About Jeff

Prior to joining the team in March of 2001, Jeff worked at The US Trust Co., Chase Manhattan Bank and The Dreyfus Funds in various capacities within the client services and Mutual Fund custody divisions. Jeff runs the day-to-day operations of the firm. He earned a B.A. degree in Banking and Finance from Hofstra University in New York in 1992.

Considerations for CFTC 4.13(a)(4) Exempt Commodity Pool Operators

Posted on February 29, 2012 by Jeff

As discussed in our previous post, as a result of the Final Rule issued by the Commodity Futures Trading Commission (the “CFTC”) on February 9th, certain private fund managers that trade directly or indirectly in commodities and/or futures will need to reconsider their status as commodity pool operators (“CPOs”) or commodity trading advisors (“CTAs”). Note that when the CFTC and the Securities and Exchange Commission (“SEC”) finalize the definition of “swap” (on the SEC’s Implementation Schedule for the first half of 2012 and expected in the next few months), pool operators trading in non-security based swaps will fall within with the definition of “commodity pool operator” and, in the absence of any applicable exemption, will be required to register.

The Final Rule, published in the Federal Register on Friday, February 24, 2012, is generally effective on April 24, 2012 and alters the registration, compliance and reporting obligations for CPOs and CTAs. In particular, the Final Rule’s rescission of the section 4.13(a)(4) exemption will require advisers that have relied upon that exemption (historically, advisers to Section 3(c)(7) private funds) to determine if there is another exemption upon which they may rely. Continue reading →

Funds of Funds and FINRA 5131(b)

Posted on February 22, 2012 by Jeff

It appears that certain funds of funds are likely to see an easing up on their due diligence obligations vis-a-vis their investors under Financial Industry Regulatory Authority (“FINRA”) Rule 5131(b), the “anti-spinning” rule governing a fund’s purchase of new issues that was effective September 26, 2011. Spinning is the practice of allocating new issues to executive officers and directors of current or potential investment banking clients in exchange for their investment banking business. For your reference, Rule 5131(b) and the de minimis exception available to funds are reviewed below.

At a meeting last week, the FINRA Board of Governors authorized FINRA staff to submit a proposed rule change to the Securities and Exchange Commission (“SEC”) that would exempt certain funds of funds from the requirement to assess the status of indirect beneficial owners for purposes of purchasing new issues under the anti-spinning provisions of FINRA Rule 5131(b). Continue reading →

Upcoming 2012 SEC Regulatory Deadlines

Posted on February 16, 2012 by Jeff

Congratulations to all newly registering investment advisers that have submitted their Forms ADV Part 1A and Part 2A via the Investment Adviser Registration Depository (“IARD”) in anticipation of the March 30, 2012 deadline! The Securities and Exchange Commission (“SEC”) generally has up to 45 days after receipt of the Form ADV to declare the registration effective and generally will notify an adviser via email once its registration is declared effective. Registrations may be declared effective at any time during that 45-day period. An adviser can also check on IARD under the heading “Registration/Reporting Status” to see if its registration has been declared effective.

Below is a review and reminder of certain of the annual regulatory requirements that may be applicable to investment advisers. This is not intended to be an exhaustive list of SEC regulatory requirements and does not cover state-specific requirements. In particular, it should be noted that the below information does not address any regulatory filings or reports required by the Internal Revenue Service, Department of the Treasury (such as TIC forms) or the Commodity Futures Trading Commission (“CFTC”). We expect to release future articles on other required regulatory filings. The information below is for informational purposes only and is not legal advice. Continue reading →

CFTC Rescinds 4.13(a)(4) Exemption Among Other Amendments to Part 4

Posted on February 12, 2012 by Jeff

The Commodity Futures Trading Commission (the “CFTC”) issued a Final Rule amending registration and compliance obligations for commodity pool operators and commodity trading advisors (“CPOs” and “CTAs”, respectively), in particular rescinding the section 4.13(a)(4) exemption upon which many investment advisers to private funds rely.

The 197-page Final Rule release as well as an explanatory Fact Sheet and Q&A document may be found here.

The Final Rule, first proposed on January 26, 2011, passed 4-1, and:

Rescinds the exemption from registration provided in section 4.13(a)(4);
Removes relief from the certification requirement for annual reports provided to operators of certain pools offered only to qualified eligible persons under section 4.7(b)(3);
Modifies the criteria for claiming relief under section 4.5;
Requires the annual filing of notices claiming exemptive relief under several sections of the CFTC’s regulations;
Adopts amendments that include new risk disclosure requirements for CPOs and CTAs regarding swap transactions; and
Adopts new data collections for CPOs and CTAs consistent with the Form PF data collection required under the Dodd-Frank Act for entities registered with both the CFTC and the Securities and Exchange Commission.

