SEC’s division of investment management offers new guidance on “distribution in guise” payments

2016 ◽  
Vol 17 (2) ◽  
pp. 27-34
Author(s):  
Arthur Delibert ◽  
Lori Schneider ◽  
Megan Clement ◽  
Shane Shannon
Keyword(s):  
Mutual Funds ◽  
Design Methodology ◽  
Conflicts Of Interest ◽  
Fiduciary Duty ◽  
Investment Management ◽  
Related Services ◽  
Content Type ◽  
Compliance Programs ◽  
Practical Guidance

Purpose To explain the January 6, 2016 written guidance (the “New Guidance”) issued by the Securities and Exchange Commission’s Division of Investment Management on payments made by mutual funds to intermediaries for distribution and non-distribution-related services. Design/methodology/approach Explains the SEC’s earlier guidance in the 1998 “Supermarket Letter,” the provisions of Rule 12b-1, the practice termed “distribution in guise,” the emphasis in the “New Guidance” on the role of a fund board’s business judgment, how Rule 12b-1 compliance fits into Rule 38a-1 compliance programs, specific fund activities and arrangements with intermediaries that are of concern to the SEC staff, and the focus of the New Guidance on an adviser’s fiduciary duty to mitigate or eliminate conflicts of interest. Findings The New Guidance articulates clear expectations that fund boards will have a process to evaluate the nature of intermediary payments and that fund advisers will provide boards with information in the advisers’ possession that the boards need to carry out that evaluation. Another intent of the New Guidance is apparently to give the SEC a clearer basis to bring enforcement actions concerning the use of fund assets to pay intermediaries for distribution-related activities. Originality/value Practical guidance from experienced investment management lawyers.

SEC publishes guidance on mutual fund distribution and sub-accounting fees

2016 ◽  
Vol 17 (2) ◽  
pp. 39-42 ◽  
Author(s):  
Marco Adelfio ◽  
Paul J. Delligatti ◽  
Jason F. Monfort
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Financial Services ◽  
Design Methodology ◽  
Investment Management ◽  
Content Type ◽  
Enforcement Action ◽  
Policies And Procedures ◽  
Practical Guidance ◽  
Investment Advisers

Purpose To explain the guidance published on January 6, 2016 by the SEC’s Division of Investment Management containing its views and recommendations relating to mutual fund distribution and sub-accounting fees. Design/methodology/approach Explains the SEC’s Office of Compliance Inspections and Examinations focus on “distribution in guise” payments, its 2013 “sweep exam,” an enforcement action against a fund’s adviser and affiliated distributor related to payments for distribution-related activities outside of a 12b-1 plan, lists SEC staff recommendations with respect to mutual fund distribution and sub-accounting fees, summarizes the SEC’s guidance on board oversight of sub-accounting fees, provides indicia that a payment may be for distribution-related activities, and points to the need for mutual funds to have policies and procedures designed to prevent violations of Section 12(b) and Rule 12b-1. Findings The guidance is an outgrowth of the staff’s observations from a three-year “distribution in guise” sweep exam of mutual fund complexes, investment advisers, broker-dealers and transfer agents conducted by the SEC’s Office of Compliance Inspections and Examinations and other offices and divisions of the SEC to identify whether firms were using fund assets to directly or indirectly finance any activities primarily intended to result in the sale of fund shares outside of an approved Rule 12b-1 distribution plan. Originality/value Practical guidance from experienced financial services lawyers.

FINRA relaxes restrictions on pre-inception performance data

2019 ◽  
Vol 20 (3) ◽  
pp. 6-9
Author(s):  
Richard F. Kerr ◽  
Matthew J. Rogers
Keyword(s):  
Design Methodology ◽  
Performance Data ◽  
Exchange Traded Funds ◽  
Investment Management ◽  
Content Type ◽  
Investment Companies ◽  
Practical Guidance ◽  
Marketing Materials ◽  
Important Shift

Purpose To explain the significance of a recently issued interpretive letter in which FINRA staff agreed to permit the use of pre-inception index performance data by passively managed, registered open-end investment companies. Design/methodology/approach FINRA recently issued an interpretive letter extending previously issued guidance by permitting passively managed open-end registered investment companies including separately-managed series of a business trust to use pre-inception index performance data in Institutional Communications. Findings The 2019 Letter is an important shift in how FINRA staff views PIP data in Institutional Communications by acknowledging that passively managed open-end funds should be treated in a similar manner as passively managed exchange-traded funds. This shift will be a welcome development for FINRA member firms wishing to include PIP data in marketing materials for the passively managed open-end funds they distribute. Originality/value Practical guidance from experienced investment management and broker-dealer lawyers.

