2020 SEC risk alert provides guidance for private fund advisers

2020 ◽  
Vol 21 (1) ◽  
pp. 49-54
Author(s):  
Kenneth Breen ◽  
Phara Guberman
Keyword(s):  
Best Practices ◽  
Design Methodology ◽  
Conflicts Of Interest ◽  
Securities And Exchange Commission ◽  
Internal Controls ◽  
Content Type ◽  
Policies And Procedures ◽  
Expert Analysis ◽  
Practical Implications ◽  
The U.S

Purpose To analyze the U.S. Securities and Exchange Commission (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) June 2020 Risk Alert, which identified three categories of deficiencies that the SEC regularly finds in its reviews of advisers to private funds, in order to understand its guidance and recommend best practices. Design/methodology/approach The study discusses the categories of deficiencies that the SEC regularly finds in its reviews of private fund advisers, current SEC enforcement trends, and recommendations for disclosures, internal controls, policies and procedures. Findings The SEC will expect private funds to identify and remedy regular deficiencies in three primary categories: gaps in client and investor disclosures regarding conflicts of interest; deficiencies in disclosures related to fees and expenses; and issues with policies and procedures regarding the treatment of material nonpublic information. Practical implications Private fund advisers should expect increased scrutiny during examinations on the identified deficiencies and use this opportunity to be proactive in addressing these issues. Originality/value Expert analysis and guidance from experienced securities enforcement attorneys.

Virtual currency in sanctioned jurisdictions: stepping outside of SWIFT

2019 ◽  
Vol 20 (2) ◽  
pp. 39-44 ◽  
Author(s):  
Katherine Kirkpatrick ◽  
Christine Savage ◽  
Russell Johnston ◽  
Matthew Hanson
Keyword(s):  
Best Practices ◽  
Design Methodology ◽  
Virtual Currency ◽  
Content Type ◽  
The Us ◽  
Expert Analysis ◽  
Practical Implications ◽  
Foreign Assets

Purpose To understand and analyze sanctions evasion and enforcement via virtual currencies. Design/methodology/approach Discusses various jurisdictions’ attempts to further the use of virtual currency to facilitate and maximize access to international funds; analyzes the aspects that make virtual currency uniquely suited to evade sanctions; suggests best practices for industry participants to be sure to account for the differences in crypto asset structure and related risks. Findings The US Treasury Department’s Office of Foreign Assets Control (OFAC) has explicitly stated that despite virtual currency’s anonymity, industry participants are still responsible for policing and enforcing client compliance. Although sanctioned jurisdictions are thinking creatively about ways around SWIFT, the use of virtual currency to skirt sanctions presents certain challenges. Practical implications Virtual currency industry participants should understand OFAC’s specific guidance regarding compliance obligations in the cryptocurrency space, and should implement best practices and conservative measures to avoid unknowingly running afoul of sanctions laws. Originality/value Expert analysis and guidance from experienced investigations and sanctions 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.

Sanofi settles FCPA charges with SEC for $25.2 million

2019 ◽  
Vol 20 (1) ◽  
pp. 27-30
Author(s):  
Jennifer Kennedy Park ◽  
Abena Mainoo
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Internal Controls ◽  
Healthcare Industry ◽  
Foreign Corrupt Practices Act ◽  
Content Type ◽  
Enforcement Action ◽  
Compliance Programs ◽  
The Us ◽  
Practical Implications

Purpose To explain a recent enforcement action by the US Securities and Exchange Commission (SEC) highlighting risk factors for Foreign Corrupt Practices Act (FCPA) violations. Design/methodology/approach Summarizes the basis of the SEC’s enforcement action against Sanofi for violating the FCPA’s books and records and internal controls provisions, reviews the terms of the SEC’s resolution with Sanofi, explains Sanofi’s remedial efforts and cooperation with the SEC’s investigation, and discusses factors contributing to corruption risks in the healthcare industry. Findings The SEC’s enforcement action against Sanofi, and other recent enforcement actions, underscore the importance of comprehensive anti-corruption compliance programs and strong internal controls across large multinationals and their subsidiaries. Practical implications Companies operating in high-risk industries and markets should regularly assess and address corruption risks. Originality/value Practical guidance from experienced enforcement lawyers.

Liu v. S.E.C.: Supreme Court’s narrowing of SEC disgorgement raises questions for insider trading cases

2020 ◽  
Vol 21 (1) ◽  
pp. 63-68
Author(s):  
Alan R. Friedman ◽  
Dani R. James ◽  
Gary P. Naftalis ◽  
Paul H. Schoeman ◽  
Chase Henry Mechanick
Keyword(s):  
Insider Trading ◽  
Design Methodology ◽  
Content Type ◽  
Legitimate Business ◽  
Case Subject ◽  
The Supreme Court ◽  
Expert Analysis ◽  
History Of ◽  
Practical Implications ◽  
The U.S

Purpose To analyze the U.S, Supreme Court’s decision in Liu v. S.E.C., 140 S. Ct. 1936 (2020) and its potential implications for insider trading cases. Design/Methodology/Approach Provides context on the history of disgorgement in SEC enforcement proceedings; discusses factual and procedural background underlying the Liu decision; summarizes the Court’s opinion and rationale, with a particular focus on the Court’s pronouncements regarding the permissible scope of SEC disgorgement as an equitable remedy; identifies and explores three possible issues in insider trading cases that may be affected by the Court’s narrowing of SEC disgorgement. Findings In Liu, the Supreme Court narrowed SEC disgorgement by stating that, as a general matter, SEC disgorgement is not permitted where: (1) the proceeds are not remitted to investors; (2) one defendant is made to disgorge profits that were received by someone else; or (3) the amount of disgorgement fails to deduct legitimate business expenses, in each case subject to possible exemptions as outlined by the Court. Practical implications This rule may call into question whether courts may: (a) order disgorgement against insider traders, given the difficulty of identifying investors who have been harmed; (b) order insider traders to disgorge profits earned by others on account of their violations; or (c) order insider traders to pay civil penalties under Section 21 A of the Exchange Act based on profits earned by others. Originality/Value Expert analysis and guidance from experienced securities enforcement lawyers with expertise in insider trading.

