Conduct of Business – Page 5 – Global Investment Law Watch

United States: The SEC Narrows the Internet Adviser Exemption

Mar 28 2024

By: Jennifer L. Klass, Matthew J. Rogers, and Bradley D. Bostwick

On 27 March 2024, the US Securities and Exchange Commission (SEC) adopted amendments (the Amendments) to Rule 203A-2(e) under the Investment Advisers Act of 1940, known as the “Internet Adviser Exemption.” The Internet Adviser Exemption allows certain advisers that provide investment advice through an interactive website (Internet Advisers) to register with the SEC, even if they do not have enough assets under management to otherwise qualify for federal registration.

United States: SEC’s Increased Focus on “AI Washing:” Charges Announced Against Two Investment Advisers for Violations of the Marketing Rule

Mar 27 2024

By: Matthew Rogers and Annabelle North

Following up on its previously-issued Investor Alert warning investors on the use of so-called “AI washing” by advisers in their marketing materials, the Securities and Exchange Commission (SEC) announced on 18 March 2024 the settlements of charges against two investment advisers for “making false and misleading statements about their purported use of artificial intelligence (AI).”

United States: NAPFM, AIMA, and MFA File Complaint Against SEC’s New Dealer Rule

Mar 20 2024

By: Richard F. Kerr, Eden L. Rohrer, Jessica D. Cohn, and Raymond F. Jensen

On 18 March 2024, the National Association of Private Fund Managers, Alternative Investment Management Association, Limited and Managed Funds Association (together, Plaintiffs) jointly filed a complaint (Complaint) against the US Securities and Exchange Commission (SEC) alleging that the SEC’s newly adopted final rule (Dealer Rule) vastly overstepped and expanded the SEC’s authority. The Complaint, which was filed in federal court in Texas, details how the Dealer Rule, expanding those industry participants who would be “dealers” under the Securities Exchange Act of 1934, is overbroad and was adopted in violation of the Administrative Procedures Act.

United States: CFTC Requests Comment on the Use of Artificial Intelligence in CFTC-Regulated Markets

Jan 30 2024

By: 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.

Asia: Tokenisation of SFC-authorised Investment Products: What You Need to Know

Nov 13 2023

By: Carolyn Sng and Tan Choo Lye

The Securities and Futures Commission of Hong Kong (SFC) has on 2 November 2023 issued guidance for the tokenisation of investment products authorised by it for offer to the public in Hong Kong, such as mutual funds, unit trusts and other collective investment schemes. The SFC is adopting a see-through approach, permitting tokenisation of authorised investment products if the underlying product satisfies all applicable authorisation requirements and additional safeguards are in place to address the new risks associated with tokenisation arrangements.

Asia: Hong Kong Backs Industry-led Voluntary Code for ESG Ratings and Data Products Providers

Nov 02 2023

By: Carolyn Sng and Sook Young Yeu

The Securities and Futures Commission in Hong Kong (SFC) has announced its support for the development of a voluntary code of conduct (VCoC) for ESG ratings and data products providers. The proposed VCoC, which will be open for ESG ratings and data products providers to sign up voluntarily, and will align with international best practices as recommended by the International Organization of Securities Commissions.

Asia: Hong Kong Proposes Guidelines for Market Soundings

Oct 30 2023

By: Carolyn Sng and Tan Choo Lye

The Securities and Futures Commission (SFC) of Hong Kong is consulting on new guidelines to regulate market soundings in advance of transactions such as private placements and block trades. Market soundings are the communication of non-public information (whether price-sensitive or not) with potential investors prior to the announcement of the transaction to gauge investor interest or assist in determining the specifications of the potential transaction. It can be an integral part of price discovery, but the process may be open to abuse if parties trade on the back of non-public information obtained.

Asia: S$2.8 Billion Money Laundering Case Threatens Singapore’s Reputation

Oct 20 2023

By: Edward Bennett and Ke Jia Lim

Singapore, known for its fiercely guarded reputation as a global financial hub and growing asset management centre, is currently entangled in one of the most substantial money laundering scandals globally, with a staggering S$2.8 billion (US$2 billion) in seized assets. Ten suspects, originally from China but residing in Singapore, face money laundering charges linked to scams and illegal online gambling.

Australia: ASIC Extends Transitional Relief For Foreign Financial Service Providers

Oct 19 2023

By: Rebecca Mangos and Lisa Lautier

The Australian Investments and Securities Commission (ASIC) announced that it has further extended relief for foreign financial services providers (FFSPs) from the requirement to hold an Australian financial services licence (AFSL) when providing financial services to Australian wholesale clients.

United States: Securities Lending Reform: Daily Public Reporting of Aggregate Loan Amounts in 2026

Oct 17 2023

By: Stacy Fuller, Kristina Zanotti, and Chase Ponder

On 13 October 2023, the US Securities and Exchange Commission (SEC) adopted new rule 10c-1a under the Securities Exchange Act of 1934. The new rule is intended to shine light on the securities lending market by providing the SEC with detailed information about most securities loans and making public, including to boards of trustees who oversee registered funds that engage in securities lending, sufficient information about such loans and Loan Rates (defined below) that they may evaluate the fairness of the loans in which funds engage.

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