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The weekly news source for investment management legal and compliance professionals

Topic: Fund Governance

Treasury Urges Liquidity Rule Compliance Date Delay, No Classification Buckets

November 3, 2017
The Treasury Departmentís recommendations that the SEC postpone at least one of the scheduled compliance dates for Rule 22e-4, the Liquidity Risk Management Rule, and eliminate the requirement that funds categorize assets into four liquidity classifications was an industry-friendly move that will likely find much applause in the asset management industry.

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Sub-Advisers and Their Role in Liquidity Risk Management Rule Compliance

October 20, 2017
Advisory firms are taking steps to comply with the Liquidity Risk Management Rule. With the compliance dates approaching Ė funds with more than $1 billion in net assets have only a little more than a year left to comply Ė smart advisers are not letting the grass grow under their feet. They are getting the preparation process underway in a variety of areas, among them the role that sub-advisers will play.

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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 wonít stand up to SEC scrutiny.

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Jury Rules Against F-Squared Founder in Federal Court

October 13, 2017
The SEC came out the winner on October 6, when a federal jury ruled against advisory firm F-Squared Investments founder and former CEO Howard Present in a case the agency brought almost two years ago in federal district court.

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Failure to Disclose Reserve Funds and Related Fees May Lead to Enforcement

September 15, 2017
Reserve funds are sometimes created and used by advisory firms to "smooth" investor earnings or to ensure redemption requests can be met. Advisers that do so must disclose such a fundís existence, ensure that fee policies are disclosed and avoid conflicts of interest. Failure to do so may lead to problems with examiners and agency enforcement.

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DOL Proposes Fiduciary Rule Exemptions Delay, Considers Further Measures

September 7, 2017
The Department of Labor keeps finding ways to prevent key elements tied to its Fiduciary Rule from taking effect. The latest: an 18-month application date delay on three Rule exemptions, the likelihood that the DOL will "in the near future" propose "a new and more streamlined class exemption," and calls for comments in several other areas.

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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 Ė 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.

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Hedge Fund Manager Ordered to Pay $13 Million in Investor Fraud Case

August 25, 2017
Donít promise what you canít deliver, donít overvalue investments and donít take from Peter to pay Paul. Those seem to be the main lessons drawn from a federal courtís judgment against a hedge fund manager that the SEC has litigated against for the past seven years.

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Liquidity Risk Management First Steps: Define Program, Assign Responsibility

August 25, 2017
Thereís no time like the present for fund managers to start working on compliance with the SECís Liquidity Risk Management Rule. The compliance deadline may be months away, but wise firms will use that time to begin the compliance process by assigning responsibility and defining a program that matches their fundsí investment portfolios. Those that do will be well-positioned to tackle the additional compliance challenges that await. Those that donít may find themselves scrambling as compliance deadlines approach.

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SEC Issues FAQs to Guide Investment Companies Through Reporting Changes

July 28, 2017
Weíre halfway through 2017 and some eyes are already on changes that 2018 will bring. An example in point is the SECís 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.

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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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