Tag: United States

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United States: What’s in a Name?  SEC Proposes Amendments to Fund Names Rule & ESG Disclosure Requirements
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United States: MNPI (aka, “My Next Possible Investigation”): The SEC’s Scrutiny of MNPI Compliance Programs
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Europe: FCA Challenge to UK Fund Service Providers    
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United States: Private Funds and SEC Crypto Regulation
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United States: Being a SPAC is No Fun(d): SEC Proposes “Safe Harbor” Exclusion for SPACs

United States: What’s in a Name?  SEC Proposes Amendments to Fund Names Rule & ESG Disclosure Requirements

By: Clair Pagnano

In a significant departure from the SEC’s long-standing position on the use of fund names, the SEC is proposing amendments to Rule 35d-1 that would expand the Names Rule to include terms denoting strategies, thereby subjecting funds that use the terms “Growth,” “Value,” and funds that use ESG-related terms in the fund’s name to the rule. It would also prohibit funds from using ESG-related terms in their names if ESG factors are considered to the same extent as other screening factors in the management of the fund (so-called “integration” funds). These and other key aspects of the proposed rule include:

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United States: MNPI (aka, “My Next Possible Investigation”): The SEC’s Scrutiny of MNPI Compliance Programs

By: Keri E. Riemer

The SEC’s Division of Examinations recently released a risk alert describing a pattern of deficiencies relating to investment advisers’ use of material non-public information (MNPI). The Staff highlighted the following as areas of concern:

  • Alternative Data. Advisers that used data from non-traditional sources beyond company financial statements, filings, and press releases appeared to not have adopted or implemented written policies and procedures reasonably designed to address the potential risk of receiving and using MNPI through such sources.
  • “Value-Add Investors”. Advisers did not have—or did not appear to implement—adequate policies and procedures related to investors who are more likely to possess MNPI (e.g., officers or directors of a public company, asset management firm principals or portfolio managers, and investment bankers).
  • Expert Networks. Advisers did not appear to adequately track calls with expert network consultants, retain detailed notes from the calls, and monitor trading activity related to companies in industries similar to those discussed during the calls.
  • Deficiencies related to Access Persons. The Staff identified advisers who failed to correctly identify “access persons” (as defined in Rule 204A-1(c) under the Investment Advisers Act), ensure that those access persons obtain pre-approval for investments in IPOs and other similar offerings, and maintain adequate records of the holding and transactions of access persons.

The Staff also encouraged industry participants to review their practices, policies, and procedures regarding the topics addressed above. We recently issued a client alert which describes the risk alert in greater detail and provides takeaways for industry participants.

Europe: FCA Challenge to UK Fund Service Providers    

By: Andrew Massey and Melissa Vance

Fund managers can expect changes to custodian and other fund service provider practices in response to regulator challenge, and should review their due diligence of service providers.

In a letter on 23 March 2022, the FCA instructed the Chief Executive and Boards of third-party custodians, depositories for authorised and non-authorised funds, and third-party administrators to review key risks identified by the FCA, including the following:

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United States: Private Funds and SEC Crypto Regulation

By: Rob Weiss

Fund sponsors continue to search for ways to get their investors exposure to cryptocurrencies.

For sponsors able to offer registered fund products, exchange-traded products (ETPs) are attractive: available to retail investors, highly liquid, and without a fixed term, ETPs check several boxes for sponsors and investors alike. However, while the SEC has authorized listing of ETPs that trade in bitcoin futures regulated by the CFTC, the SEC has not authorized listing of ETPs that trade directly in spot cryptocurrency. We recently wrote an article on this point, which can be accessed here.

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United States: Being a SPAC is No Fun(d): SEC Proposes “Safe Harbor” Exclusion for SPACs

By: C. Todd Gibson

Last year, a number of lawsuits were filed against SPACs and their sponsors challenging (in part) their status under the U.S. Investment Company Act of 1940 (“1940 Act”) arguing that SPACs are essentially unregistered investment companies.   A brief filed by two professors supported this notion on the basis that SPACs typically hold government securities until a target company is acquired (and thus, such SPACs are investment companies required to be registered).  In an unusual move to provide SPAC market participants with some comfort on this issue, a number of law firms joined together refuting this position in a joint public statement outlining legal practioners’ historic view that SPACs are not investment companies.

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