SEC Provides Updates from Investigation of 2016 Cyber Intrusion WHAT HAPPENED? On October 2, 2017, the SEC provided an update on its ongoing staff investigation of the 2016 cyber intrusion into the EDGAR system. The SEC announced that the third party performing the intrusion acquired the names, birth dates [...]
SEC Creates Cyber Unit and Retail Strategy Task Force WHAT HAPPENED? On September 25, 2017, the SEC announced the creation of the Enforcement Division’s Cyber Unit and Retail Strategy Task Force. These new initiatives will support the SEC in identifying cyber-related misconduct and risks directly impacting retail investors, respectively. [...]
PE Firm Charged with Improper Allocation of Broken Deal Expenses WHAT HAPPENED? On September 21, 2017, the SEC charged a registered investment adviser with improperly allocating broken deal expenses between three private equity funds it manages (collectively, the “Private Equity Funds”) and separate co-investment vehicles (the “Co-Investors”). From 2004 [...]
Amendments to the Books and Records Rule, Effective October 1st WHAT HAPPENED? Effective October 1st, advisers will be required to comply with the revised Books and Records Rule. Under the new rule, advisers must maintain additional records supporting the calculation and distribution of performance information. The amendments were made [...]
SEC Charges SunTrust With Improperly Recommending Costlier Mutual Funds WHAT HAPPENED? On September 14, 2017, the SEC charged SunTrust Investment Services with receiving more than $1.1 million in client fees by improperly recommending costlier share classes of mutual funds when cheaper shares were available. The SEC alleged that SunTrust [...]
OCIE Announces Most Frequent Advertising Rule Risks Identified in Examinations WHAT HAPPENED? On September 14, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) announced the most frequent compliance issues with the Advertising Rule that were identified in their recent deficiency letters and examinations. The Advertising Rule states that [...]
PE Firm Charged for Improperly Allocating Overhead and Portfolio Expenses to Funds WHAT HAPPENED? On September 11, 2017, the SEC charged a registered investment adviser (“the RIA”) and its principal (collectively, “Respondents”) with improperly allocating fees and expenses to two private equity funds (collectively, “the Funds”) managed by Respondents. [...]
SEC Charges Investment Adviser with Defrauding Clients and Prospective Clients WHAT HAPPENED? On August 31, 2017, the SEC charged an investment adviser and its principal (collectively, the “Defendant”) with misleading clients and prospective clients about the performance track record of an investment strategy they offered. The SEC explained that the [...]
Action Advisers Should Take Prior to January 30, 2018, to Comply with the Custody Rule THE CUSTODY RULE As summarized in a previous Flash, the SEC published a ‘no-action’ letter in February 2017, stating that custody requirements can be triggered under certain circumstances when an adviser participates in first-party and [...]
Preparing Compliant Advertising (Including GIPS) THE AD RULE Advertising is often a key focus of the SEC’s examinations, making it imperative for investment advisers to remain up to date on the requirements of marketing-related regulations. All written communication provided to more than one person and any notice that solicits investment advisory [...]