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The weekly news source for investment management legal and compliance professionals

Topic: Enforcement

Former Private Equity Adviser Partner/CCO Settles Conflict of Interest Charges

August 16, 2018
Itís probably never wise for an adviser to condition an investment on a personal transaction Ė and itís almost certain that if the arrangement is undisclosed and client approval is not obtained, whoever was behind it is courting trouble from the SEC.

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Five Settlements Show the SEC’s Determination to Enforce the Testimonial Rule

August 16, 2018
Thereís talk of the SEC revising parts of the Advertising Rule, including its ban on testimonials. That day may come, perhaps sooner than later Ė but until it does, the agencyís Division of Enforcement is making clear that violations of the Advertising Rule, in particular its testimonial ban, will be prosecuted.

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Refund Unearned Advisory Fees as Contracts and Policies Stipulate

August 10, 2018
Advisory firms receiving requests from clients to refund their advisory fees need to do so on time and in accordance with their advisory contracts, policies and procedures, and other disclosures. Failure to do so, whatever the reason, may draw attention from SEC examiners and possibly the Division of Enforcement.

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Compliance Officer Latest to Settle AML Charges in Aegis Capital Case

August 3, 2018
The SEC wants anti-money laundering rules followed Ė and will go after both firms and individuals at firms that it believes violate those rules. A compliance officer at a dually-registered adviser and broker-dealer learned this the hard way earlier this month after he allegedly failed to file Suspicious Activity Reports on hundreds of transactions.

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Failure to Offset Fees May Result in Payments to Both Clients and the SEC

July 27, 2018
Itís great when fees come in, whether for management, consulting or something else. But check your governing documents Ė not all fees are meant to be kept by the advisory firm, and keeping such fees may result in a visit from the SECís Division of Enforcement staff.

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OIG Recommends Seven Changes in SEC Use of External Experts

July 20, 2018
The SEC has had its eye on advisory firm use of external experts and taken enforcement action when it found problems. Now the agency itself is under the spotlight. The OIG recently recommended seven steps it wants the SEC to take in its own use of external experts.

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Trump Gives SEC and Other Agencies More Leeway in Choosing ALJs

July 20, 2018
President Donald Trump on July 10 allowed the SEC and other agencies that employ administrative law judges greater leeway in just how they find and hire those ALJs. Some industry observers are welcoming the move as an important step to streamline the hiring process, while others are questioning whether politically appointed agency heads will now be able to appoint ALJs that meet their political points of view.

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Third-Party Agreements: Ensure Clients Don’t Get Burned by Conflicts of Interest

July 13, 2018
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 donít create conflicts of interest with clients. When that happens, the agreements may bring in more than additional revenue Ė they may bring in SEC examiners and investigators.

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Expect Kavanaugh to Stay in Line with Supreme Court Securities Rulings

July 13, 2018
Should federal appeals court Judge Brett Kavanaugh be confirmed as a Supreme Court justice, as many commentators think likely, donít expect him to rock the boat when it comes to rulings involving the nationís 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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Wells Process: Enforcement Co-Director Offers Best Practices for Defense

July 6, 2018
SEC Division of Enforcement co-director Steven Peikin may not be in the business of helping defense attorneys win their cases, but he recently offered some advice that might be worth their time: Doís and doníts in having a productive Wells meeting.

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SEC Strategic Plan Draft Calls for Cybersecurity, Enforcement, Revisiting Rules

July 6, 2018
The SECís draft five-year strategic plan for 2018 through 2022 Ė the first released by chairman Jay Clayton Ė centers around three high-concept goals: Investors, innovation and performance. Within those three goals, however, are more practical initiatives focusing on a variety of topics, including cybersecurity, enforcement and revisiting existing rules.

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Hedge Fund Manager Fined Over Inflated Assets Despite Personally Recapitalizing Fund

June 22, 2018
Sometimes personal efforts to make things right donít entirely work. A case in point might be when a managing member of a hedge fund advisory firm personally recapitalizes a fund after it is all but wiped out Ė and is then fined by the SEC anyway.

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Check Out Audit Team Members before Retaining Firm

June 22, 2018
It is essential that accounting firms hired to perform audits Ė and their individual audit team members Ė 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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Repeated Failures to File Form PF Lead to Censure and Fines from the SEC

June 8, 2018
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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Hedge Fund Advisers that Inflate Asset Value Likely to Draw SEC Attention

May 31, 2018
It may sound like a way to bring in investor dollars, but in reality it is more likely to bring in SEC investigators. Hedge fund advisers tempted to lure new investors and keep existing ones by taking questionable steps to increase fund value run the risk of being taken to court by the SEC for fraud.

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Enforcement Co-Directors Take Issue with Disgorgement Time Limits

May 31, 2018
The SEC doesnít like having to comply with the statute of limitations when it comes to disgorgement. Division of Enforcement co-directors Stephanie Avakian and Steven Peikin, in testimony before a panel of the House Committee on Financial Services, made clear that, in some cases, five years may not be long enough.

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Hedge Fund Adviser Execs May Face Personal Fines if They Ignore Red Flags

May 18, 2018
A chief financial officer at a hedge fund advisory firm on May 8 settled SEC charges that he failed to act on red flags involving asset mismarking and insider trading. The firm ended up paying more than $10 million, and the CFO agreed to separately pay a $100,000 fine. The lesson: Advisory firm executives need to be on the lookout for signs of fraud, and act on them when they find them.

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SEC Should Not Prioritize Enforcement Over Other Parts of its Mission: Peirce

May 18, 2018
SEC enforcement is important and must continue, but has gone too far. While enforcement is necessary, agency staff should use it as a last resort and rein in the kind of enforcement-by-numbers philosophy that the SEC has been using over the past few years.

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SEC Keeps Gatekeepers in Its Sights with New Accounting Firm Settlement

May 11, 2018
The SEC made it known back when Mary Jo White was the agency chair that it would go after what it terms "gatekeepers" Ė attorneys, accountants, consultants and others Ė if it believes they took part in fraud. With its May 4 settlement with an accounting firm and two of the firmís partners, chairman Jay Clayton signaled that his SEC will do the same.

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DOL Won’t Enforce Prohibited Transactions Claims in Light of Court Action

May 11, 2018
The last rites for the Department of Laborís Fiduciary Rule are turning out to be an extended affair.

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