The Securities and Exchange Commission recently issued an interpretive release designed to reaffirm, and in some cases clarify, the standard of conduct that investment advisers owe to their clients. While the interpretive release includes no new regulation, it clarifies the type of disclosure, policies and procedures that advisers should adopt to ensure that they continue to operate in a manner that is consistent with their fiduciary obligations.
The Securities and Exchange Commission (SEC) recently announced settlements with 79 investment advisers who self-reported violations of the Investment Advisers Act in connection with the SEC Division of Enforcement Share Class Selection Disclosure Initiative. The advisers collectively agreed to return more than $125 million in fees and prejudgment interest to clients.
The end of 2018 was notable for two Securities and Exchange Commission (SEC) enforcement actions against private equity fund managers for violations of the Investment Advisers Act. The actions demonstrate the SEC's continued focus on private equity fund managers' use of operating partners or consultants and the particular issue of how the expenses of such operating partners or consultants are allocated.
The Security and Exchange Commission Division of Investment Management has released a series of frequently asked questions (FAQs) regarding the new liquidity rule. The FAQs relate to sub-advised funds and exchange-traded funds that meet redemptions through in-kind transfers of securities, positions and assets other than a de minimis amount of cash and are a timely reminder that the compliance date for the liquidity rule is fast approaching.
Currently pending amendments to Form ADV have a compliance date of October 1 2017 and, as of that date, an adviser filing an initial Form ADV or an amendment to an existing Form ADV must use the revised Form ADV. The staff of the Division of Investment Management recently gave some breathing room to advisers who do not have enough information to respond to new questions required by the recent amendments to Form ADV.
In a letter to the Investment Adviser Association, the staff of the Division of Investment Management said that investment advisers acting pursuant to a standing letter of instruction or other similar asset transfer authorisation (SLOA) established by a client with a qualified custodian will be deemed to have custody of client assets for Custody Rule purposes. Nonetheless, the staff will not recommend enforcement action if an adviser, acting pursuant to an SLOA, did not obtain a surprise examination of custody accounts.
The Securities and Exchange Commission (SEC) recently banned the managing member and chief compliance officer of a registered investment adviser from the securities industry for illegally 'cherry-picking' investments among the adviser's managed accounts. The SEC has alleged that the principal made more than $1.3 million in profits from cherry-picking stocks to be allocated to his account versus client accounts.