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The weekly news source for investment management legal and compliance professionals

Topic: Trading Desk Issues

Trade Pre-Clearance and Blackout Periods: Use Them Wisely

April 13, 2018  Trade pre-clearance and blackout periods are two reliable methods used by advisers seeking to avoid certain kinds of problems when trading securities or with personal trading. That’s not to say, of course, that these methods don’t carry their own problems if not done right.
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Restricted Lists: Update, Monitor and Avoid Common Errors

April 6, 2018  Many advisory firms maintain "restricted lists:" compiled names of companies and securities with which they do not allow trading. These lists protect an advisory firm from a number of dangers – but advisers with such lists need to ensure they are properly updated, monitored and that they avoid mistakes that may cause problems down the road.
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F-Squared Founder Ordered to Pay More than $13 Million

March 30, 2018  The F-Squared Investments saga seems to open or close a new chapter every few months since 2014, when the SEC first brought charges against the advisory firm for allegedly making false and misleading statements about its investment strategy algorithm. The latest development occurred March 22, when a federal judge ordered that F-Squared founder and former CEO Howard Present personally pay $13 million, including a $1.58 million civil money penalty, following his loss at trial this past October.
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Follow State Restrictions When Offering Investments to Public Pension Plans

December 8, 2017  Just because a state allows its public pension plans to place money in types of funds that it had previously not allowed does not mean that advisers should rush in with investments. As with any type of investment, the fine print needs to be read first.
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Clayton Rejects Request to Extend CAT Deadline

November 17, 2017  SEC chairman Jay Clayton on November 14 issued a nuanced statement?rejecting a request from the national securities exchanges and FINRA to delay the initial deadline of the Comprehensive Audit Trail – better known as the CAT – by a year, and other deadlines by a year or more. His decision leaves at least the short-term implementation of the much-discussed high-tech tool up in the air.
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SEC Provides Temporary Relief from MiFID II Research Requirements

October 27, 2017  Advisers and broker-dealers can relax – at least a bit. In a trio of no-action letters issued October 26, the SEC assured them that they will not take enforcement actions against them if they fail to meet certain European Union requirements regarding research dollars and more that take effect January 3.
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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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Settlement Shines New Light on Old Practice of Scalping

October 6, 2017  With ever-more sophisticated securities transactions seemingly becoming the norm, the SEC increasingly relies on its own high-tech abilities to identify fraud. Elaborate new ways of investing and transacting should not, however, distract compliance departments from monitoring their firms for some of the most basic kinds of fraud. The practice known as "scalping" is a case in point.
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12b-1 Fees: SEC Settles Share Class Charges with Two More Advisers

September 29, 2017  If you think the SEC only occasionally charges advisers for placing clients in expensive share classes when less expensive classes are available, recent events should change your mind. The agency reached settlements with two advisory firms involving share classes just last month, and those followed up on still other settlements and developments earlier this year and the year before.
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Trade Aggregation and Allocation: Key Practices to Keep Your Advisory Firm Safe

July 28, 2017  The trading desk is, in many ways, the heart of what your advisory firm does. It’s where client securities are bought and sold, where critical decisions on investments are made – and where missteps can lead not only to bad investment results, but attention from government regulators.
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Latest Cherry-Picking Case Includes Improper Fee, Investment Strategy Charges

June 23, 2017  It’s no secret that the SEC’s 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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Portfolio Manager Charged with Stealing Dollars in Matched-Trades Scheme

April 28, 2017  Chief compliance officers know that high among the advisory firm employees they need to monitor are portfolio managers. After all, they sit at the nexus of the trading action. The SEC, in an April 24 complaint filed against a Massachusetts-based portfolio manager, makes clear just how serious the dangers are.
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Another Wrap Fee Adviser Settles with SEC Over Tradeaway Disclosures

March 31, 2017  The SEC isn’t letting up in its scrutiny of dually registered advisers/broker-dealers, particularly those offering wrap fee programs that result in clients paying unexpected fees for transactions that are "traded away" to other brokers. It settled two such cases a few months back – and on March 13 settled a new one.
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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 SEC’s 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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SEC Charges Adviser for Steering Clients to More Expensive Share Classes

August 26, 2016  Less than three weeks after the SEC announced in a risk alert that it would be scrutinizing advisory firms that, without disclosure, place clients in mutual fund share classes that are more expensive than others, the agency charged an adviser with doing just that.
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