A seasoned investment banker established a hedge fund and solicited terminally ill patients to open brokerage accounts as joint tenants with rights of survivorship. Upon the death of a patient, the investment banker exercised the survivor's option and assigned the profits to the hedge fund. The Securities and Exchange Commission filed charges against those behind this investment strategy for possible securities law violations, which were recently dismissed by an SEC administrative law judge.
A recent cease-and-desist order from the Securities and Exchange Commission illustrates the types of activity and compliance issue that should be causes for concern for registered investment advisers (RIAs) when recommending non-traditional exchange traded funds. The order stated that the RIA wilfully violated the anti-fraud provisions of the Advisers Act and the requirements to maintain policies and procedures designed to prevent violations of the act.
In a recent case, a former investment adviser lost a petition to review and vacate a Securities and Exchange Commission (SEC) administrative law judge's decision relating to the improper use of backtested information. The case is an illustration of how the improper presentation of backtested information can lead to trouble under the SEC's rules and regulations.
The Depository Trust Company (DTC) recently adjusted its eligibility procedures to comply with the Internal Revenue Code. For securities to become and remain DTC eligible securities, issuers must now comply with the new procedures. An officer of the issuer must attest to the applicability of compliance and issuers must provide the DTC with dividend equivalent payments.