By: Pablo J. Man, TJ Bright, Kenneth Holston, Christopher W. Phillips-Hart, and Tristen C. Rodgers
Earlier today, 5 June 2024, the US Fifth Circuit Court fully vacated the Private Fund Adviser Rules (PFAR) in a unanimous and highly anticipated decision curbing the Securities and Exchange Commission’s authority to regulate private funds. Absent a successful appeal of the decision, the PFAR will not come into effect.
Read MoreBy: Lance C. Dial, Pablo J. Man, Pamela A. Grossetti, and Bradley D. Bostwick
On 12 April 2024, the SEC announced the settlement of charges against five registered investment advisers for violations of Rule 206(4)-1 under the Advisers Act (Marketing Rule). The allegations in these settlements will be familiar: the SEC determined that the five firms advertised hypothetical performance to the general public on their websites. As noted in prior settlements, the SEC takes the view that hypothetical performance should not be included on a firm’s public website, because public website disclosure does not allow firms to ensure that (through the adoption and implementation of policies and procedures) the hypothetical performance is “relevant to the likely situation and investment objectives of each advertisement’s intended audience”, as required under the Marketing Rule.
Read MoreBy: Richard F. Kerr, Jennifer L. Klass, and Annabelle H. North
On 13 February 2024, the Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking (NPRM) that would impose anti-money laundering (AML) and counter-terrorist financing (CFT) requirements on Securities and Exchange Commission-registered investment advisers (the SEC, and such investment advisers, RIAs) and exempt reporting advisers (ERAs). FinCEN previously made similar rule proposals in both 2003 and 2015, which were never finalized.
Read MoreBy: TJ Bright, Annabelle H. North, and Bradley D. Bostwick
On 5 February 2024, the US Fifth Circuit Court of Appeals heard oral arguments from the Securities and Exchange Commission (SEC) and industry groups representing private investment fund sponsors, in the industry groups’ ongoing petition to vacate the new private fund adviser rules (PFAR) adopted by the SEC on 23 August 2023.
Read MoreBy: Richard F. Kerr, Eden L. Rohrer, Jessica D. Cohn, and Raymond F. Jensen
On 6 February 2024, the US Securities and Exchange Commission (SEC) adopted two new rules – Rules 3a5-4 and 3a44-2 of the Securities Exchange Act of 1934 (the Act) – that significantly expand the definitions of a “dealer” and “government securities dealer.” The new rules define the phrase “as a part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Act to determine if a person is engaged in a “regular pattern of buying and selling securities that has the effect of providing liquidity to other market participants.” Such persons would be required to register as “dealers” or “government securities dealers” under Sections 15 and 15C of the Act, respectively.
Read MoreBy: Cheryl L. Isaac, Matthew J. Rogers, and Benjamin C. Skillin
On 25 January, 2024, multiple Divisions of the Commodity Futures Trading Commission (CFTC) issued a Request for Comment (RFC) on the use of Artificial Intelligence (AI) in CFTC-regulated derivatives markets. The RFC seeks information on the current and potential uses of AI as well as the risks associated with using it. The RFC is intended to complement the Biden Administration’s Executive Order urging federal agencies to promote the safe, secure, and trustworthy development of AI. The CFTC staff views the RFC as an opportunity to “identify the highest priorities and return-on-investment projects with AI use cases” and enhance the CFTC’s data-driven approach to policy, surveillance, and enforcement.
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