LexisNexis® Legal Newsroom
The US Private Equity Fund Compliance Guide

One of the struggles with implementing a compliance program for a private equity fund is that the Investment Advisers Act is targeted at retail operations dealing with relatively liquid investments. Neither fits well with the private equity model of institutional investors and large, illiquid transactions...

SEC Proposes New Rules to Implement Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers

By: John A. Brunjes , Arthur Don and Genna Garver On November 19, 2010, the Securities and Exchange Commission ("SEC") proposed new rules and rule amendments (the "Proposed Rules") under the Investment Advisers Act of 1940, as amended (the "Advisers Act") to implement...

Calculating Regulatory Assets Under Management for Private Funds

For private fund managers, one troubling aspect of Form ADV had been the calculation of "assets under management" in item 5.F. If securities are less than 50% of the portfolio then the portfolio would not be a securities account. Except for real estate debt funds, most real estate funds...

Job Description For CCOs of Advisers to Private Investment Funds

Back in 2005, Associate Director Office of Compliance Inspection and Examinations of the SEC, Gene Gohlke gave a speech addressing hedge funds who would soon have to register under the doomed hedge fund rule. He focused on what the funds needed in a Chief Compliance Officer. Rule 206(4)-7 requires...

Clawbacks From "Madoff" Style Ponzi Schemes - Searching For Deep Pockets During Economic Uncertainty

by Sidney Goldstein Excerpt: With the first glimmer of a revival in the credit markets, many of us are quick to forget the tough lessons learned during the crisis period. One such lesson is the havoc that can be created by an aggrieved creditor's and in some instances a borrower's search...

SEC Study on Enhancing Investment Adviser Examinations

Now that most private funds managers are required to register with SEC as investment advisers, the SEC is considering abandoning them to regulation by FINRA. The SEC released the much anticipated report, a 40-page " Study on Enhancing Investment Adviser Examinations" mandated by Section...

Controls on Political Contributions

In the face of some pay-to-play scandals involving investment advisers and government sponsored investment fund officials, the Securities and Exchange Commission slapped restrictions on the ability of investment advisers and fund managers to make political contributions. Rule 206(4)-5 prohibits an...

Have You Set Up Your IARD Account?

With the impending deadline for filing Form ADV to register as an investment adviser, you need to jump through some hoops before you can do the filing. First step is visiting the Investment Adviser Registration Depository . Form ADV needs to be filed electronically and this is the electronic mailbox...

Duane Morris Alert: Supreme Court Holds Mutual Fund Investment Adviser Not Liable for Misleading Statements in Fund's Prospectus

On June 13, 2011, in Janus Capital Group, Inc. v. First Derivative Traders , 1 the U.S. Supreme Court held that a mutual fund investment adviser and administrator could not be held liable under federal securities laws for alleged misrepresentations in the prospectuses issued by the mutual fund itself...

Report on Investment Adviser’s Use of Social Media in Massachusetts

Social Media used by Investment Advisers There is a growing trend in the financial services industry to use social media sites for outreach to existing as well as potential customers. Noticing this trend, the Securities Division of The Office of the Secretary of the Commonwealth surveyed investment...

Presidential Campaign Season and the SEC’s Pay-to-Play Rule

With the recent Iowa Straw Poll, the presidential campaign season is getting into full gear. That also means that campaign fundraising is in full gear. I thought it would be useful to apply the SEC's new Pay-to-play for Investment Advisors to the crop of presidential contenders. Under SEC ...

A Proactive Approach to Ensure Advisors Adopt Procedures

The reorganization of the Division of Enforcement which spawned the re-introduction of specialty groups was, in part, designed to focus the resources of the Division and increase efficiency and effectiveness. Three recently filed cases are an example of the results of the reorganization and the creation...

State Investment Adviser Exams Reveal Significant Deficiencies

The results of coordinated state examinations of investment advisers in the first half of 2011 by the North American Securities Administrators Association (NASAA) reveal significant deficiencies in a broad range of areas. As investment advisers gear up nationally to register either with their state...

