SEC adopts rules and interpretive guidance designed to enhance and clarify the obligations of financial professionals

2019 ◽  
Vol 20 (4) ◽  
pp. 35-44
Author(s):  
Michael R. Rosella ◽  
Vadim Avdeychik ◽  
Justin R. Capozzi
Keyword(s):  
Historical Context ◽  
Legal Counsel ◽  
Legal Analysis ◽  
Best Interest ◽  
Extensive Experience ◽  
Content Type ◽  
The Us ◽  
Investment Advisers ◽  
Definition Of ◽  
Practical Implications

Purpose This article provides an overview of the US Securities and Exchange Commission’s (SEC) recent approval of a package of rulemakings and interpretations designed to enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers. Design/Methodology/Approach The article provides legal analysis for and historical context of the requirements of the SEC’s adopted rules, Regulation Best Interest and Form CRS in addition to the two separate interpretations under the Investment Advisers Act of 1940, the Standard of Conduct for Investment Advisers; and the Broker-Dealer Exclusion from the Definition of Investment Adviser. Findings The SEC’s adopted regulatory package does not adopt a uniform fiduciary standard for broker-dealers and investment advisers but instead promulgates legal requirements and mandated disclosures in order to conform to the SEC’s perceived expectations for reasonable investors. Practical implications Investment advisers and broker-dealers should consult with their legal counsel in assessing how and to what extent the new regulatory package is applicable to them. Originality/Value This article provides practical guidance from lawyers who have extensive experience with the Investment Company Act, Investment Advisers Act, and the Securities Acts.

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.

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.

The deductibility of Sarbanes-Oxley costs incurred by Australasian companies

2014 ◽  
Vol 27 (1) ◽  
pp. 52-70 ◽  
Author(s):  
Julie Harrison ◽  
Mark Keating
Keyword(s):  
New Zealand ◽  
Transfer Pricing ◽  
Legal Analysis ◽  
Content Type ◽  
Reporting Requirements ◽  
Sarbanes Oxley ◽  
The Us ◽  
To Receive ◽  
Parent Companies ◽  
Practical Implications

Purpose – This paper aims to examine the nature of Sarbanes-Oxley (SOX) costs incurred by subsidiaries of USA parent companies, and considers whether any value flows to non-USA subsidiaries. Deductibility is analysed under both the general deductibility provisions and the transfer pricing regimes of Australia and New Zealand (NZ). Reference is also made to the Organisation for Economic Cooperation and Development (OECD) transfer pricing guidelines and the US transfer pricing regulations. Australasian and New Zealand subsidiaries of US parent companies frequently incur costs related to their parent’s regulatory reporting requirements under the Sarbanes-Oxley Act of 2002. Tax authorities, generally, view these costs as “shareholder activities”, i.e. activities performed for the benefit of the parent only. As such, they are considered non-deductible to the subsidiaries of USA parents because an independent party dealing at arm’s length would not pay to receive similar services. We consider circumstances in which some costs may be deductible. Design/methodology/approach – Legal analysis. Findings – We conclude that there can be circumstances where these so-called shareholder activities do provide value to subsidiaries and, accordingly, may (or should) be deductible in the local jurisdiction. Research limitations/implications – This analysis is limited to a consideration of Australian, NZ, OECD and US sources. Practical implications – This paper provides an analysis of the deductibility of a type of expenditure commonly encountered by subsidiaries of US parent companies. Originality/value – Limited research is available that deals with this issue. In most cases, only general statements on deductibility of similar types of expenditure are available to taxpayers.

SEC requires hedge funds to prevent insider trading despite unsettled legal definition

2017 ◽  
Vol 18 (1) ◽  
pp. 63-64
Author(s):  
Nicolas Morgan ◽  
Art Zwickel ◽  
Thomas A. Zaccaro ◽  
Jenifer Q. Doan
Keyword(s):  
Supreme Court ◽  
Insider Trading ◽  
Legal Concept ◽  
Content Type ◽  
Legal Definition ◽  
Enforcement Action ◽  
The Us ◽  
Us Supreme Court ◽  
Investment Advisers ◽  
Definition Of

