Tag:United States

1
The SEC Narrows the Internet Adviser Exemption
2
SEC’s Increased Focus on “AI Washing”: Charges Announced Against Two Investment Advisers for Violations of the Marketing Rule
3
NAPFM, AIMA, and MFA File Complaint Against SEC’s New Dealer Rule
4
Modernized SBIC Program Hits Milestones
5
CFTC Proposes Rule to Address Margin Adequacy and Treatment of Separate Accounts by FCMs
6
FinCEN Proposes AML Requirements on Registered Investment Advisers (including Exempt Reporting Advisers)
7
Fifth Circuit Court of Appeals Hears Oral Arguments in Industry Groups’ Ongoing Petition to Vacate Private Fund Adviser Rules
8
SEC Expands Definition of Dealers and Government Securities Dealers
9
CFTC Requests Comment on the Use of Artificial Intelligence in CFTC-Regulated Markets
10
Industry Groups File First Reply to SEC in Ongoing Petition Against New Private Fund Adviser Rules

The SEC Narrows the Internet Adviser Exemption

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.

Read More

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

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).”

Read More

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

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.

Read More

Modernized SBIC Program Hits Milestones

By: TJ Bright, Matt F. Phillips, and Tristen C. Rodgers

For the past two decades, the Small Business Investment Company (SBIC) program (the SBIC Program) has primarily offered one type of government-guaranteed loan to private investment funds holding an SBIC license (SBICs): the “Standard SBIC Debenture.” This loan requires private funds to pay the U.S. Small Business Administration (SBA) interest semi-annually, which closely aligns with the cash flow patterns of mezzanine debt and private credit funds. As a result, the ecosystem of debt-focused SBICs has thrived. However, the SBIC Program has been less attractive to funds with equity-oriented strategies.

Read More

CFTC Proposes Rule to Address Margin Adequacy and Treatment of Separate Accounts by FCMs

By: Matthew Rogers and Benjamin Skillin

On February 20, 2024, the CFTC approved a proposed rule that would apply a margin adequacy requirement to all futures commission merchants (FCMs), with respect to their customers. The new requirement—titled Regulation 1.44—is designed to ensure that an FCM does not permit a customer to withdraw funds from its account if the remaining balance would be insufficient to meet the customer’s initial margin requirements.

Read More

FinCEN Proposes AML Requirements on Registered Investment Advisers (including Exempt Reporting Advisers)

By: 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 More

Fifth Circuit Court of Appeals Hears Oral Arguments in Industry Groups’ Ongoing Petition to Vacate Private Fund Adviser Rules

By: 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 More

SEC Expands Definition of Dealers and Government Securities Dealers

By: 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 More

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

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.

Read More

Industry Groups File First Reply to SEC in Ongoing Petition Against New Private Fund Adviser Rules

BY: TJ Bright and Annabelle North

On 22 January 2024, industry groups representing private investment fund sponsors, including the Alternative Investment Management Association (AIMA), National Association of Private Fund Managers, and Managed Funds Association, filed their first reply to the Securities and Exchange Commission’s (SEC) response in the groups’ ongoing petition against the new private fund adviser rules (PFAR) adopted by the SEC on 23 August 2023.

Read More

Copyright © 2023, K&L Gates LLP. All Rights Reserved.