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The Fabulous Fab Rule

Don't write emails so provocative that they wind up reproduced on the front page of the Wall Street Journal. With many fund managers having to register under the Investment Advisers Act, they will now be subject to more extensive record-keeping requirements. That means more emails will be saved...

The SEC is Looking at Advisers’ Use of Social Media

According to a story in Investment News , the Securities and Exchange Commission began a sweep of investment advisers' use of social media and social networking last month. The story has a quote from Doug Flynn, an adviser at Flynn Zito Capital Management LLC, that is exactly on target for...

Are You an Investment Company?

Fund managers are dealing with Dodd-Frank and the requirements under the Investment Advisers Act made by the Securities and Exchange Commission. Of course, a fund manager needs to focus on other areas of financial regulation and enforcement by the Securities and Exchange Commission. Fund managers...

Is It an Advertisement?

Section 206 of the Investment Advisers Act prohibits fraud, deception or manipulation, regardless of whether the fund manager is registered. Once registered, Rule 206(4)-1 imposes additional restrictions on advertising that the SEC has determined would be fraudulent deceptive or manipulative. ...

Intent and the Advertising Rule for Investment Advisers

In its prohibition against fraud, deceit and manipulation, Section 206 of the Investment Advisers Act is strict. There is no requirement of intent. You can argue that you didn't mean to mean to commit fraud. That may affect whether you get referred to enforcement instead of merely getting hit...

Fees and Performance Results for Advisers and Fund Managers

Section 206 of the Investment Advisers Act prohibits fraud, deception or manipulation, regardless of whether the fund manager is registered. Once registered, Rule 206(4)-1 imposes additional restrictions on advertising that the SEC has determined would be fraudulent, deceptive or manipulative. ...

Lessons from Wunderlich

I don't take pleasure from others' failings, but I do try to learn lessons. The recent settlement between Wunderlich Securities and the Securities and Exchange Commission is full of lessons to be learned. overcharged advisory clients for commissions and other transactional fees in violation...

Sometimes You Get Stuck and Can’t Get Out

Finally, the SEC is going to take some action today on the regulation of investment advisers, venture capital funds, and private fund managers. For years, they've been trying to get regulatory control of private funds. Now they are going to get it. Do they really want it? Sometimes what...

SEC Proposes Amendments to the Qualified Client Standard

by Kay Gordon and Joshua M. O'Melia Excerpt: I. Introduction On May 10, 2011, as required by Section 418 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), the U.S. Securities and Exchange Commission (the "SEC") proposed to amend Rule...

Soros Doesn’t Want Your Money

In one of the most visible moves as a result of the new SEC regulations on investment advisers, George Soros is closing his $25 billion Quantum Endowment Fund to outside investors and returning their money. Why? "We have relied until now on other exemptions from registration which allowed...

What is the SEC Looking For With Private Fund Managers

IA Watch published a few recent document request letters in connection with SEC examinations of investment advisers. One is a document request letter sent to a private fund manager ( subscription required; 7-day free trial available ). These are some of the items requested that caught my attention...

SEC Revamps Investment Adviser Regulatory Scheme as Mandated by the Dodd-Frank Act July 22, 2011

by Cynthia Krus & Michael Koffler I. Introduction In response to the Congressional directives contained in Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd Frank Act"), the U.S. Securities and Exchange Commission ("SEC" or "Commission"...

Amending the Reporting Requirements of Form ADV & Modifying Pay to Play Rule

by Marc Mehrespand and Joshua O'Melia Various companion releases implementing various provisions of the Dodd-Frank Act. Form ADV amendments, Rule 206(4)-5, and registration requirements for private funds. Excerpt: In much anticipated companion releases implementing various provisions of the...

Reporting Requirements for Funds Exempted from Investment Advisers Act Registration

As a result of the new rules under the Investment Advisers Act of 1940, even fund managers that are exempt from registration will need to file annual reports with the SEC. Exempt reporting advisers (" Exempted Advisers "), including fund managers that rely on either the venture capital...

Massachusetts Revises Proposed Private Fund Adviser Exemption

From my discussions, many real estate fund managers are still not sure if they are subject to registration under the Investment Advisers Act. The definition of "private fund" can exclude many real estate funds depending on the structure of their investments. I think the result is that you...

Tighter Rules on Advisory Performance Fee Charges

Under the Investment Advisers Act, an adviser can only charge a performance fee if the client was a "qualified client". The SEC equates net worth with sophistication, so a "qualified client" had to have a level assets to prove their financial sophistication. Those levels are now...

High Court Says Discovery Rule Doesn't Apply To Securities And Exchange Commission

WASHINGTON, D.C. -- (Mealey's) The U.S. Supreme Court on Feb. 27 reversed a Second Circuit U.S. Court of Appeals ruling allowing the Securities and Exchange Commission to seek securities fraud penalties for conduct that had ceased more than five years before the SEC brought the lawsuit, saying that...

"Venture Capital Fund" Flowchart for Exemption Under the Investment Advisers Act of 1940

This article is appearing simultaneously on The Venture Alley and on Startup Law Blog . The below flowchart may be helpful to you in answering the question whether you qualify for the exemption for "venture capital funds" under Section 203(l) of the Investment Adviser's Act of 1940...

SEC Commissioner Gallagher: Guidance Is Needed for IA CCOs

SEC Commissioner Daniel Gallagher published a statement explaining his dissent in two recent enforcement actions in which the Chief Compliance Officer of an investment adviser was charged, noting that the trend in such actions is toward strict liability. “Statement on Recent SEC Settlements Charging...

Summary of the Proposed Amendments to Form ADV and Investment Advisers Act Rules

On May 20, 2015, the SEC issued proposed amendments to Form ADV and the Investment Advisers Act rules. In the release, the SEC proposed amendments to Form ADV that would require advisers to disclose additional information, such as information about separately managed account business, and allow private...

Sixth Circuit Concludes Morrison Does Not Apply to Advisers Act

In Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010) the Supreme Court held that the reach of Exchange Act Section 10(b) is the water’s edge of the United States [subscribers can access an enhanced version of this opinion: lexis.com | Lexis Advance ]. Specifically, the court held that...