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 →

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.

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.

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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.”
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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 →

SEC Database Improves Tracking of Tips and Complaints

Posted on July 29, 2011 by Zabrina

The SEC received heavy criticism for their failure to conduct a proper investigation into early tips received relating to the Madoff scandal. In response, they have developed the Tips, Complaints and Referrals Database (the “TCR Database”) which significantly improves their ability to track and respond to tips and complaints on potential wrongdoers. The TCR Database has emerged alongside a new program by the FBI’s criminal profiling group in Quantico, Va. that is creating a series of behavioral composites to help agents investigate white collar crime.

In recent years, financial crimes have been on the rise.

In the US government’s 2010 fiscal year, the FBI’s economics crime unit reports the bureau had 1,703 active securities and commodities fraud investigations, a 41 percent increase over the number of active investigations in 2008. Over the past year, the amount of monetary penalties the SEC has imposed on wrongdoers has almost tripled…

Prior to the creation of the TCR Database tips would come in via phone calls, e-mails, faxes and even handwritten letters into the SEC’s 11 regional offices and Washington headquarters and often were not properly recorded or followed up. The TCR database now provides a systematic and organized approach to reviewing the information provided by tipsters, whistle-blowers and self-regulatory organizations. Once a tip or complaint is entered into the system through the online questionnaire available in the TCR Database portal, about 2,300 SEC employees can see it, analyze the information and add to it.

While the TCR Database can not yet be cross-checked against other internal databases or against trading activity, company filings or news feeds, it is a start and a positive reform and improvement for the SEC.

SEC To Finally Clarify Registration Extension?

Posted on June 16, 2011 by Jordan

Weeks after an unofficial comment by a senior SEC staffer, we may finally find out the plans for a registration extension for hedge fund and other private fund managers. The SEC announced that it will be holding an Open Meeting on June 22nd where Item 1 of discussion includes:

The Commission will consider whether to adopt new rules and rule amendments under the Investment Advisers Act of 1940 to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules and rule amendments are designed to give effect to provisions of Title IV of the Dodd-Frank Act that, among other things, increase the statutory threshold for registration of investment advisers with the Commission, require advisers to hedge funds and other private funds to register with the Commission, and address reporting by certain investment advisers that are exempt from registration.

Hopefully this will finally allow worried managers to know whether or not they will have until next year to file their Form ADVs. We will keep you posted of any developments coming out of the meeting.

SEC Adopts Final Rules for Whistleblower Provisions under Dodd-Frank

Posted on June 6, 2011 by Marissa

The U.S. Securities and Exchange Commission (the “SEC”) voted 3-2 on May 25, 2011 to adopt final rules implementing whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule is called “Securities Whistleblower Incentives and Protection” which falls under Section 21F of the Securities and Exchange Act of 1934.

The new rule will require the SEC to pay an award, subject to certain limitations, to eligible whistleblowers who voluntarily provide the SEC with original information about a violation of federal securities laws that leads to successful enforcement of a covered judicial or administrative action, or a related action. Further, employers are prohibited to retaliate against employees that provide the SEC with information about possible violations.

FINRA 5131 Anti-Spinning Rule Delayed

Posted on May 20, 2011 by Tim

On May 18, 2011, the U.S. Securities and Exchange Commission approved certain amendments to the originally adopted version of FINRA Rule 5131 (the “anti-spinning rule”). Most importantly, the recent amendments delay the implementation date from May 27, 2011 until September 26, 2011. In addition, the old FINRA Rule 5131(b)(1) is deleted. Such provision had required FINRA members to establish and maintain policies and procedures to ensure that investment banking personnel have no involvement or influence in the new issue allocation decisions of FINRA members.

The rule change can be found here.

President nominates SEC commissioners

Posted on May 20, 2011 by Tim

President Obama plans to nominate Republican Daniel Gallagher and Democrat Luis Aguilar as commissioners at the U.S. Securities and Exchange Commission.

Gallagher is currently a partner in the securities department of Wilmer Cutler Pickering Hale and Dorr LLP. He previously worked at the SEC from 2006 through 2010. Gallagher would replace Commissioner Kathleen Casey should he be confirmed. Kathleen Casey’s term expires later this year. She is one of two Republicans on the five-person Commission and Gallagher would keep the party split 3-2.

Current SEC Commissioner Luis Aguilar was appointed in 2008. The term expired last year but he has continued serving in that position, as permitted by law.

Both nominations are subject to approval by the U.S. Senate.

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