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The weekly news source for investment management legal and compliance professionals

CCOs Must Keep Pace with Changes in How Firms Retain Books and Records

The world of information technology has changed virtually everything it has touched since the advent of email, data management and the Internet. Compliance with the SEC’s Rule 204-2, the Books and Records Rule, is no different. Advisers today typically keep some, if not most, of their documents electronically – and must remember to adapt their compliance efforts to match.
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Recent Stories

As Election Season Heats Up, Pay Attention to Pay-to-Play

Presidential candidates and talk about the 2020 elections is in the news – and likely to increase as the months progress. Too far away to pay attention? Not for advisory firm chief compliance officers. Now, in fact, is a good time to start ensuring advisory firm compliance with Rule 206(4)-5, the Pay-to-Play Rule.
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Insider Trading Settlement Notes Destruction of Evidence by Branch Manager

Trading in a company’s stock and options based on material non-public information obtained from a friend who worked at that company will doubtless draw the attention of SEC enforcers. Destruction of subpoenaed evidence is likely to only add to investigators’ fervor and increase settlement penalties – as one branch manager at a duly registered adviser/broker-dealer found out.
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Peirce Calls for Digital Token Safe Harbor

Long a backer of digital innovation in the securities markets, SEC Commissioner Hester Peirce on July 30 called for the creation of a digital token safe harbor that would permit issuers to offer tokens "under an alternative regime with robust requirements."
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SEC and CFTC Settle Mispricing Charges with Hedge Fund Portfolio Manager

Regulators take improper valuation and mispricing seriously, particularly when the party accused of doing so also allegedly tried to hide his actions. An advisory firm and commodity pool operator portfolio manager found this out the hard way after reaching settlements with both the SEC and the CFTC that together left him almost $850,000 poorer and barred from both the securities industry and futures trading for at least three years.
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Failure to Disclose Conflicts of Interest Lands Firm Founder in Hot Water

The founder and owner of an advisory firm that failed to disclose material conflicts of interest about investments he advocated has now experienced the cost of his alleged malfeasance. In a settlement this month with the SEC, he was barred from the securities industry for life and agreed to pay, together with his firm, more than $1.2 million in disgorgement and fines.
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SEC Staff Urges Market Participants to Begin Transition from LIBOR

The end of 2021 may still seem some far off, but in terms of advisers and other market participants that will need to transition from the London Interbank Offered Rate (LIBOR), it may be getting uncomfortably close. The SEC staff in July issued a statement urging all market participants using LIBOR to begin the process of moving away.
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SEC Report Card: OIG Focuses on Information Security and More

The SEC, those regulated by it may be glad to know, is itself scrutinized – by its internal Inspector General, whose office issues a report to Congress every six months. The most recent report makes clear that the SEC is not bulletproof, needs better information security, and is the subject of audits concerning its analytics initiatives, information technology investments and more.
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Clayton Rebuts Critics of SEC Standards of Conduct Package

The SEC is standing its ground on Regulation Best Interest, the investment adviser fiduciary interpretation, Form CRS and the agency’s interpretation of the "solely incidental" prong under the Advisers Act. Much of the criticism, agency Chairman Jay Clayton said in a strongly-worded July 8 Boston speech, is "false, misleading, and, unfortunately, in some cases, is simply policy preferences disguised as legal critiques."
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SEC Will Revisit Registration Exemptions, 401(k) Private Fund Investments

The SEC is seeking public comment on ways to reform registration exemptions in order to "expand investor opportunities while maintaining appropriate investor protections." The concept release and request for comment is expected to, among other things, look at ways to ease the ability of 401(k)s and other retail investor retirement vehicles to invest in private funds.
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Clayton Backs Simultaneous Resolution of Settlement Offers and Waiver Requests

Advisers and their attorneys face a problem when the SEC acts on a settlement offer but holds off on granting related waiver requests – leaving them in the position of having to decide whether to accept a settlement without knowing whether needed waivers are forthcoming. Those facing agency enforcement will likely be happy to know that SEC Chairman Jay Clayton this month came down on the side of simultaneous resolution of both.
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