Services in the forest-based sector – unexplored futures

foresight ◽  
2015 ◽  
Vol 17 (4) ◽  
pp. 378-398 ◽  
Author(s):  
Annukka Näyhä ◽  
Päivi Pelli ◽  
Lauri Hetemäki
Keyword(s):  
Design Methodology ◽  
Business Models ◽  
Services Research ◽  
Related Services ◽  
Content Type ◽  
Case Examples ◽  
The Future ◽  
Future Potential ◽  
Practical Implications

Purpose – The purpose of this paper is to analyze and provide a synthesis of how services are understood, how they are likely to develop and how future development can be studied more closely in the forest-based sector (FBS). Services are likely to have an increasing role in the FBS in the future. Design/methodology/approach – The findings are based on a literature review of FBS outlook studies, strategies and programs and services-related studies in FBS and general services literature. Three case examples of services businesses in FBS companies are presented, and possible foresight approaches related to them are discussed. Foresight methods used in parallel sectors are also discussed. Findings – The study provides the first systematic introduction, classification and review of FBS services to include both industry- and non-industry-related services. The paper also points out the need for foresight studies and suggests various approaches for an analysis of the potential of FBS services in the future bioeconomy. Practical implications – The study shows that the role of services in FBS research has been understood too narrowly. As a result, services research has been rather lacking and the future potential of services in the FBS has not been fully acknowledged. The study argues for and points toward the need to use foresight approaches to update FBS strategies, business models and policies to fully benefit from the future potential of services. Originality/value – The study is a novel introduction, review and discussion of the role of services in the FBS and their future outlook.

RegTech solutions and AML compliance: what future for financial crime?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Esman Kurum
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Design Methodology ◽  
Financial Crime ◽  
Strong Positive Correlation ◽  
Content Type ◽  
Compliance Programs ◽  
Time Required ◽  
International Experts

Purpose This study aims to discuss the growing use of RegTech solutions by financial institutions to comply more efficiently with regulation in terms of anti-money laundering compliance and more specifically its influence on the evolution of financial crime in the next ten years. Design/methodology/approach Based on two online Delphi surveys sent to a panel of international experts composed of eight specially recruited professionals and specialists of anti-financial crime compliance and RegTech, five main predictions have been developed. Findings It was found that artificial intelligence would become the most impactful technology for financial institutions to fight financial crime, and that there will be a strong positive correlation between ever-more elaborated compliance programs and the level of sophistication of methods used for money laundering. Furthermore, the panel designated regulators’ recommendations as likely to be less influential than RegTech solutions, and the time required to integrate RegTech solutions for AML compliance as the main future challenge. Originality/value These predictions are meant to provide financial institutions and regulators with useful outlooks. While the reviewed literature focused on the role of regulations on the evolution of money laundering, this study puts stress on RegTech solutions and their impact on both compliance and financial crime.

MSRB publishes its first compliance advisory for broker-dealers

2016 ◽  
Vol 17 (3) ◽  
pp. 49-51
Author(s):  
Scott R. Anderson ◽  
Kate S. Poorbaugh
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Content Type ◽  
Compliance Programs ◽  
Policies And Procedures ◽  
Practical Guidance ◽  
Effective Compliance ◽  
Practical Implications

Purpose To summarize the Municipal Securities Rulemaking Board’s 2016 Compliance Advisory for brokers, dealers and municipal securities dealers. Design/methodology/approach Summarizes several Municipal Securities Rulemaking Board (MSRB) rules that the Compliance Advisory highlights as presenting key compliance risks for brokers, dealers and municipal securities dealers. Discusses the factors included in the Compliance Advisory that dealers should consider when evaluating compliance procedures and controls. Findings By highlighting some key compliance risks and providing considerations tailored to those risks, the Compliance Advisory can be used as a tool to aid dealers in developing and assessing effective compliance programs. Practical implications Dealers should consider reviewing their firms’ existing compliance policies and procedures in light of the considerations discussed in the Compliance Advisory. Originality/value Practical guidance from experienced securities and financial services regulatory lawyers.

SEC updates regulatory framework for good faith determinations of fair value

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christopher Palmer ◽  
Paul Delligatti ◽  
Andrew Zutz ◽  
William Lane
Keyword(s):  
Design Methodology ◽  
Fair Value ◽  
Securities And Exchange Commission ◽  
Business Development ◽  
Good Faith ◽  
Investment Management ◽  
Investment Company ◽  
Content Type ◽  
Investment Companies ◽  
Practical Guidance

Purpose To explain the new U.S. Securities and Exchange Commission (“SEC”) Rule 2a-5 (the “Fair Value Rule”) under the Investment Company Act of 1940 (the “1940 Act”), which addresses the valuation practices of registered investment companies and business development companies. Design/methodology/approach Provides an overview of the Fair Value Rule, followed by a more detailed summary of the key provisions, including relevant guidance provided by the SEC in the release adopting the Fair Value Rule. Findings The Fair Value Rule establishes a specific framework, a standard of baseline practices across funds, and a set of required functions that must be performed in order to determine in good faith the fair value of a fund’s investments for purposes of applying Section 2(a)(41) of the 1940 Act. Originality/value Practical guidance from experienced investment management lawyers.

