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The weekly news source for investment management legal and compliance professionals

Topic: Enforcement

Examine Adviser-Broker Relationships for Conflicts of Interest

March 24, 2017
One hand washes the other, or so the saying goes. Advisers and brokers washing each otherís hands, though, would be wise to make sure they are not really engaging in what the SEC might label a conflict of interest.

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SEC Crackdown on Misleading Marketing Nets Another Adviser

March 17, 2017
Use of hypothetical and/or backtested performance results in marketing is a surefire way to draw attention from SEC staff. A new settlement with an advisory firm should serve as a potent reminder to anyone who may have forgotten.

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Appellate Ruling Increases Chances SEC Use of ALJs Will Go to Supreme Court

March 9, 2017
Not only do the U.S. Courts of Appeals for the 2nd Circuit and the 10th Circuit disagree on the issue of whether SEC use of administrative law judges is constitutional, the 2nd Circuit will now look into a past ruling of its own three-judge panel on the same question in a review scheduled for May 24. Itís increasingly looking like the U.S. Supreme Court will provide the final answer.

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New SEC Already Here as Piwowar and White House Make Changes

March 3, 2017
If youíre looking for changes at the SEC, you donít need to wait for Jay Clayton to be approved by the Senate as the new SEC chair. The agency has already changed in a number of ways. Acting chairman Michael Piwowar recently limited who can initiate enforcement actions, most division directors have left, and the Trump administration plans to place regulatory monitors in federal agencies.

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Share All Risks and Costs with Investors When Selling Securities

February 17, 2017
Sometimes even the big players need to learn a lesson about disclosure. Morgan Stanley Smith Barney and Citigroup Global Markets found this out the hard way when they each settled charges from the SEC that they made false and misleading statements about a foreign exchange trading program they sold to investors.

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Permission, Disclosure Required Before Tapping Funds to Keep Business Afloat

February 17, 2017
It probably canít hurt to be reminded that the funds an adviser manages are not piggy banks that advisers can dip into when needed. Even if an advisory firm believes it is entitled to compensation beyond what it is contractually due, any such remuneration must be approved by the fundís investors and fully disclosed.

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SEC Cherry-Picking Dragnet Yields Adviser Plea Bargain and Civil Settlement

February 10, 2017
Allocation of trade results that consistently favor an adviserís own accounts over his clients are likely to gain the attention of government enforcement officials. One adviser just found that out the hard way.

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SEC Focus on Conflicts of Interest Leads to Settlement with Private Fund Adviser

February 3, 2017
Disclosure of conflicts of interest has long been a priority for the SEC in its policing of financial service firms. So when the agency conducted an examination of a public equity fund adviser in 2014 and found what it believed to be potential conflicts of interest that were not disclosed, it mounted an enforcement action that resulted in a settlement.

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10 Advisory Firms Learn the Meaning of Pay-to-Play

February 3, 2017
If only they had monitored the political contributions their employees made. Then, they wouldnít be getting all this bad publicity, SEC attention, and having to pay fines ranging from $35,000 to $100,000.

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Advisory Firm Owner and Lawyer Settle with SEC After Deception Allegations

January 27, 2017
The founder and former majority owner of an investment advisory firm and an attorney he worked with found themselves on the wrong side of an SEC enforcement action this month involving allegations of secret referral fees, attempts to mislead SEC investigators and deceiving clients on whether an investigation was even underway.

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Examination Findings Led to Court Actions Against Platinum’s Founder

January 27, 2017
Platinum Partners received quite a bit of negative publicity since the civil and criminal charges against the hedge fund managerís founder and two of its subsidiary advisory firms in U.S. District Court last month. But perhaps less publicized was that much of the enforcement action began after an SEC examination found evidence of wrongdoing.

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Supreme Court Will Review Whether Time Limits Apply to Disgorgement

January 20, 2017
Those committing fraud may no longer have to disgorge money if five years pass after the theft was committed. It all depends on what the Supreme Court decides after hearing a case it just agreed to review.

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Private Fund Adviser Charged with Failure to Disclose Conflicted Transactions

January 13, 2017
The SECís enforcement activities against private fund advisers apparently are not limited to those that registered with the agency. Consider the case of Chicago-based Augustine Capital Management, which, along with two of its three owners, was recently charged by the SEC with a myriad of allegations, including failure to disclose conflicted transactions to investors.

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SEC Use of Administrative Law Judges Unconstitutional, Appeals Court Rules

January 6, 2017
The battle over administrative law judges goes on, and it increasingly looks like the U.S. Supreme Court will be the final arbiter.

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PIMCO Settlement Demonstrates SEC Scrutiny of ETF Performance Claims

December 30, 2016
The SEC is paying close attention to exchange-traded funds and how their performance is reported to investors. If you have any doubt, consider the agencyís nearly $20 million settlement with Pacific Investment Management Company.

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2016 in Review: Enforcement, New Rules and Cybersecurity

December 16, 2016
A lot happened in 2016, but the question hovers like a cloud over the asset management industry: Will Donald Trump change all that?

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Protect Your Firm from Investment Performance Scrutiny

December 8, 2016
The SEC has made no secret about its focus on how advisers and their sub-advisers represent investment performance. Recent agency settlements with advisory firms highlight the need for advisers to take necessary steps so they do not find themselves in the crosshairs.

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Supreme Court Sides with Prosecutors in Insider Trading Case

December 8, 2016
The U.S. Supreme Court on December 6 gave Justice Department and SEC prosecutors an early holiday gift: it unanimously rejected a challenge to a lower court ruling on an insider trading case. In doing so, the Supreme Court returned one of the standards by which insider trading cases are judged to approximately where it was prior to 2014.

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Settlement with Auditing Firm Shows SEC Ongoing Focus on Gatekeepers

December 2, 2016
A pair of recent settlements between the SEC, an audit firm and the firmís former engagement partner provide increased evidence, if more is really needed, that the agency remains determined to pursue "gatekeepers" Ė accountants, attorneys, consultants and others Ė to ensure compliance among investment advisers.

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Beware the CAT: More Scrutiny Likely After Approval of Trading Database Plan

December 2, 2016
The SEC will soon be able to track trading activity in domestic equity and options markets to within 100 microseconds. Once it is active, the Comprehensive Audit Trail (CAT) will allow the agency to conduct not only more focused investigation of broker-dealers, but also of advisers. The agency recently approved the plan to create this single, comprehensive database, which is expected to be up and running within two years.

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