OCIE issues risk alert on the most frequently identified advisory fee and expense compliance issues

2018 ◽  
Vol 19 (4) ◽  
pp. 1-3
Author(s):  
Robert Van Grover
Keyword(s):  
Design Methodology ◽  
Best Practice ◽  
Investment Management ◽  
Content Type ◽  
Informed Decisions ◽  
Policies And Procedures ◽  
The Us ◽  
Investment Advisers ◽  
Practical Implications

Purpose To summarize and interpret a Risk Alert issued on April 12, 2018 by the US SEC’s Office of Compliance Inspections and Examinations (OCIE) on the most frequent advisory fee and expense compliance issues identified in recent examinations of investment advisers. Design/methodology/approach Summarizes deficiencies identified by the OCIE staff pertaining to advisory fees and expenses in the following categories: fee billing based on incorrect account valuations, billing fees in advance or with improper frequency, applying incorrect fee rates, omitting rebates and applying discounts incorrectly, disclosure issues involving advisory fees, and adviser expense misallocations. Findings In the Risk Alert, OCIE staff emphasized the importance of disclosures regarding advisory fees and expenses to the ability of clients to make informed decisions, including whether or not to engage or retain an adviser. Practical implications In light of the issues identified in the Risk Alert, advisers should assess the accuracy of disclosures and adequacy of policies and procedures regarding advisory fee billing and expenses. As a matter of best practice, advisers should implement periodic forensic reviews of billing practices to identify and correct issues relating to fee billing and expenses. Originality/value Expert guidance from experienced investment management lawyer.

Pay to play violations: an SEC focus

2017 ◽  
Vol 18 (2) ◽  
pp. 13-15
Author(s):  
Robert Van Grover
Keyword(s):  
Design Methodology ◽  
Investment Management ◽  
Content Type ◽  
Policies And Procedures ◽  
Practical Analysis ◽  
Investment Advisers ◽  
Practical Implications

Purpose To explain and analyze the SEC’s January 17, 2017 announcement of settlements with ten investment advisory firms related to charges that those firms violated Rule 206(4)-5, known as the “Pay-to-Play Rule,” of the Investment Advisers Act of 1940. Design/methodology/approach Explains the Pay-to-Play Rule, its applicability to investment advisers, the de minimis and returned contribution exceptions, and the Rule violations cited by the SEC, and draws conclusions for the benefit of registered investment advisers and exempt reporting advisers. Findings The settlement included censures, civil money penalties, and recovery of compensation earned for firms’ failure to abide by the Rule, most often involving relatively small contributions by single covered individuals. Practical implications In light of these settlements, registered investment advisers and exempt reporting advisers may wish to review the adequacy of their policies and procedures with respect to the Pay-to-Play Rule and the effectiveness of their implementation. Originality/value Practical analysis and guidance from an experienced lawyer with a specialty in investment management.

SEC releases enforcement division FY 2017 annual report: shift in tone and likely approach

2018 ◽  
Vol 19 (1) ◽  
pp. 15-19
Author(s):  
Matthew C. Solomon ◽  
Robin M. Bergen ◽  
Alexis Collins
Keyword(s):  
Asset Management ◽  
Design Methodology ◽  
Annual Report ◽  
Risk Profile ◽  
Content Type ◽  
Policies And Procedures ◽  
The Us ◽  
Retail Investors ◽  
Practical Implications ◽  
Insight Into

Purpose To discuss and analyze the US Securities and Exchange Commission’s (SEC’s) FY 2017 Annual Report, which details its priorities for the coming year and evaluates enforcement actions that occurred during FY2017. Design/methodology/approach Summarizes key shifts from FY 2016, outlines the Enforcement Division’s current priorities, and, in view of its stated focus on the conduct of investment professionals and protection of retail investors, provides guidance to the investment management industry as it gears up for the coming year. Findings The Report provides insight into changes in the SEC’s approach to enforcement actions, including a general shift in tone suggesting a more measured approach to enforcement and remedies and a move away from a statistics-oriented approach, and a glimpse into its priorities for the coming year, including five core principles guiding the Division’s enforcement decisions. Practical implications As those in the asset management industry consider revisions to their policies and procedures for FY 2018, as well as their risk profile more generally, they should keep in mind key insights into the Commission’s enforcement strategy offered by the Report. Originality/value Practical guidance from experienced securities enforcement, litigation, compliance and anti-corruption lawyers.

