July 1 Compliance Date for Adviser Disclosure to ERISA Clients and Investors

Posted on May 7, 2012 by Jeff

As of July 1, 2012, managers advising ERISA (Employee Retirement Income Security Act of 1974) defined benefit and defined contribution pension plans generally will be required to provide the plans’ fiduciaries with information about fees, services and potential conflicts of interest the fiduciaries need in order to meet their obligations in selecting and monitoring the service providers. ERISA’s new Rule 408b-2 provisions requires “covered service providers” (defined below) to make these disclosures to managed account clients and fund investors that are “covered plans” (defined below). HedgeOp encourages investment advisers with ERISA-covered defined benefit and defined contribution pension plan clients or fund investors to commence drafting such disclosures, if they have not already done so. Additional information about the content of, and method of providing, such disclosures is provided below. Continue reading →

Large Trader FAQs; Extension of Broker-Dealer Compliance Date

Posted on May 3, 2012 by Jeff

The Securities and Exchange Commission (“SEC”) recently posted two items related to the “large trader reporting rule” (i.e., Rule 13h-1 under the Securities Exchange Act of 1934). First, the staff of the Division of Trading and Markets issued FAQs with new guidance for “large traders” and registered broker-dealers about completing Form 13H and otherwise complying with Rule 13h-1. Second, the SEC issued an Order (i) granting an exemption for certain securities transactions for purposes of determining large trader filing thresholds, and (ii) extending the compliance date for most registered broker-dealers from April 30, 2012 to May 1, 2013. The delay of the compliance date gives broker-dealers more time to report large traders’ data to the SEC, but does not affect large traders’ responsibilities. Continue reading →

Form PF and Investor Representations in Subscription Agreements

Posted on May 2, 2012 by Jeff

This is a reminder for all managers of private funds to consult their counsel about representations that counsel may recommend adding to the private funds’ subscription agreements so that the managers may accurately report information about their private fund investors on Form PF. The information on Form PF will not be publicly available, but will be used to assist the Financial Stability Oversight Council in its assessment of systemic risk in the U.S. financial system. Continue reading →

SEC’s OCIE Issues Risk Alert on Unauthorized Trading and Activities

Posted on March 7, 2012 by Jeff

The Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) recently released a National Examination Risk Alert titled “Strengthening Practices for Preventing and Detecting Unauthorized Trading and Similar Activities.”

The Risk Alert is addressed to both broker-dealers and investment advisers. Carlo di Florio, Director of OCIE, suggested that firms consider the observations in the Risk Alert “as they review their compliance and supervisory controls to detect and deter unauthorized trading” and other unauthorized activities. As the SEC has repeatedly stated, a firm must set the tone from the top and create a culture of compliance. OCIE recommends involving management and non-management personnel in the efforts. Continue reading →

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 →

HedgeOp Merges with the IMS Group

Posted on January 17, 2012 by HedgeOp

HedgeOp Compliance, LLC has announced today that it is merging with The IMS Group, a leading European governance, risk and compliance services group. The enlarged Group has offices in London, New York, Boston and San Francisco, with more than 100 staff supporting approximately 700 investment management firms globally. Please visit HedgeOp’s website to read the full press release.

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 →

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