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The weekly news source for investment management legal and compliance professionals

Topic: Fund Governance

SEC Adopts Final Liquidity Risk Management and Related Rules with Changes

October 14, 2016
The SEC adopted its final liquidity risk management rule, along with related rules and amendments, on October 13. While the final rule has some significant changes from the proposed version Ė such as reducing the number of liquidity classifications from six to four Ė it will still have a significant effect on how mutual funds and other open-end management funds conduct business.

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IAA Tries to Steer Global Body Away from Single Leverage Measurement

September 30, 2016
The Investment Adviser Association is unhappy with a recent recommendation from the Financial Stability Board that a "single simple way" for asset management firms to measure leverage be developed and used worldwide. In a September 21 letter to the FSB, the IAA argued that such an attempt would be unlikely to work.

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Funds with Overlapping Trades Require Complete and Accurate Disclosure

June 24, 2016
Broad investment strategy disclosures that really donít say much may not pass muster with the SEC. Consider the agencyís June 3 settlement with a hedge fund manager because its disclosures about overlapping trades and resulting allocations between funds werenít as precise as the SEC thought they should be.

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Fund Managers Seek Changes in Proposed Derivatives Rule

April 8, 2016
How caps on derivatives leverage should be measured, the kinds of assets that qualify as liquid, even whether certain kinds of funds need fear for their very existence: These are just some of issues that fund managers raised in their public comments on the SECís proposed rule on derivatives.

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Vetting Board Members: A Small Role for CCOs, but an Influential One

April 1, 2016
The SEC appears to be putting increasing responsibility on investment company board members. The proposed rules for both liquidity management and for derivatives list board involvement as a key ingredient in mitigating risk. It stands to reason that the members chosen for a board are vetted to ensure they bring the right experience and expertise to the table.

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Grim Calls on Mutual Funds to Revisit How They Choose Illiquid Investments

March 18, 2016
Should open-end funds avoid certain illiquid investments? Itís an issue that fund management and boards need to think about, particularly in light of this past Decemberís Third Avenue Management debacle.

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Multiple Disclosure Issues Lead to Enforcement Against Hedge Fund Manager

February 5, 2016
Disclosure is a basic requirement of most SEC regulations. If you want a visit by the SEC, failure to disclose, particularly when it occurs more than once, is one of the best ways to ensure that you get one.

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Fund Managers Challenge SEC Liquidity Risk Management Proposal

January 29, 2016
Fund managers, like a number of industry associations, are sounding the alarm in regard to elements of the SECís proposal to manage liquidity risk.

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Bricks and Mortar: Real Estate Investments Provide Unique Challenges

January 22, 2016
Private funds that invest client money in illiquid real estate Ė true bricks and mortar as opposed to real estate securities Ė face unique challenges. Not least among them is scrutiny from the SECís Office of Compliance Inspections and Examinations.

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Liquidity Risk Management: Associations Want Proposed Rules Revised

January 22, 2016
Major securities industry associations want the SEC to slow down and revisit their proposed rules to manage liquidity risk. While they support the general principle of regulating liquidity risk, they find specific elements of the proposed rules problematic, among them how funds should classify such risks, a requirement that funds maintain a three-day minimum liquidity amount, and a swing pricing option.

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SEC’s Proposed Derivatives Rule Seeks to Limit Fund Use of Leverage

December 18, 2015
Mutual funds and other funds that invest in derivatives are in a new ballgame. The SECís proposed derivatives rule would place new risk management caps on the use of these financial instruments by mutual funds, ETFs, closed-end funds and business development companies. The result will be a lot of additional work for firms managing such funds, particularly if the funds are heavily invested in derivatives. Some advisers and fund managers may ask themselves if the effort required by the proposed new rule is worth it and may choose to lessen their reliance on derivatives.

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Private Equity + Conflict of Interest + Failure to Disclose = SEC Enforcement

November 13, 2015
Hereís a recipe sure to draw the SECís attention, direct from the Division of Enforcementís cookbook: Take one private equity firm, add a tablespoon of conflict of interest, mix, and then bake. When done, divide among selected colleagues and enjoy the finished product in private. Be sure not to share the recipe with clients, investors or board members. Warning: This recipe may prove significantly more expensive than expected, and you may not be doing much more baking after agency charges lead to a costly settlement.

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Proposed Liquidity Management Rules Would Change How Mutual Funds Work

September 25, 2015
The SECís proposed set of liquidity risk management rules for mutual funds and exchange-traded funds are likely, if adopted as written, to make major changes in how those funds, and the advisers who manage them, do business.

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Real Estate Investments: Don’t Fail to Supervise Fund Managers

September 11, 2015
Thereís no substitute for effective and implemented supervision policies and procedures, particularly if those being supervised are remotely located Ė as one adviser and its director of compliance discovered after settling a case with the SEC.

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One in a Million: SEC Data Analytics and Cherry-Picking

July 17, 2015
After the simulation was run one million times, the SEC knew the advisory firm owner could not have profited that much by chance.

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Misallocation of CEO Compensation Adds Penalty to Adviser’s Ledger

May 15, 2015
If the charges in an SEC settlement are to be believed, an adviser and its chief financial officer/chief compliance officer attempted to deceive the board of directors of a fund series by misallocating the adviser CEOís salary in an attempt to make profits look consistent. Now it is paying the costs of a settlement instead.

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Money Market Fund FAQs Raise More Questions

May 8, 2015
Sometimes attempts to bring clarity raise more questions. So it may be with the SEC staffís recent issuance of a large set of answers to frequently asked questions about its July 2014 money market fund amendments and a smaller set of FAQs involving related valuation issues.

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OCIE Turns Its Attention to Never-Before-Examined Investment Companies

May 1, 2015
Mutual funds, open-end funds and other investment companies that have never been examined should start getting a bit nervous: Examiners may be coming.

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Diversion of Investor Dollars During Fund Wind-Down Draws SEC Ire

January 9, 2015
Winding down a fund is not an opportunity to divert money to other investments Ė thatís just misappropriation of client assets, otherwise known as theft.

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SEC Keeps Its Eye on the Alternative Mutual Fund Ball

November 7, 2014
Sunlight is often described as the best way to prevent infections. The SEC wants the sun to shine very brightly on alternative mutual funds.

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