OCIE to investment advisers: focus on these five problem areas

2017 ◽  
Vol 18 (2) ◽  
pp. 16-18
Author(s):  
Brynn D. Peltz ◽  
Ilan S. Nissan ◽  
Evyn W. Rabinowitz
Keyword(s):  
Design Methodology ◽  
Code Of Ethics ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Policies And Procedures ◽  
Funds Management ◽  
Practical Guidance ◽  
Investment Advisers ◽  
Practical Implications

Purpose To explain a Risk Alert published on February 7, 2017 published by the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) describing the five compliance topics most frequently identified in deficiency letters sent to investment advisers after the completion of an OCIE examination. Design/methodology/approach Discusses deficiencies noted by the OCIE relating to the Compliance Rule, required regulatory filings, the Custody Rule, the Code of Ethics Rule, and the Books and Records Rule. Findings The OCIE published the Risk Alert with its noted deficiencies only one month after releasing its exam priorities for the year. Practical implications All investment advisers should consider reviewing their compliance practices, policies and procedures in light of the deficiencies and weaknesses identified in the SEC Risk Alert. Originality/value Practical guidance from experienced lawyers specializing in asset and funds management.

Heightened supervision of branch offices

2015 ◽  
Vol 16 (2) ◽  
pp. 18-21
Author(s):  
Daniel A. Nathan ◽  
Lauren Navarro ◽  
Kevin Matta
Keyword(s):  
Regulatory Authority ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Financial Industry ◽  
Content Type ◽  
National Examination ◽  
Policies And Procedures ◽  
The Us ◽  
Branch Office ◽  
Practical Implications

Purpose – To explain expectations of the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) as to what constitutes successful branch inspection programs for broker-dealers. Design/methodology/approach – Summarizes FINRA’s rules requiring firms to implement branch inspection programs; examines the SEC’s and FINRA’s joint 2011 National Examination Risk Alert, which expanded upon FINRA’s rules, requiring firms to conduct risk-based analyses on each branch office to determine the appropriate frequency, intensity, and focus of inspections; discusses FINRA’s expectation that firms examine their registered representatives’ financial circumstances to reduce the risk of fraud; explains how FINRA’s Comprehensive Automated Risk Data System may impact branch inspections; and recommends several sources that firms should review when implementing a successful branch inspection program. Findings – Regulators have heightened their expectations as to what constitutes successful branch inspection programs for broker-dealers. Practical implications – To avoid regulatory intervention and discipline, firms should continue to review their policies and procedures to ensure that their programs are sufficiently comprehensive. Originality/value – This article will encourage firms with branch offices to review their branch inspection programs, and assist those firms in implementing sufficiently comprehensive policies and procedures.

SEC issues Staff Legal Bulletin after four-year comprehensive review of proxy system

2015 ◽  
Vol 16 (1) ◽  
pp. 63-65
Author(s):  
John E. Sorkin ◽  
Abigail Pickering Bomba ◽  
Steven Epstein ◽  
Jessica Forbes ◽  
Peter S. Golden ◽  
...  
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Third Parties ◽  
Comprehensive Review ◽  
Content Type ◽  
Policies And Procedures ◽  
Practical Guidance ◽  
Investment Advisers ◽  
Practical Implications

Purpose – To provide an overview of the guidance for proxy firms and investment advisers included in the Staff Legal Bulletin released this year by the Securities and Exchange Commission (SEC) after its four-year comprehensive review of the proxy system. Design/methodology/approach – Discusses briefly the context in which the SEC’s review was conducted; the general themes of the guidance provided; the most notable aspects of the guidance; and the matters that were expected to be, but were not, addressed by the SEC. Findings – The guidance does not go as far in regulating proxy advisory firms as many had anticipated it would. The key obligations specified in the guidance are imposed on the investment advisers who engage the proxy firms. The responsibilities, policies and procedures mandated do not change the fundamental paradigm that has supported the influence of proxy firms – that is, investment advisers continue to be permitted to fulfill their duty to vote client shares in a “conflict-free manner” by voting based on the recommendations of independent third parties, and continue to be exempted from the rules that generally apply to persons who solicit votes or make proxy recommendations. Practical implications – The SEC staff states in the Bulletin that it expects that proxy firms and investment advisers will conform to the obligations imposed in the Bulletin “promptly, but in any event in advance of [the 2015] proxy season.” Originality/value – Practical guidance from experienced M&A lawyers.

The SEC brings its first enforcement action under the identity theft red flags rule

2019 ◽  
Vol 20 (1) ◽  
pp. 31-35
Author(s):  
Vincente L. Martinez ◽  
Julia B. Jacobson ◽  
Nancy C. Iheanacho
Keyword(s):  
Design Methodology ◽  
Identity Theft ◽  
Securities And Exchange Commission ◽  
Red Flags ◽  
Content Type ◽  
Enforcement Action ◽  
Policies And Procedures ◽  
The Us ◽  
Practical Guidance ◽  
Investment Advisers

Purpose To explain the significance of the first enforcement action under the Identity Theft Red Flags Rule by the US Securities and Exchange Commission (SEC), which was announced on September 26, 2018. Design/methodology/approach Explains how the SEC’s order not only cites violations of the Safeguards Rule under Regulation S-P (a staple of SEC cybersecurity enforcement actions against broker-dealers and investment advisers) but also is the SEC’s first enforcement action for a violation of the Identity Theft Red Flags Rule under Regulation S-ID, which requires certain SEC registrants to create and implement policies to detect, prevent and mitigate identity theft. Findings Cybersecurity policies and procedures must match business risks and change as business risks change. Originality/value Practical guidance from experienced cybersecurity and privacy lawyers.

