Richard D. Marshall

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On November 4, the Securities and Exchange Commission announced that it voted to propose amendments to modernize the rules under the Investment Advisers Act of 1940 (Advisers Act) addressing investment adviser advertisements and payments to solicitors. According to the SEC, the “proposed amendments to the advertising rule (Rule 206(4)-1 under the Advisers Act) would replace the current rule’s broadly drawn limitations with principles-based provisions,” and would permit the use of testimonials, endorsements and third-party ratings, subject to certain conditions. The proposed rule also would include tailored requirements for the presentation of performance results based on an advertisement’s intended audience.
Continue Reading SEC Proposes Changes to the Advertising and Cash Solicitation Rules for Investment Advisers

Investment Advisers

On August 21, by a vote of 3 to 2, the Securities and Exchange Commission issued interpretive guidance on an investment adviser’s fiduciary duties with respect to voting of proxies for client accounts. The guidance makes clear that advisers may agree with their clients that the client, and not the adviser, will vote proxies, but such guidance is generally impractical for advisers to private funds and registered investment companies (because there is no practical way to assign voting power to the funds).
Continue Reading SEC Issues New Guidance Regarding Proxy Voting Responsibility of Investment Advisers and the Applicability of Proxy Rules to Proxy Voting Advice

On June 21, the Securities and Exchange Commission adopted a package of new rules and rule amendments to establish capital, margin and segregation requirements under Title VII of the Dodd-Frank Act.

The new rules address the following areas:

  • Capital requirements for security-based swap dealers (SBSDs) and major security-based swap participants (MSBSP), for which there is not a prudential regulator (nonbank SBSDs and MSBSPs).
  • Capital requirements for broker-dealers that trade security-based swaps or swaps and are not registered as an SBSD or MSBSP.
  • Minimum net capital requirements for broker-dealers that use internal models to compute net capital.
  • Margin requirements for nonbank SBSDs and MSBSPs with respect to non-cleared security-based swaps.
  • Segregation requirements for SBSDs and stand-alone broker-dealers for cleared and non-cleared security-based swaps.

Continue Reading SEC Adopts Capital, Margin and Segregation Requirements for Security-Based Swap Dealers and Major Participants

On June 5, the Securities and Exchange Commission voted to adopt a package of rules and interpretations designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers. Specifically, the SEC approved Regulation Best Interest.
Continue Reading SEC Adopts Rules and Interpretations To Enhance Protections and Preserve Choice for Retail Investors

On February 21, the US Supreme Court decided Digital Realty Trust, Inc. v. Somers (583 U.S. ____ (2018)), which resolved a circuit split related to whether the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd-Frank) extend to individuals who have not reported a securities law violation to the Securities and Exchange Commission and, therefore, falls outside of Dodd-Frank’s definition of a “whistleblower.”
Continue Reading Supreme Court Limits Scope of Dodd-Frank Whistleblower Protections

On March 2, the US Department of Labor (DOL) published a proposed extension (the Proposal) of the effective date of what is commonly referred to as the “fiduciary rule” or the “fiduciary advice rule” (the Rule). The Rule provides that persons who provide investment advice or recommendations for fees or other compensation with respect to …

On January 19, the Securities and Exchange Commission announced that it had settled with Equinox Fund Management LLC (Equinox). The SEC order found that Equinox, with respect to its managed futures fund (the Fund), had overcharged management fees to investors and failed to follow its valuation methods as disclosed to investors.
Continue Reading SEC Settles With Adviser That Allegedly Overcharged Management Fees and Misled Investors

On January 11, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released its 2016 examination priorities for investment companies, investment advisers, broker-dealers and transfer agents. The examination priorities highlight new and continuing areas of interest.
Continue Reading SEC 2016 Examination Priorities Focus on ETFs, Cybersecurity and Liquidity Controls for Fixed-Income Funds

On September 22, the Securities and Exchange Commission proposed a comprehensive package of rule reforms designed to enhance effective liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETFs). Under the proposal, mutual funds and ETFs would be required to implement liquidity risk management programs and enhance disclosure regarding fund liquidity and redemption practices. The proposal is designed to better ensure investors can redeem their shares and receive their assets in a timely manner.
Continue Reading SEC Proposes Liquidity Management Rules for Mutual Funds and ETFs

On September 14, the Internal Revenue Service (IRS) issued final regulations under Internal Revenue Code Section 851 clarifying that control groups under the regulated investment company (RIC) rules may consist of two entities (i.e., the RIC and one subsidiary), rather than two levels of entities, settling a decades-long debate. The IRS also issued Rev. Proc. 2015-45, 2015-39 IRB 1, which provides a safe harbor for fund of funds structures.
Continue Reading IRS Addresses RIC Asset Diversification Requirements