In preparing the Final Rule, the CFTC considered comment letters, including one submitted by HedgeOp Compliance, LLC, requesting that the 4.13(a)(4) exemption be retained for funds that are advised by an SEC-registered investment adviser and invest indirectly in commodity interests through a fund of funds structure. The CFTC has determined to withhold consideration of such an exemption pending receipt of data from the new Forms CPO-PQR and/or CTA-PR. The CFTC will consider requests for exemptive relief for funds of funds on a case by case basis.

The CFTC today also issued a Proposed Rule to harmonize compliance obligations for SEC-registered investment advisers to registered investment companies that would be required to register as commodity pool operators.

HedgeOp will be reviewing the Final Rule release and analyzing its potential ramifications.

Keep a look out for additional post summarizing the details and timing issues.

SEC Provides Guidance on Registration of Advisers Related to Registered Investment Advisers

Posted on January 27, 2012 by Jeff

On January 18, 2012, the Securities and Exchange Commission (the “SEC”) issued a No-Action letter (the “2012 ABA Letter”) to the American Bar Association (the “ABA”), Business Law Section, providing guidance as to when certain entities affiliated with a registered investment adviser would be permitted to rely on the registered investment adviser’s registration, and would not be required to register separately as investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”). The 2012 ABA Letter confirms the SEC’s guidance on these issues in Question and Answer G.1. of its December 8, 2005 letter addressed to the ABA’s Subcommittee on Private Investment Entities and responds to additional related questions. Question and Answer G.1. is referred to as the “2005 ABA Letter” and is further described below. The continued applicability of the 2005 ABA Letter had been called into question by the amendments resulting from the repeal of the section 203(b)(3) private adviser exemption under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Continue reading →

Recent SEC Investment Adviser Enforcement Cases – Deficient Compliance Programs and Aberrational Performance

Posted on December 15, 2011 by Jeff

HedgeOp would like to take the opportunity to highlight recent enforcement actions brought by the SEC Enforcement Division’s Asset Management Unit and remind all about the importance of implementing a thorough compliance program and of maintaining a robust culture of compliance.

Continue reading →

Insider Trading Action: Exchange-Traded Funds (“ETFs”)

Posted on November 30, 2011 by Jeff

The SEC appears to be focusing on markets and products not previously investigated in the insider trading context. According to Sanjay Wadhwa, Associate Director of the SEC’s New York Regional Office and Deputy Chief of the Market Abuse Unit, the SEC is “aggressively working to identify and prosecute illegal insider trading across multiple markets and derivatives products regardless of the complexity of the trading pattern that we have to unravel in our investigations.”
Continue reading →

Final Form PF Approved by CFTC

Posted on November 27, 2011 by Jeff

Recently, the Commodity Futures Trading Commission (the “CFTC”) approved joint final rules under the Commodity Exchange Act (the “CEA”) and the Investment Advisers Act of 1940 (the “Advisers Act”) and the final Form PF (report by private fund advisers). The new rules implement provisions of Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Continue reading →

And Now Another Post from HR…..

Posted on February 2, 2011 by Jeff

Although the focus of Compliance Avenue is compliance issues, from time to time, we will post relevant articles from experts that apply to the business-side of the RIA. Today’s post focuses on HR issues that many workplaces may face:

Sick Employees Should Stay Home

Many employees feel pressure to report to work even when they are sick whether or not they have paid sick leave. The problem is that employees who are ill while getting their work done may be getting their co-workers sick. If an employee is sick they should be encouraged to talk to their manager about staying home or working remotely until they are no longer contagious.

Most managers and HR professionals agree that if an employee is sick they should stay home. If they need to be in the office, the sick employee should try to isolate themselves as best they can by working in a conference room or confined space. They should be reminded to cover their mouth when coughing or sneezing and to use a hand sanitizer frequently. They should regularly clean their keyboard, phone and desk often.

Employers should remember to communicate their sick time policy to ensure that employees understand how much time they can use for this purpose so they use it and keep their germs away from their co-workers.

Joint Statement by CFTC Chairman Gary Gensler and European Commissioner Michel Barnier on the Financial Reform Agenda

Posted on September 29, 2010 by Jeff

Washington, DC –United States Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and European Commissioner Michel Barnier spoke today and reaffirmed their strong determination to cooperate closely in strengthening the global financial system. Specifically, Chairman Gensler and Commissioner Barnier discussed regulatory reform of the over-the-counter (OTC) derivatives markets with respect to Dodd-Frank Wall Street Reform and Consumer Protection Act and the September 2010 European proposal for a Regulation on OTC derivatives, central counterparties and trade repositories. Continue reading →

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