Bi-Partisan Legislation Authorizing SROs for Retail Investment Advisers

Posted on April 27, 2012 by Jeff

On 4/26/12, House Financial Services Committee Chairman Spencer Bachus (R-LA) and Rep. Carolyn McCarthy (D-NY) introduced legislation to amend the Investment Advisers Act of 1940 (the “Advisers Act”) to authorize one or more self-regulatory organizations (SROs) for investment advisers, to be funded by membership fees. Generally, NIAA membership would be required only for investment advisers conducting business with retail customers; investment advisers to private funds would be among the advisers exempt from the NIAA membership requirement. As such, under the proposal, private fund advisers would be exempt from the NIAA membership requirement. Continue reading →

General Solicitation Ban to be Lifted

Posted on March 30, 2012 by Jeff

Significant changes are imminent for the methods that may be used by private funds to market their products. Congress has approved the bi-partisan HR 3606, the Jumpstart Our Business Startups (JOBS) Act, which President Obama is expected to sign in the near future. The JOBS Act includes a provision of great interest to our private fund adviser clients: the easing of the general solicitation and general advertising ban in private offerings under Securities Act of 1993 Regulation D Rule 506 and the application of that amendment to other federal securities laws. Also included is a provision raising the threshold for an issuer’s registration under the Securities Exchange Act of 1934 (the “Exchange Act”) from 500 “holders of record” to 2,000. Continue reading →

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 →

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 →

Division of Investment Management Requests Extensions of Deadlines for Mid-Sized Advisers and Private Fund Advisers

Posted on May 9, 2011 by Yonina

IA Watch is reporting that the Division of Investment Management has formally requested that the Securities and Exchange Commission (SEC) move to next year the deadlines for mid-sized advisers (certain advisers with between $25 million and $100 million in assets under management) to switch to state registration and for private fund advisers with more than $150 million in assets under management to register with the SEC. IA Watch states: “The formal request moves this closer to becoming reality, should the Commission act on it.”

Robert E. Plaze, Associate Director of the Division of Investment Management, had suggested that extensions to the first quarter of 2012 were a possibility in his April 8, 2011 letter to David Massey, President, North American Securities Administrators Association, Inc. and Deputy Securities Administrator, North Carolina Securities Division.

“We anticipate that the Commission will complete its implementing rulemaking by July 21,2011 in accordance with the Dodd-Frank Act, but expect in connection therewith that the Commission will consider providing additional time for investment advisers affected by these provisions to come into compliance.”

With respect to the switch of mid-sized advisers to state registration, Mr. Plaze’s letter noted that once the SEC adopts the implementing rulemaking, the Investment Adviser Registration Depository system (lARD) will “require re-programming to accept advisers’ transition filings” and that they “understand that the re-programming process will take until the end of the year to complete.” As a result, under consideration was the possibility that “all SEC-registered advisers would be required to report their eligibility for registration with the Commission in the first quarter of 2012.” He went on to say that, even if the implementing rulemaking is completed prior to July 21, 2011, private fund advisers will need time to register and come fully into compliance with the accompanying obligations, and that they “expect that the Commission will consider extending the date by which these advisers must register and come into compliance with the obligations of a registered adviser until the first quarter of 2012.”

IA Watch‘s report is not surprising given recent reports in industry publications (including a May 2 report by IA Watch) that SEC staff members have indicated the expectation that the delays will go through. One such statement was reported to have been made by Sara Crovitz, a Branch Chief in the Office of Chief Counsel in the Division of Investment Management, as a participant in a DC bar luncheon panel discussion on “Cross Border Issues Affecting Investment Advisers in the World of Dodd-Frank.”

SEC Division of Investment Management Staff Responds to Questions about Form ADV Part 2

Posted on March 22, 2011 by Yonina

On March 18, 2011, the staff of the SEC’s Division of Investment Management issued responses to questions about the amended Part 2 of Form ADV.

The Division answered questions regarding the following topics, generally restating information already known about the compliance dates for delivery questions, but providing guidance not previously offered on the remaining issues:

compliance dates for delivery of Part 2A and Part 2B
Part 2A brochure format, material change and risk disclosure, filing and delivery requirements
“covered persons” for Part 2B brochure supplements
Part 2B brochure supplement delivery requirements

Among the responses offered are the following:

An offshore adviser whose only clients are offshore funds would not have to prepare or file a brochure as part of its Form ADV. (Question II. 6)
An adviser that is not required to deliver a brochure, but nevertheless chooses to prepare and deliver one, is not required to file the brochure with the SEC. (Question III. 1)
An adviser to a hedge or other private fund could meet its delivery obligation to the fund client by delivering the brochure to a “legal representative of the fund, such as the fund’s general partner, manager or person serving in a similar capacity.” In its response, the staff cites the U.S. Court of Appeals D.C. Circuit 2006 decision in Goldstein v. Securities and Exchange Commission (“Goldstein”) that the “client” of an investment adviser managing a hedge fund is the fund itself and not any of the investors in the fund. (Question III. 2)

Despite the Goldstein decision, many advisers provide copies of their brochures to all investors in their funds, as a matter of best business practice. It is expected that many advisers will continue to do so, as a matter of best business practice, despite the staff’s response to Question III. 2.

In their introduction to these responses, the staff of the Division of Investment Management state that they expect to update the site with their responses to additional questions “from time to time.” Investment advisers will continue to look for further guidance from the staff.

The full text of the Division of Investment Management staff responses may be found here and the final rule adopting the related amendments to Part 2 may be found here.

SEC December Activities Implementing Dodd-Frank

Posted on November 29, 2010 by Yonina

The SEC staff continues to carry out the rulemaking and proceed with the studies mandated by the Dodd-Frank Act.

The SEC’s “Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act” web page consolidates links to all of the SEC’s related accomplishments to date, includes a calendar of its planned activities implementing the Dodd-Frank Act through July 2011 and provides a link to comments the SEC has received on both rulemaking and planned studies.

In November, the SEC proposed the following: an anti-manipulation rule for security-based swaps, a Whistleblower Incentives and Protection Program, rules regarding the registration and regulation of security-based swap repositories and security-based swap reporting and, most recently, exemptions from investment adviser registration for venture capital firm advisers and certain private fund advisers, as well as rules and changes to forms to implement the transition of mid-sized investment advisers from SEC to State regulation.

Highlights of the December, 2010 calendar most relevant to hedge funds and investment advisers include: Continue reading →

SEC October Calendar of Activities Implementing the Dodd-Frank Act

Posted on October 7, 2010 by Yonina

The SEC staff has been working hard on the rulemaking and studies mandated by the Dodd-Frank Act, signed into law by President Obama on July 21, 2010.

The SEC’s webpage captioned “Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act” consolidates links to all of the SEC’s related accomplishments to date, and includes a calendar of its planned activities implementing the Dodd-Frank Act through July 2011.

Highlights of the October, 2010 calendar relevant to hedge funds and investment advisers include:

proposing rules defining “family office”;
proposing rules regarding conflicts of interest for clearing agencies, execution facilities and exchanges involved in security-based swaps;
adopting an interim final rule for reporting of security-based swaps entered into before the enactment of the Dodd-Frank Act; and
reporting to Congress on a Whistleblower Program.

The full list of planned activities for October appears on the calendar on the SEC site.

Compliance Avenue

The place to talk IA compliance

Tag Archives: investment adviser registration