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The weekly news source for investment management legal and compliance professionals

Topic: Trade Aggregation/Allocation

Latest Cherry-Picking Case Includes Improper Fee, Investment Strategy Charges

June 23, 2017
Itís no secret that the SECís Division of Enforcement is targeting advisers that misallocate trade results to favor themselves, a practice known as cherry-picking. What is also turning up in some of these enforcement actions are additional charges, such as improper fees and deviations from investment limitations.

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Trade Allocation Not Consistent with Client Disclosure is Enforcement Red Flag

May 12, 2017
Make sure your trade allocation practices match what you promise in your disclosures. Any deviation between them Ė even if your firm thinks itís fair to the client Ė can land you in hot water with the SEC.

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SEC Cherry-Picking Dragnet Yields Adviser Plea Bargain and Civil Settlement

February 10, 2017
Allocation of trade results that consistently favor an adviserís own accounts over his clients are likely to gain the attention of government enforcement officials. One adviser just found that out the hard way.

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Liquidity Risk Management Rule Compliance: Don’t Wait for 2018, Prepare Now

October 28, 2016
December 1, 2018 may seem like a long time away, and June 1, 2019 even longer. But smart chief compliance officers at advisory firms managing mutual and exchange-traded funds will not let those dates lull them into putting off needed preparations to comply with the SECís final liquidity risk management rule, adopted earlier this month. The time to begin compliance preparations is not in 2018 or 2019, but now.

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Another Adviser Charged in SEC’s Cherry-Picking Crackdown

October 21, 2016
Advisers engaging in the practice of allocating profitable trades to themselves rather than to their clients need to beware. Not only is the practice illegal and a violation of their fiduciary duty, the SEC is making a point of putting a stop to such activity when it finds it.

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Private Equity Adviser Exams: Fees and Expenses Likely to Dominate the Visit

August 19, 2016
Advisers to private equity funds preparing for a visit from SEC examiners need to keep their eye on the ball: While examiners may inquire into a number of areas, the bulk of the visit is likely to be spent on the fees and expenses charged to funds and portfolio companies.

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SEC Use of Data Analytics Helps Drive Another Cherry-Picking Settlement

August 5, 2016
The SECís crackdown on advisers allegedly performing fraudulent trade allocations Ė more commonly known as "cherry-picking" Ė is alive and well, as is the agencyís reliance on data analytics to make its case.

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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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SEC Links Two More Cherry-Picking Cases to Data-Driven Enforcement Initiative

April 29, 2016
The SEC is holding up two new cherry-picking enforcement actions as examples of its use and analysis of data. But whether the new cases were brought because of information uncovered by data analysis, or whether data analysis simply reinforced information that was already provided, remains something of an open question.

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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 fundís governing documents just how those expenses will be allocated. Failure to provide such disclosure is a red flag likely to draw SEC attention.

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Cherry-Picking Initiative Yields First Settlement

October 30, 2015
The first catch in the SECís cherry-picking initiative has resulted in the adviser in the case being barred from the securities industry and having to pay a $300,000 fine, plus disgorgement and interest of about $418,000.

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Protect Your Firm from the SEC’s Cherry-Picking Initiative

October 2, 2015
The SEC is going after firms that misallocate trades to favor certain clients or the traders themselves Ė a practice known as cherry-picking. Chief compliance officers can stay one step ahead of the crackdown by taking steps to ensure they detect the practice before the agency does.

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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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40 Months in Prison Plus $788,000: The Price of Cherry Picking

January 23, 2015
The short-term gains of cherry picking are simply not worth it, particularly when they bring long time pain in the form of incarceration, a civil money penalty, damaged credibility and a ruined career.

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Cross-Trading Settlement Demonstrates Peril of Favoring One Client Over Another

February 7, 2014
As fiduciaries, advisers are required to act in the best interests of their clients. That can get tricky when effecting cross trades between two funds. How do you get each the best deal without harming the other?

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Cherry Picking and Misuse of Soft Dollars Drive SEC Case Against Firm

September 13, 2013


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Analyze Your Trade Blotter and Increase Compliance

August 3, 2013


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