US Supreme court rules SEC administrative law judges are subject to the appointments clause

2019 ◽  
Vol 20 (1) ◽  
pp. 22-26
Author(s):  
Joshua D. Roth ◽  
Justin J. Santolli
Keyword(s):  
Design Methodology ◽  
The United States ◽  
Administrative Law ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Us Supreme Court ◽  
Expert Analysis ◽  
Administrative Proceeding ◽  
Administrative Proceedings ◽  
Practical Implications

Purpose The purpose of this paper is to analyze the Supreme Court’s decision in Lucia v. Securities and Exchange Commission, 138 S.Ct. 2044 (June 21, 2018). Design/methodology/approach The approach of this paper is to discuss the Securities and Exchange Commission’s (“SEC”) use of Administrative Law Judges (“ALJs”), and the litigation challenging the appointment of those ALJs, culminating in the Supreme Court’s decision in Lucia. Findings In Lucia, the Court held that SEC ALJs are “officers of the United States,” and thus subject to the Constitution’s Appointments Clause, which limits the power to appoint “officers” to the President, “Courts of Law” or “Heads of Departments.” Because the ALJ who presided over Lucia’s administrative proceeding was not appointed by the SEC itself, the Court held that the ALJ’s appointment was unconstitutional and ordered the SEC to provide Lucia with a new hearing in front of a new (constitutionally appointed) ALJ. Practical implications The Supreme Court’s decision in Lucia provides defense counsel with new ammunition to challenge SEC administrative proceedings. It will likely have a significant effect on many pending and already-concluded SEC administrative proceedings but also leaves open a number of important questions for further litigation. Originality/value This paper provides expert analysis and guidance from experienced securities litigators.

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.

FINRA’s disciplinary actions in 2017: increased restitution ordered with minimal changes in number of cases

2018 ◽  
Vol 19 (2) ◽  
pp. 19-23
Author(s):  
Brian Rubin ◽  
Adam Pollet
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Disciplinary Actions ◽  
Financial Industry ◽  
Electronic Communications ◽  
Content Type ◽  
The Past ◽  
Expert Analysis ◽  
Research Analysts ◽  
Practical Implications

Purpose The purpose of this paper is to analyze the Financial Industry Regulatory Authority’s (FINRA) 2017 disciplinary actions, the issues that resulted in the most significant fines and restitution and the emerging enforcement trends from 2017 and beyond. Design/methodology/approach The approach of this paper discusses the disciplinary actions in 2017 and prior years, details the top 2017 enforcement issues measured by total fines assessed, including anti-money laundering, trade reporting, electronic communications, books and records, research analysts and research reports, and explains current enforcement trends, including restitution, suitability cases and technological issues. Findings In 2017, restitution more than doubled from the prior year, resulting in the fourth highest total sanctions (fines combined with restitution and disgorgement) assessed by FINRA over the past 10 years. Practical implications Firms and their representatives should heed the trends in both the substantial restitution FINRA is ordering and the related enforcement issues in the cases FINRA has brought. Originality/value This paper provides expert analysis and guidance from experienced securities enforcement lawyers.

Understanding a shifting methodology

2018 ◽  
Vol 30 (11) ◽  
pp. 3423-3441 ◽  
Author(s):  
Elizabeth A. Whalen
Keyword(s):  
Best Practices ◽  
Online Community ◽  
Design Methodology ◽  
Virtual Communities ◽  
Tourism Research ◽  
Content Type ◽  
Analysis Techniques ◽  
Hospitality And Tourism ◽  
Qualitative Methodologies ◽  
Practical Implications

PurposeWhile netnography was established to study virtual communities from the traditional ethnography methodology, over time it has evolved and moved away from standard ethnographic practices. The modifications are especially prevalent in hospitality and tourism research because of the nature of experiential and service-based goods. This gap has created exciting new opportunities for researchers. As netnography has matured into its own methodology, it has provided the opportunity for researchers to use netnography techniques or more traditional techniques by following ethnography methodologies. This paper aims to analyze the differences between these two methodologies within hospitality and tourism literature enabling researchers to choose the methodology that is most suited for their project.Design/methodology/approachThis study reviews netnographic research in hospitality and tourism and compares current uses of netnography against traditional ethnographic methodologies.FindingsThere are four major differentiating points between netnography and ethnography: online community definitions, data collection methodologies, ethics in research and data analysis techniques.Practical implicationsIn comparing ethnography and netnography in hospitality and tourism research, this analysis provides a foundation to evaluate the best use and best practices for these two distinct qualitative methodologies in the field. The study also provides references to how other hospitality and tourism researchers have used netnography.Originality/valueEthnographic principles grounded in the foundation of anthropological doctrines are important and distinct from netnography. The ability to use the diverse tools in the qualitative methods toolbox will help hospitality and tourism researchers understand the transforming marketplace.

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