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The weekly news source for investment management legal and compliance professionals

Topic: SEC Operations and Agenda

Discovery of Fraudulent Registration Offers No Relief from Rule Compliance

April 20, 2018
One might think that an advisory firm charged with misstating its assets under management in order to register with the SEC could take some solace in believing that it never had to comply with agency rules. After all, such an adviser might think, the Custody Rule, the Books and Records Rule, the Advertising Rule and other rules apply only to SEC registrants. But such an assumption would be a mistake.

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SEC Proposes Broker-Dealer Best Interest Standard, Adviser Fiduciary Interpretation

April 20, 2018
The SEC on April 18 laid down its initial markers on the subject of standards of conduct for both broker-dealers and advisers – while making clear that it expects and welcomes changes.

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New Share Class Settlements May Increase Self-Reporting Pressure on Advisers

April 13, 2018
Is it a coincidence? With just under two months before the SEC’s Share Class Selection Distribution initiative’s self-reporting deadline, the agency on April 6 announced new share-class settlements with three advisory firms containing civil money penalties that collectively total almost $2 million. The SEC used the occasion to issue a press release that "strongly encourage[s]" advisers to participate and avoid such fines themselves.

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Exam Referrals to Enforcement: How Much Should Advisers Worry?

April 13, 2018
It’s every advisory firm’s nightmare. SEC examiners visit, find some deficiencies and suggest some corrective actions, which the adviser makes. Some months later, the advisory firm learns that it is the subject of a Division of Enforcement investigation, based on a referral from the exam team.

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SEC’s Information Security Found Wanting by its Inspector General

April 6, 2018
The SEC continues to have a way to go to improve its own cybersecurity. A new audit from the agency’s Office of the Inspector General has found that information security at the SEC in at least six of seven functional areas is two levels below what is needed.

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SEC Commissioner Adds Her Voice to Call for Retrospective Rules Review

March 30, 2018
SEC commissioner Hester Peirce has made no bones about it: She wants the agency to conduct ongoing retrospective reviews of existing rules to see if those rules, both individually and collectively, "accomplish what they were designed to do."

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SEC Moving Forward on Exchange-Traded Funds Rule

March 23, 2018
The SEC under chairman Jay Clayton has a relatively short list of regulatory priorities for 2018, and one that appears to be on the high-priority track is proposing an Exchange-Traded Funds Rule. Division of Investment Management director Dalia Blass, who spoke on the need for such a rule at a recent conference, is clearly an advocate of getting such a rule adopted.

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SEC Reverses Itself and Votes Against Public Reporting of Liquidity Classifications

March 16, 2018
In something of a turnaround, the Commission on March 14 voted, 3 to 2, to change a previously adopted liquidity classification requirement. Under the proposed amendments, funds will no longer need to publicly report the classification buckets their securities fall into. Instead, they will simply need to provide a qualitative narrative describing how their liquidity risk management programs are working.

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Cryptocurrencies: Caution is the Watchword as This Digital Avenue Grows

March 2, 2018
Digital currencies such as bitcoin and ethereum may be the wave of the future – but that future is not here yet and may not be for a while. Advisers, investment companies and broker-dealers looking at cryptocurrencies should consider holding back until the SEC and other regulators work out a number of outstanding questions, many of which have a direct bearing on investor protection and fiduciary duty.

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SEC 2019 Budget Request Seeks to Restore Cuts from Previous Years

February 23, 2018
The hiring freeze for the SEC will be over if the Trump Administration and Congress approve the agency’s $1.658 billion budget request for fiscal year 2019. The request represents a 3.5 percent increase over FY 2018 budget of $1.602 billion and would restore 100 positions and 50 full-time equivalents that were lost since approximately FY 2016, after which the budget remained "essentially flat," according to the agency.

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SEC Extends Liquidity Rule Classification Deadline by Six Months

February 23, 2018
Mutual fund managers concerned about the requirements of the SEC’s Liquidity Risk Management Rule got a partial reprieve on the evening of February 21. The Commission voted to create an interim final rule extending the compliance deadline for the most contentious part of the Rule – the requirement that open-end funds classify their securities into four liquidity groupings, often referred to in the industry as "buckets" – by six months.

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Advertising Rule Reform: What to Expect

February 9, 2018
Reform of Rule 206(4)-1, the Advertising Rule, has long been a goal of many in the investment advisory community. With the new SEC chair, Jay Clayton, now indicating that he too would like to see some long-term agency rules revisited, it is beginning to look like 2018 may be the year when the Advertising Rule is brought in line with the realities of today’s business world.

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SEC Liquidity Risk Management FAQs Flesh Out ETFs, Role of Subadvisers

January 18, 2018
Funds and advisers with questions about liquidity risk management programs may breathe a bit easier – at least if some of those questions pertained to how in-kind exchange-traded funds work and the role of sub-advisers. The SEC’s Division of Investment Management on January 10 issued FAQs that address at least some of the questions that have arisen in these areas.

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SEC May Propose Its Own Fiduciary Rule by Second Quarter

January 12, 2018
It’s an ambitious target, but the SEC is reportedly planning to propose a Fiduciary Rule that would cover all brokers – not just those selling retirement accounts – by the second quarter of this year. That could mean that there will be a proposed rule in about 10 weeks, but it could also mean in about five months, depending on whether "by the second quarter" means the beginning or the end of that quarter.

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Peirce and Jackson Approved as SEC Commissioners

December 29, 2017
The SEC once again has a full set of commissioners. Hester Peirce and Robert Jackson were both approved by the U.S. Senate on December 21, returning the total number of commissioners to five for the first time since 2015.

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2017 in Review: A New SEC, Cybersecurity Threats and the Fiduciary Rule

December 29, 2017
The past year saw a great deal of change and development in the asset management community, but three loom larger than others: A new SEC with Jay Clayton at the helm, bringing different priorities than his predecessor; exacerbating cybersecurity concerns, with the SEC itself one of the victims; and the Department of Labor’s Fiduciary Rule and its exemptions, delays in their taking effect, and the increasing likelihood of SEC involvement in the process.

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2018: What Advisers Should Expect in the Year Ahead

December 29, 2017
Prognostication is always a bit of a guessing game. What may look like priorities in January may be replaced by other issues in the latter part of the year or may be driven by external and internal events, politics and the marketplace. Whatever may occur, 2018 is already marked as a year for change in the asset management industry.

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Cybersecurity Concerns Cause SEC to Delay Reporting Requirements

December 15, 2017
Investment companies and their advisers now have nine more months to comply with new EDGAR reporting requirements, the SEC said on December 8. It tied the delay to cybersecurity steps that the agency is or will be undertaking.

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Enforcement Unit Chief Named

December 8, 2017
Daniel Michael is the new chief of the SEC Division of Enforcement’s Complex Financial Instruments Unit, the agency announced December 7. The unit is composed of attorneys and industry experts in various offices nationwide who investigate potential misconduct related to complex financial products and practices involving sophisticated market participants.

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OIG Turns Spotlight on SEC Exam Program, Data Center Management Problems

December 8, 2017
Every six months, the SEC’s Office of the Inspector General issues a report to Congress in which it updates its progress in investigating aspects of the Commission’s activities. In its latest report, released December 1, the watchdog arm of the SEC takes aim at, among other things, the Office of Compliance Inspections and Examinations’ investment adviser exam controls, and the agency’s management of its data centers

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