The future of SEC enforcement under the Biden administration

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
John J. Carney ◽  
Jonathan R. Barr ◽  
Teresa Goody Guillén ◽  
Jimmy Fokas ◽  
Kevin R. Edgar ◽  
...  
Keyword(s):  
Climate Change ◽  
Design Methodology ◽  
Investor Protection ◽  
Content Type ◽  
Blockchain Technology ◽  
Compliance Programs ◽  
Practical Guidance ◽  
Securities Laws ◽  
Practical Implications ◽  
Current Emphasis

Purpose To examine what to expect from Chair Gary Gensler’s SEC and the new Biden presidential administration following Chair Gensler’s U.S. Senate confirmation on April 14, 2021. Design/methodology/approach Reviews past SEC Chair Jay Clayton’s legacy and Chair Gensler’s prior regulatory actions and focus, and outlines Chair Gensler’s expected initiatives, including a heightened focus on cryptocurrency regulation, investigation of COVID-19-related fraud, and ESG and climate change disclosure. Findings This change will bring forth a Democratic majority at the SEC which, in turn, suggests that the Commission will change its current emphasis on capital formation to focus more on investor protection, rules required by the Dodd-Frank Act, inspections, examinations, and enforcement Practical implications Firms should examine their compliance programs in anticipation of heightened advocacy for investor protection; an increased focus on cryptocurrency and blockchain technology, as well as ESG disclosures with an emphasis on climate change; and an increase in inspections and examinations which will drive more enforcement in the fund industry, as well as increases in initiatives regarding transparency, additional disclosures, and investor protection. Organizations will also benefit by reexamining their existing compliance programs with the advice of counsel as a mechanism to mitigate the risk of potential securities laws violations. Originality/value Practical guidance from experienced securities enforcement and litigation lawyers.

CFTC clarifies and expands relief relating to delegation of commodity pool operator responsibilities

2015 ◽  
Vol 16 (1) ◽  
pp. 69-73
Author(s):  
Cary Meer ◽  
Lawrence B. Patent
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Commodity Futures ◽  
Investment Management ◽  
Futures Trading ◽  
Content Type ◽  
Commodity Futures Trading Commission ◽  
Practical Guidance

Purpose – To explain CFTC No-Action Letter 14-126, issued on October 15, 2014 by the Commodity Futures Trading Commission Division of Swap Dealer and Intermediary Oversight, which sets forth a number of conditions with which a commodity pool operator (“CPO”) that delegates its CPO responsibilities (“Delegating CPO”) to a registered CPO (“Designated CPO”) must comply in order to take advantage of no-action relief from the requirement to register as a CPO. Design/methodology/approach – Explains the modified conditions provided by Letter 14-126, including clarification of the permissible activities in which a Delegating CPO seeking to take advantage of registration no-action relief may engage regarding investment management, solicitation, and management of pool property; lists other criteria carried over from Letter 14-69 of May 12, 2014; provides analysis and discusses limitations of the relief provided by the CFTC No-Action letter. Findings – The letter makes more liberal several of the conditions set forth in CFTC Letter 14-69 of May 12, 2014, with which many Delegating CPOs could not comply. Originality/value – Practical guidance from experienced financial services lawyers.

SEC approves new municipal advisor fiduciary duty rule

2016 ◽  
Vol 17 (2) ◽  
pp. 43-49
Author(s):  
Stephen Wink ◽  
Anna Rienhardt ◽  
Brett M. Ackerman ◽  
Sean Miller
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Fiduciary Duty ◽  
Wall Street ◽  
Content Type ◽  
Final Version ◽  
Consumer Protection Act ◽  
Standards Of Conduct ◽  
Practical Guidance ◽  
Significant Milestone

Purpose To analyze the Municipal Securities Rulemaking Board’s new rule outlining the standards of conduct and fiduciary duties applicable to municipal advisors. Design/methodology/approach This article contains a summary of new MSRB Rule G-42 and identifies key areas where the final version of MSRB Rule G-42 differs from the initial proposal. Findings New MSRB Rule G-42 represents another significant milestone in the MSRB’s development of a comprehensive regulatory framework for municipal advisors mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act and imposes significant requirements on municipal advisors. Originality/value Practical guidance from experienced securities and financial services lawyers.

U.S. Securities and Exchange Commission (SEC) Staff issues no-action relief to facilitate implementation of Markets in Financial Instruments Directive II (MiFID II) research provisions

2018 ◽  
Vol 19 (1) ◽  
pp. 53-57
Author(s):  
Paul J. Delligatti ◽  
William P. Lane
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Background Information ◽  
Financial Instruments ◽  
Investment Management ◽  
Financial Industry ◽  
Content Type ◽  
Market Participants ◽  
Practical Guidance

Purpose The purpose of this paper is to summarize and discuss the implications of three related U.S. Securities and Exchange Commission (SEC) no-action letters dated October 26, 2017 that seek to address the provisions of MiFID II related to “inducements”. Design/methodology/approach Provides background information regarding MiFID II and summarizes each of the three SEC Staff no-action letters: the SIFMA letter, the ICI letter and the AMG letter. Findings The no-action letters provide market participants with increased clarity as to how certain aspects of their business activities, in particular the “bundling” or “unbundling” of payments for research and execution, can comply with potentially competing systems of regulations. Originality/value Practical guidance from experienced financial industry and investment management lawyers.

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