Purpose To explain the import of a recent enforcement action by the US Securities and Exchange Commission (SEC) against an investment adviser for failing to prevent insider trading against the context of an unsettled legal definition of “insider trading” as evidenced by the issue presented in a recent case before the US Supreme Court. Design/methodology/approach Reviews the principal issues raised by the SEC in its enforcement action, legal requirements imposed on investment advisers, and the insider trading issues presented by the US Supreme Court case. Findings Because the legal concept of insider trading has developed through case law and is not defined by statute, it remains uncertain, and therefore the practice of insider trading will be difficult to prevent without restricting activities that could ultimately be determined to be legal. Practical implications In light of the SEC’s high threshold for investment advisers to prevent insider trading and the uncertain legal definition of that concept, investment advisers should review their insider trading policies and err on the side of caution. Originality/value Practical guidance from an experienced former SEC counsel and SEC practitioners offers new insights into the steps investment advisers should take in response to SEC enforcement activities and nebulous legal definitions.

Decoding the SEC rulemaking package on standards of conduct for investment professionals

2018 ◽  
Vol 19 (4) ◽  
pp. 6-12
Author(s):  
Mark M. Attar ◽  
Marguerite Bateman ◽  
Jack P. Drogin ◽  
Domenick Pugliese ◽  
Rachael Leah Schwartz ◽  
...  
Keyword(s):  
Best Interest ◽  
Current Form ◽  
Content Type ◽  
Doing Business ◽  
The Us ◽  
Retail Investors ◽  
Retail Investor ◽  
Standards Of Conduct ◽  
Investment Advisers ◽  
Proposed Regulation

Purpose To provide an overview of the US Securities and Exchange Commission’s (SEC’s) recently proposed rulemaking package relating to standards of conduct for investment professionals. The three proposals included: interpretation regarding the standard of conduct of investment advisers under the Investment Advisers Act of 1940; Form CRS which both registered investment advisers and registered broker-dealers would have to provide to retail investors; and proposed regulation best interest. Design/methodology/approach Reviews and summarizes the three individual proposals. Findings The SEC has proposed this rulemaking package in order to meet three goals: enhance retail investor protection and decision making, preserve investor choice and cost, and raise retail investor awareness of whether they are doing business with a registered financial professional. The SEC is looking for feedback, particularly from retail investors, on whether these proposals would achieve the SEC’s goals. Originality/value Summarizes the three proposals in a manner that provides insight into how investment advisers and broker-dealers would be required to conduct business with retail investors if the proposals are adopted in the current form.

Selling structured products to retail investors in the US

2017 ◽  
Vol 18 (3) ◽  
pp. 59-63
Author(s):  
Margaret Sheehan
Keyword(s):  
Financial Services ◽  
Regulatory Agencies ◽  
Content Type ◽  
Structured Products ◽  
The Us ◽  
Retail Investors ◽  
Investment Advisers ◽  
And Control ◽  
Practical Implications ◽  
Do So

Purpose To explain the inherent risks, draw attention to SEC and FINRA guidance, and suggest ways to limit and control the sale of structured securities to retail investors. Design/methodology/approach Explains potential problems with the sale of structured securities to retail investors; recommends marketing, disclosure, training, suitability, and supervision guidelines; summarizes the results of an SEC sweep examination; draws conclusions. Findings Both the SEC and FINRA have stopped short of saying that retail sales of structured products is unsuitable per se, but both have demonstrated unease about this activity and clearly indicated that firms who engage in it have heightened and specific disclosure, training, suitability and supervisory obligations. Practical implications Although firms certainly can sell these products in the retail market in a responsible and compliant manner, they should do so with thought, preparation and caution, because the regulatory agencies are watching. Originality/value Practical guidance from experienced financial services and securities lawyer concentrating on investment advisers and broker-dealers.

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.

