SEC – Global Investment Law Watch

SEC Risk Alert Offers Initial Observations on Compliance

Apr 18 2024

By: Michael S. Caccese and Lance C. Dial

On 17 April 2024, the Securities and Exchange Commission (SEC) Division of Examinations issued a risk alert entitled “Initial Observations Regarding Marketing Rule Compliance” (the Alert). The Alert reflected the SEC examination staff’s preliminary observations coming from its examination program and noted that compliance with Rule 206(4)-1 (the Marketing Rule) continues to be a priority for the SEC staff.

Marketing Rule Enforcement Remains Priority: SEC Charges Five Advisers for Marketing Rule Violations

Apr 15 2024

By: 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.

SEC Fines Adviser for Off-Channel Communications

Apr 05 2024

By: Lance C. Dial and Pablo J. Man

On 3 April 2024 the SEC announced the first off-channel communications settlement with a registered investment adviser who was not otherwise affiliated with a broker-dealer. This settlement provides new insight into how the SEC views adviser’s recordkeeping obligations, which are narrower than broker-dealer regulatory requirements.

2024: The Year of the Spot Bitcoin ETP

Jan 11 2024

By: Peter J. Shea, Richard F. Kerr, Keri E. Riemer, and Aiden D. O’Leary

The US Securities and Exchange Commission (SEC) is making 2024 a significant year for exchange-traded products (ETPs) by declaring effective the registration statements of ten Bitcoin ETPs, and approving their listing on one of the major stock exchanges. This is a monumental step to bringing access to Bitcoin to a broader retail market in the US For over a decade, the staff of the SEC (Staff) had denied or otherwise blocked applications to list spot Bitcoin ETPs, claiming, in part, that there were insufficient protections against market manipulation in the underlying Bitcoin market. The approvals issued this week unlock – although do not widely open – a previously dead bolted door to registered products offering direct exposure to Bitcoin, providing an opportunity for retail investors to have easier access to exposure to Bitcoin in a regulated product.

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.

SEC Adopts Amendments to Beneficial Ownership Reporting

Oct 11 2023

By: Jennifer Gonzalez, Trayne Wheeler, and Megan Clement

On 10 October 2023, the SEC adopted amendments to beneficial ownership reporting requirements under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. The amendments shorten deadlines for Schedule 13D and 13G filers, clarify Schedule 13D disclosure requirements for derivatives, and require filers to use machine readable data language.

U.S. Congressional Hearing on Oversight of SEC’s Division of Investment Management

Sep 22 2023

By: Megan Clement

On 19 September, U.S. Congress’ Sub-Committee on Capital Markets held a hearing on oversight of the SEC’s Division of Investment Management during which Director William Birdthistle testified on various SEC proposed rules affecting investment funds and advisers.

Amendments to the Names Rule

Sep 21 2023

By: Abigail Hemnes, George Zornada, Franklin Na, Donela M. Qirjazi and Christine Mikhael

On 20 September 2023, the SEC adopted amendments to the Names Rule (35d-1) that will significantly expand the Names Rule’s applicability and will require all funds to consider whether changes are required to their names, 80% policies, disclosures, compliance tests, and reporting requirements.

United States: SEC Charges 11 Firms with Record Retention Violations

Aug 11 2023

By: Neil Smith , Hayley Trahan Liptak and Peter Shanley

For over twenty months, the U.S. Securities and Exchange Commission (SEC) has steadily announced settled orders against broker-dealers and investment advisers for failure to retain business-related communication. On 8 August 2023, the SEC released another round of settled orders with 11 firms for violation of Exchange Act Rule 17a-4 for failing to retain off-channel business-related communication. One dually registered broker-dealer and investment adviser was also charged with violating recordkeeping provisions of the Investment Advisers Act of 1940. The content of the orders, and the firms involved, show the SEC’s attention may be shifting from wide-spread violations at large institutions to more limited compliance failures at firms of differing sizes. The assessed penalties, although still considerable, are consistent with this shift.

United States: We’re Not in Kansas Anymore: The SEC Proposes Rules for the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers

Jul 27 2023

By: Richard Kerr and Matthew Rogers

On July 26, 2023, the Securities and Exchange Commission (“SEC”) proposed new rules (“Proposal”) intended to address certain conflicts of interests associated with the use of “Covered Technology” (defined below) by broker-dealers and investment advisers (“firms”) in investor interactions. If adopted as proposed, firms will be required to (i) identify conflicts of interests when using Covered Technology in interactions with investors, and (ii) adopt policies and procedures to eliminate or neutralize those conflicts of interests.

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