Compliance Solutions for Investment Advisers

Monthly Archives: April 2012

Common Deficiencies

In order to provide state-registered investment advisers with a better understanding of what they need to do to “stay out of trouble” we analyzed all the state-level compliance material (e.g., examination request lists, deficiency letters, policy notices, speeches) we have assembled over the years to develop a list of compliance issues that are of greatest

Did You Know?

. . . that the SEC annually examines only about 8% of the nearly 12,000 advisers registered with the agency.

You Ain’t Going to Get Away With it

Attorney, Wall Street Trader, and Middleman Settle SEC Charges in $32 Million Insider Trading Case The Securities and Exchange Commission announced a settlement in a $32 million insider trading case against a corporate attorney and a Wall Street trader. The SEC alleged that the insider trading occurred in advance of at least 11 merger and

SEC Versus State Registration

We have always contended that it is far easier to register as an investment adviser with the SEC than it is with most any state. Counterintuitive though it may be, registration with the SEC requires the filing of ONLY two documents (e.g., the ADV Part 1 and Part 2A). When registering as an investment adviser

ERISA 408(b)(2) – Fees and Expenses Disclosures

One of the disclosure required of Advisers by the Department of Labor under ERISA section 408(b)(2) is in regard to the fees and expenses relating to a Plan’s investment options. Fees and expenses include additional investment disclosures from providers of fiduciary services to an investment contract, product, or entity that holds plan assets and in

FINRA for Investment Advisers?

House Financial Services Committee Chairman Spencer Bachus, R-Ala., formally introduced a bill on Wednesday that would shift the oversight of investment advisers from the Securities and Exchange Commission to a separate agency – perhaps the Financial Industry Regulatory Authority Inc.

ERISA 408(b)(2) – Recordkeeping Disclosures

One of the disclosure required of Advisers by the Department of Labor under ERISA section 408(b)(2) is in regard to the cost of recordkeeping services. Recordkeeping services include services related to plan administration and monitoring of plan and participant and beneficiary transactions (e.g., enrollment, payroll deductions and contributions, offering designated investment alternatives and other covered

The High Cost of Misleading Investors

SEC Charges Father-and-Son Hedge Fund Managers Who Agree to Pay $4.8 Million to Settle Fraud Case The Securities and Exchange Commission today charged a Boston-based father-son duo of hedge fund managers and their firms with securities fraud for misleading investors about their investment strategy and past performance.  

ERISA 408(b)(2) – Indirect Compensation

One of the disclosure required of Advisers by the Department of Labor under ERISA section 408(b)(2) is in regard to indirect compensation. “Indirect” compensation is compensation received from any source other than the covered plan, the plan sponsor, the covered service provider, or an affiliate. Examples of Indirect Compensation: Soft Dollars; 12b-1 fees (even if

California Requirements

For those SEC-registered advisers transitioning to registration in the State of California, you need to include the following two disclosures in your ADV Part 2A: “XYZ Advisors has disclosed all material conflicts of interest under section 260.238(k) of the California Code of Regulations regarding the firm, its representatives and its employees which could be reasonably

SEC sifts through Hedge Fund Data to Identify Risk

The Securities and Exchange Commission received disclosure from hundreds of hedge funds and other private money managers detailing their investors, funds, brokers and other information. The SEC is looking through the data in search of risky behavior. “Pick your fraud of the day, and the question is, ‘Can we extract information from this data system

ERISA 408(b)(2) Disclosures

Changes to section 408(b)(2) requires advisers to make additional disclosures to Plan Sponsors.  These changes take affect on July 1, 2012. The Final Rule: Reasonable Contract or Arrangement Under Section 408(b)(2) – Fee Disclosure is actually fairly clear as to what is required. The required disclosures – which must be made in a document separate

Stock Picking Robot (No, Really)

The Securities and Exchange Commission recently charged twin brothers from the U.K. with defrauding approximately 75,000 investors through an Internet-based pump-and-dump scheme in which they touted a fake “stock picking robot” that purportedly identified penny stocks set to double in price. Not sure which is more remarkable – that there could actually be such a

Choice of Law

California is requiring an adviser that is transitioning its SEC registration to state registration in multiple states to change the choice of law provision in its advisory agreement from its home state (not California) to California. Does anyone know of any requirement under either the investment adviser regulations or corporate regulations that require this? I

California Dreaming . . .

California has been extremely tough, but also extremely fair, with transitioning SEC investment advisers. The thoroughness of those individuals tasked with reviewing application material has been impressive. Don’t get me wrong, dealing with California is a pain in the behind, but compared to the ridiculous requests and incompetence of some other states, it is a

The Battle Is On!

Despite all hopes to the contrary, there has been nothing easy about the registration transition process. It has become obvious that some states are ill-prepared to handle the crush of transitioning SEC advisers.

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