Interaction, engagement, and perceived interactivity in single-handed interaction

2016 ◽  
Vol 26 (5) ◽  
pp. 1134-1157 ◽  
Author(s):  
Donghee Shin ◽  
Myunggoon Choi ◽  
Jang Hyun Kim ◽  
Jae-gil Lee
Keyword(s):  
Behavioral Intention ◽  
Interaction Techniques ◽  
Content Type ◽  
Thumb Movement ◽  
Wide Range ◽  
Mobile Industry ◽  
Perceived Interactivity ◽  
The Subject ◽  
Definition Of ◽  
Practical Implications

Purpose The purpose of this paper is to examine the effects of interaction techniques (e.g. swiping and tapping) and the range of thumb movement on interactivity, engagement, attitude, and behavioral intention in single-handed interaction with smartphones. Design/methodology/approach A 2×2 between-participant experiment (technological features: swiping and tapping×range of thumb movement: wide and narrow) was conducted to study the effects of interaction techniques and thumb movement ranges. Findings The results showed that the range of thumb movement had significant effects on perceived interactivity, engagement, attitude, and behavioral intention, whereas no effects were observed for interaction techniques. A narrow range of thumb movement had more influence on the interactivity outcomes in comparison to a wide range of thumb movement. Practical implications While the subject of actual and perceived interactivity has been discussed, the issue has not been applied to smartphone. Based on the research results, the mobile industry may come up with a design strategy that balances feature- and perception-based interactivity. Originality/value This study adopted the perspective of the hybrid definition of interactivity, which includes both actual and perceived interactivity. Interactivity effect outcomes mediated by perceived interactivity.

The operational efficiency of passenger aircraft

2006 ◽  
Vol 78 (1) ◽  
pp. 32-38 ◽  
Author(s):  
Donald McLean
Keyword(s):  
Design Methodology ◽  
Operational Efficiency ◽  
Civil Aviation ◽  
Content Type ◽  
Transport Economics ◽  
Load Factors ◽  
Consistent Assessment ◽  
Definition Of ◽  
Passenger Aircraft ◽  
Practical Implications

PurposeTo provide for the use of airlines and other civil aviation organizations a practical definition of operational efficiency and to show how it can be determined.Design/methodology/approachA brief account of air transport economics is used to demonstrate how bom load factors and aircraft utilization need to be considered in assessing operational efficiency. Then other efficiencies are treated briefly before an example is given of how the better of two fictitious aircraft can be chosen for a particular route. A second example involving the calculation of the operational efficiency achieved by an imaginary airline is also given to show that the typical value is lower than might be expected, particularly in view of the relatively high load factors involved.FindingsProvides performance values and economic figures which are typical of current airline operations.Practical implicationsUse of the proposed definition will allow the consistent assessment of the economic performance of airlines.Originality/valueAt present there is no definition of operational efficiency in general use although it is greatly needed by airlines. The definition proposed in this paper is practical and easy to use.

Digital competences of the workforce – a research topic?

2017 ◽  
Vol 23 (3) ◽  
pp. 721-734 ◽  
Author(s):  
Matthias Murawski ◽  
Markus Bick
Keyword(s):  
Research Topic ◽  
Future Research ◽  
Digital Competence ◽  
Content Type ◽  
Research Activities ◽  
Starting Point ◽  
Pros And Cons ◽  
Definition Of ◽  
The Individual ◽  
Practical Implications

Purpose Considering working in the digital age, questions on the consequences for the individual workers are, so far, often neglected. The purpose of this paper is to deal with the question of whether the digital competences of the workforce is a research topic. The authors argue for the thesis that it is indeed a research topic. Design/methodology/approach In addition to a literature analysis of the top IS, HR, and learning publications, non-scientific sources, as well as the opinions of the authors, are included. The authors’ thesis is challenged through a debate of corresponding pros and cons. Findings The definition of digital competences lacks scientific depth. Focussing on the workforce is valid, as a “lifelong” perspective is not mandatory for research. Digital competence research is a multidisciplinary task to which the IS field can make a valuable contribution. Research limitations/implications Although relevant references are included, some aspects are mainly driven by the opinions of the authors. The theoretical implications encompass a call for a scientific definition of digital competences. Furthermore, scholars should focus on the competences of the workforce, including occupations, roles, or industries. The authors conclude by providing a first proposal of a research agenda. Practical implications The practical implications include the alignment of multiple stakeholders for the design of “digital” curricula and the integration by HR departments of the construct of digital competences, e.g. for compensation matters and job requirements. Originality/value This paper is one of very few contributions in the area of the digital competences of the workforce, and it presents a starting point for future research activities.

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