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
Except for real estate debt funds, most real estate 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...
by Sidney Goldstein
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...
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...
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...
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
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
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...
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.
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 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...
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
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
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...
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...
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...
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...
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 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...
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...
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.
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...
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...
The SEC announced another new initiative. It is known as the “Distribution-in-Guise Initiative.” This initiative focuses on preserving the assets of mutual funds for its shareholders, apparently by ensuring that fund managers and advisers do not improperly use the assets. The first case,...
The Commission filed another action in which admissions were required as part of the settlement. The action centers on an investment adviser who misappropriated just under $2 million from his clients. As part of the settlement he admitted the theft. SEC v. Donnelly, Civil Action No. 15 6873 (E.D. Pa...