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

Topic: Fund Disclosure

Fraud Charges Demonstrate that Actions Must Match Disclosures

February 8, 2019
Telling investors one thing and then doing another is often a recipe for trouble. This may have been particularly true for one advisory firm that the SEC charged January 26 with promising some investors that portions of their profits would be used to protect their investments but instead were used to pay the living expenses of the firm’s owner.

Read More

Fund Association Wants SEC to Propose Rule for Summary Shareholder Reports

November 2, 2018
The Investment Company Institute (ICI) has made a proposal to the SEC as part of its answer to the agency’s request for comment on ways to enhance fund disclosure for investors. The association, which represents regulated funds worldwide, suggested in a comment letter that the Commission propose a rule creating a new, optional summary shareholder report that would ostensibly make the full shareholder report easier for investors to understand while also helping them compare funds.

Read More

Blass Wants Readable Fund Disclosures, Opens Door to New Derivatives Rule

November 2, 2018
SEC Director of Investment Management Dalia Blass donned the mantle of a writing coach in a recent speech to investment company professionals, urging those who write fund disclosures to “tell a clear story,” “write clearly and consistently,” and watch for individual sentences that contain more than 70 words.

Read More

Concealing Asset Values Won’t Solve Problems, May Bring SEC Charges

September 28, 2018
No adviser wants to see declines in the asset values of the client accounts they manage. Concealing those declines from clients and regulators, however, is not the answer. Not only will clients find out and likely be quite upset, but there is a good possibility the SEC’s Division of Enforcement will take notice. Better to come clean about the true state of affairs.

Read More

Settlement Shows Peril of Failing to Disclose Conflicts of Interest

August 24, 2018
Advisers that receive more than fees when clients follow their recommendations and invest in entities from which the adviser receives a financial incentive need to be very careful. Conflicts of interest not only should be avoided – they must be disclosed.

Read More

Associations Support Proposed Liquidity Rule Changes. . . But Suggest More

June 15, 2018
The period for public comments on the SEC’s proposed amendments to the Liquidity Risk Management Rule is over, and the comments, at least from three major associations in the asset management community, appear to be positive – but with suggestions for more changes.

Read More

SEC Adopts Rule Bringing Fund Report Delivery into the 21st Century

June 8, 2018
The Commission, perhaps realizing that what looked like the future is already here, on June 5 made a quantum leap: It adopted a Rule allowing mutual funds, exchange-traded funds and other investment funds to offer investors the ability to give up paper shareholder reports and instead opt to view those reports online.

Read More

New Law Reforming Dodd-Frank Affects Advisers and Funds

May 31, 2018
Now that the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) has been signed into law, what’s in it for investment advisers and investment companies? Not a lot, it turns out, but there are key measures that advisory firms and funds should be aware of.

Read More

SEC Files Misrepresentation Charges Against Adviser Raising Money to Flip Real Estate

February 2, 2018
Flip or flop? Advisers seeking to raise money from clients and investors for the declared purposed of flipping residential properties would be wise to ensure that the dollars raised go to that purpose. The SEC has filed charges against an adviser and others for allegedly failing to do just that.

Read More

Undisclosed Investment Strategy Changes Unlikely to Save the Day

January 26, 2018
An adviser may start a fund with high expectations, but find that, for a number of reasons, returns do not come in as expected, and in fact go south. Advisers in such situations may be tempted to turn to a higher risk/higher reward investment strategy in the hope it will make up for the losses. Those that do should be aware that such a move may bring with it business and compliance challenges that no adviser wants to face.

Read More

Failure to Provide Counsel with Key Information Likely Won’t Pass SEC Muster

October 13, 2017
When seeking legal advice, advisers should provide all relevant material facts to the attorney. Failure to do so may result in a legal opinion that won’t stand up to SEC scrutiny.

Read More

Fund Managers Should Disclose Before Using One Fund to Prop Up Another

August 25, 2017
Recipe for a conflict of interest: An adviser managing two funds causes one fund to invest in the second – but fails to disclose the investment to the investors of the first fund. The fund receiving the investments uses them to finance and help grow the advisory firm.

Read More

SEC Issues FAQs to Guide Investment Companies Through Reporting Changes

July 28, 2017
We’re halfway through 2017 and some eyes are already on changes that 2018 will bring. An example in point is the SEC’s Division of Investment Management, which this month issued guidance in the form of FAQs to help investment companies and their managers meet the new reporting requirements that begin next year.

Read More

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.

Read More

Warning: Avoid Mixing Client and Adviser Money in the Same Illiquid Assets

September 8, 2016
It’s a recipe for conflict of interest: An advisory firm with an equity stake in certain illiquid assets adds client dollars to those assets – and fails to disclose to the clients that it is doing so. Sound unlikely? Charges alleging just that were leveled against a Salt Lake City-based adviser and two of its executives.

Read More

New OCIE Target: Adviser Share Class Recommendations

July 15, 2016
The SEC’s Office of Compliance Inspections and Examinations has found its next target: Advisers that receive compensation or financial incentives for recommending mutual fund and 529 Plan share classes with substantial loads or distribution fees. OCIE wants to know whether such arrangements involve conflicts of interest, are properly disclosed, and are covered by an advisory firm’s written compliance policies and procedures.

Read More

New Guidance Calls for Disclosure of Risks from Changing Market Conditions

March 18, 2016
The SEC is relentless in seeking that funds and the advisers that manage them disclose risks to investors. It has done so for risks involving a fund’s principal investments; the volatility, leverage, liquidity and other risks that come with investments in derivatives; and even the risks posed by fund names that may be perceived as suggesting safety and protection from loss. Now it wants updated disclosures of risks caused by changing market conditions.

Read More

Investment Strategy Changes: Don’t Get Burned by Failing to Disclose

March 4, 2016
Many advisers will re-evaluate and change their investment strategies over the course of a client’s life. It’s part of making sure that clients get the best returns. What a shame, then, when some of those advisers cause new problems for themselves and for their clients by failing to disclose those changes.

Read More

White Justifies SEC Push to Go Beyond Disclosure

February 26, 2016
SEC chair Mary Jo White last week laid out her case for agency actions that take the SEC beyond its traditional role of requiring disclosure to one of requiring more substantive steps, among them the recently proposed rules on derivatives and liquidity management. Advisers should take note: It’s not your grandparents’ SEC anymore.

Read More

Broken Deal Expense Allocations: A Question of Disclosure

February 19, 2016
The key for private equity and other funds allocating broken deal expenses is that they explicitly disclose in the fund’s governing documents just how those expenses will be allocated. Failure to provide such disclosure is a red flag likely to draw SEC attention.

Read More