Cybersecurity enforcement actions: is the SEC bringing strict liability cases?

2016 ◽  
Vol 17 (1) ◽  
pp. 112-116
Author(s):  
Brian Rubin ◽  
Amy Xu
Keyword(s):  
Design Methodology ◽  
Strict Liability ◽  
Securities And Exchange Commission ◽  
Cyber Attack ◽  
Content Type ◽  
Enforcement Action ◽  
The Us ◽  
Investment Advisers ◽  
Practical Implications

Purpose To analyze how the US Securities and Exchange Commission (SEC) has sanctioned broker-dealers (BDs) and registered investment advisers (RIAs) when cybersecurity breaches have occurred and to discuss whether the SEC is imposing a strict liability approach. Design/methodology/approach Describes the cyber-attack of a small RIA, the remedial steps the RIA took after the attack, the SEC’s enforcement action, why this particular case is noteworthy, and the case’s implications for RIAs and BDs. Findings RIAs and perhaps BDs may face strict liability from the SEC if they are victims of cybersecurity attacks. Practical implications Firms may want to address the likelihood of an SEC enforcement action if a breach occurs by reviewing recent enforcement actions, SEC reports and statements, and FINRA reports and statements. Originality/value Discusses the possible future of SEC enforcement actions regarding cybersecurity breaches.

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.

SEC proposes rules on adviser business continuity and transition plans

2016 ◽  
Vol 17 (4) ◽  
pp. 65-70 ◽  
Author(s):  
Kay Gordon
Keyword(s):  
Design Methodology ◽  
Business Continuity ◽  
Content Type ◽  
Record Keeping ◽  
Transition Plans ◽  
The Us ◽  
Investment Advisers ◽  
Definition Of ◽  
The Universe ◽  
Practical Implications

Purpose To discuss the requirements and implications of the US Securities and Exchange Commission’s (SEC’s) proposed new Rule 206(4)-4, which would require all SEC-registered investment advisers to adopt and implement written business continuity and transition plans (BCPs) reasonably designed to address operational and other risks related to a significant disruption in the investment adviser’s operations. Design/methodology/approach Explains the proposed rules’ definition of and specific requirements of BCPs, other requirements relating to annual reviews and record-keeping, practical considerations including advisers’ need to update and revise their BCPs, and the SEC’s request for comment on issues including possible additional obligations for certain types of clients, reporting of incidents to the SEC, and filing of BCPs with the SEC. Findings By arguably broadening its approach to the universe of risks that should be addressed in a BCP, the SEC potentially places a higher burden on the advisers to design their BCPs to anticipate all material risks that may become applicable or be responsible for a violation of their fiduciary duties to clients. Practical implications Given the detailed requirements of the Proposed Rules, including as interpreted by the Proposing Release, it is likely that most registered advisers would have to revisit and revise their BCPs if the rules are adopted. Originality/value Practical guidance from experienced securities, fund management, regulatory and compliance lawyer.

scholarly journals How the information use environment influences search activities

2019 ◽  
Vol 75 (2) ◽  
pp. 435-455 ◽  
Author(s):  
Sophie Rutter ◽  
Paul David Clough ◽  
Elaine G. Toms
Keyword(s):  
Primary Schools ◽  
Value Of Information ◽  
Design Methodology ◽  
Best Practice ◽  
National Curriculum ◽  
Information Use ◽  
Search Process ◽  
Search Activity ◽  
Content Type ◽  
Practical Implications

Purpose The information use environment (IUE) – the context within which the search activity takes place – is critical to understanding the search process as this will affect how the value of information is determined. The purpose of this paper is to investigate what factors influence search in English primary schools (children aged 4–11) and how information found is subsequently used. Design/methodology/approach Ten teachers, selected using maximal variation sampling, describe search-related activities within the classroom. The resulting interview data were analysed thematically for the influence of the environment on search and different information uses. The findings were then validated against three classroom observations. Findings 12 categories of information use were identified, and 5 aspects of the environment (the national curriculum, best practice, different skills of children and teachers, keeping children safe, and limited time and resource) combine to influence and shape search in this setting. Research limitations/implications Findings support the argument that it is the IUE that is the key influence of search activity. What makes children a distinct user group is linked to the environment within which they use information rather than age, as advocated in previous studies. Practical implications The features of search systems and practical guidance for teachers and children should be designed to support information use within the IUE. Originality/value As far as the authors are aware, this is the first study to consider the influence of the IUE on how search is enacted within primary schools.

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