Changes Coming With Anti-Money Laundering Requirements

James H. Freis, Jr., Director of the Financial Crimes Enforcement Network, let us know that his agency is working on anti-money laundering requirements for investment advisers. At a November 15, 2011 speech at the American Bankers Association/American Bar Association's Money Laundering Enforcement...

New Anti-Money Laundering Requirements for Non-Bank Mortgage Lenders and Originators

Private Equity has been siting on the fringes of Anti-money laundering regulation for many years. It's still illegal to be involved in money laundering and fund managers should be taking some steps to protect themselves and to identify problems. There's just no set script. FinCEN is supposedly...

Middle Names and Form ADV

When filling out Form ADV, Schedule A and Schedule B require you to disclose control persons, owners, and significant indirect owners of the investment adviser. The instructions call for the full legal name: Last name, first name, and middle name. And the SEC means it. They require full legal names...

Investment Advisers May Need to Report General Partner Ownership

Important news out of the SEC this week for investment advisers who are now registering or filing reports as exempt reporting advisers (ERAs) courtesy of the new Dodd-Frank requirements. The SEC posted a new FAQs on its website regarding Form ADV filings that would require fund managers to report...

SEC Files Another Action Centered on Investment Adviser Nikolai Battoo

Alternative investment manager Nikolai Battoo appeared to be the all-American success story. He began as a Florida cook and rose to manage over a billion dollars in assets. He attracted investments from investors across the globe. He claimed to have successfully navigated the financial crisis and Madoff...

SEC Prevails in Jury Trial Against Investment Adviser and Principal

The Commission prevailed in another jury trial this week, securing a favorable verdict against a registered investment adviser, Sage Advisory Group, LLC, and its principal, Benjamin Grant. SEC v. Sage Advisory Group, LLC, Civil Action No. 1: 10-cv-11665 (D. Mass.). The action centered around Mr. Grant’s...

SEC Proceedings Against Investment Advisers Center on Conflicts of Interest

Conflicts of interest are at the center of two administrative proceedings recently instituted by the SEC. One involved the failure to adequately disclose the conflict. The other focuses on a failure to institute appropriate supervisory procedures for a known conflict. In the Matter of The Robare Group...

Investment Adviser Pleads Guilty to Wire Fraud Charge

Investment adviser Ismail Elmas pleaded guilty this week to an information charging one count of wire fraud. U.S. v. Elmas, No. 1:14-cr-00358 (E.D. Va.). This action is the latest is a series cases centered on investment frauds in which the adviser or promoter solicits funds from unsuspecting investors...

Adviser, Co-Founder, Settle SEC Breach of Duty Proceeding

The Commission filed settled administrative proceedings against an investment adviser and its co-founder based on a claimed breach of fiduciary duty. The Order alleged violations based on negligence, citing Securities Act Section 17(a)(2) and Advisers Act Section 206(2) and, in addition, Advisers Act...

Three Principals of Adviser Settle SEC Charges Over Undisclosed Conflicts

The Commission filed another settled action based on undisclosed conflicts involving an investment adviser. In this proceeding Respondents, principals of the adviser, failed to disclose a fee splitting arrangement with an executing broker. In the Matter of Gavornki, Adm. Proc. File No. 3-16286. The...

BlackRock, CCO Settle SEC Conflict Charges

Conflicts of interest involving market professionals continue to be a focus of SEC enforcement. In many cases the conflict is uncovered by the inspection staff, OCIE. This time, however, the information came from an article published by the Wall Street Journal. In the Matter of BlackBock Advisors, LLC...

SEC Sanctions Adviser For Not Fully Disclosing Fee Arrangements

The Commission has brought a series of cases focused on undisclosed conflicts of regulated entities. A number of those cases centered on undisclosed fee and compensation arrangements. In its most recent case the agency went one step further, charging an investment adviser with fraud who disclosed the...