Last week, representatives of the Securities and Exchange Commission gave the first of many reports concerning its “presence exam” initiative for conducting initial regulatory exams of private advisers, and reported a lower rate of deficiencies compared with regular exams. The panel highlighted exam findings and staff observations concerning investment conflicts, marketing, valuation and custody.
The Dodd-Frank Act required approximately 1,500 private advisers to register with the SEC in 2012 – resulting in a current population of approximately 4,000 registered private advisers. (more…)
The Securities and Exchange Commission is on track to meet its goal for auditing private advisers that are newly-registered with the SEC under the Dodd-Frank Act , according to the agency’s 2014 examination priorities published this month.
The SEC has made it clear that this initiative remains a priority this year and if a firm has not already been audited, it should prepare by reviewing five focus areas. (more…)
A recent report offered by the regulators of investment advisers with less than $100 million in assets under management found 6,482 adviser deficiencies during a six month period of examinations.
The deficiencies were detected in 20 compliance areas with the top three deficiencies involving books and records, registration and contracts. A review of the specific deficiencies in each compliance area unveiled that many of them could be considered simple or administrative tasks (i.e. incomplete or inconsistent core documents) that should have been managed and detected by an effective compliance program. (more…)
The Securities and Exchange Commission last week voted to lift the ban on general solicitation and advertising by private funds, as mandated by Congress in the Jumpstart Our Business Startups Act (JOBS Act). The new rule, 506(c), will now permit many hedge funds, private equity funds and venture capital funds to use general advertising and solicitation when attracting new investors.
The current regulatory regime only allows private funds to communicate with potential investors that have a pre-existing or tangible business relationship with the fund. (more…)
During an inspection, an examiner will inevitably ask the chief compliance officer of an advisory firm if they advertise and all too often, the examiner will receive a quick “no.” Although this may be true in the traditional sense of advertising, most firms do advertise with the use of a firm website and often don’t know it.
An adviser’s website is definitely a form of advertising and it’s usually a firm’s most public or visual form of it. Knowing some of the common compliance pitfalls when it comes to a firm website’s can save time and alleviate regulatory scrutiny. The listed pitfalls fall into four categories, they include: accuracy, disclosure, advertising rule considerations and documentation. (more…)
Historically, the act of trading on material, non-public information or insider trading was thought to be limited to corporate insiders or investment bankers, but that has not been the cases in recent years. The Securities and Exchange Commission reports that approximately 16 percent of the insider trading cases brought by the SEC in fiscal 2012 were against hedge funds and their advisers.
In a recent speech to an audience of compliance professionals, SEC Commissioner Luis Aguilar highlighted instances where investment advisers fail to do the right thing, with failing to prevent insider trading among them. He noted that insider trading – particularly relating to hedge fund and hedge fund advisers – continues to be an area of active enforcement by the SEC. (more…)
Financial planners use social media in their personal lives but shy away from it professionally out of concern over compliance issues and an uncertain regulatory environment, a recent survey reveals.
The survey of 3,500 certified financial planners was conducted by the Certified Financial Planner Board of Standards and released at the end of January It was accompanied by a social media guide for CFP professionals that can be broadly useful to any investment adviser representative, credentialed or not. (more…)
Managing an ever- changing compliance program can be overwhelming for many and it’s not getting any easier. Investment advisers have been faced with myriad new and prospective rules and regulatory requirements all while complying with the Investment Advisers Act of 1940 and upholding its fiduciary duty. Finding a way to relieve some of the stress can be as simple as getting organized and creating a compliance calendar for 2013.
Organizing and taking a systematic approach to compliance is especially important for a large number of investment advisers. Most advisers are considered small businesses, having fewer than 10 employees, and those employees fulfill multiple roles within the firm. A chief compliance officer may also be the portfolio manager or even the chief executive. (more…)