card

Advisers, funds and broker-dealers used to dealing with examinations and investigations from the SEC might find some solace in the fact that the agency itself is continually under investigation by its own Office of the Inspector General. The OIG every six months issues a report card to Congress about the status of these investigations, and the latest, issued June 7, was not short on substance.
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Repeated Failures to File Form PF Lead to Censure and Fines from the SEC

The SEC is making no bones about it. When it requires registrants to complete and file a new form, it expects those requirements to be acted on. Form PF is a case in point. The agency on June 1 made an example of 13 private fund advisers that, it said, repeatedly "failed to provide required information" by being "delinquent" in their Form filings over multiple years.
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