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Periodically, SEC staff issue alerts describing deficiencies observed during exams, as a tool to help advisers improve their compliance programs. the Office of Compliance Inspections and Examinations issued a Risk Alert identifying common deficiencies in adviser compliance with Rule 206(4)-3 under the Investment Advisers Act of 1940 (the “Cash Solicitation Rule”), and suggesting that deficiencies in this area could indicate that an adviser is struggling with its fiduciary duties to clients under Sections 206(1) and…
Why Blockchain Custody Is So Difficult—A Hard Part” was recently posted on Perkins Coie’s Asset Management ADVocate blog. The blog post continues the analysis of the difficult question of how to comply with regulations requiring independent custody of cryptocurrency. This series focuses on the custody requirements for registered investment companies in an attempt to respond to important questions raised by the SEC’s Director of Investment Management. This installment discusses challenges custodians will face…
In our previous post, we provided a simple answer to the following question posed by Director Dalia Blass of the SEC’s Division of Investment Management: To the extent a fund plans to hold cryptocurrency directly, how would it satisfy the custody requirements of the 1940 Act and relevant rules?” Our simple answer was to treat cryptocurrencies as “financial assets” under Article 8 of the Uniform Commercial Code. But, as Director Blass knows, this is…
Why Blockchain Custody Is So Difficult—The Simple Part” was recently posted on Perkins Coie’s Asset Management ADVocate blog. The post begins with an analysis of the difficult question of how to comply with regulations requiring independent custody of cryptocurrency. This series will focus on the custody requirements for registered investment companies in an attempt to respond to important questions raised by the SEC’s Director of Investment Management. We propose a simple legal answer,…
“There are no easy answers, but there are simple answers.”—President Reagan In a January 2018 letter to the ICI and SIFMA, Director Dalia Blass of the SEC’s Division of Investment Management posed the following question, among many others: To the extent a fund plans to hold cryptocurrency directly, how would it satisfy the custody requirements of the 1940 Act and relevant rules?” There is a simple answer to this: “Just like our custodian satisfies these…
Welcome back for Part 3 of our discussion of the SEC’s April 18, 2018, fiduciary rulemaking proposal (the “Proposal”). Here, we dive into the SEC’s proposed Form CRS Relationship Summary and its proposed amendments to Form ADV. We also discuss the proposed rulemaking to restrict broker‑dealers’ use of the term “adviser” and variations thereof.…
This post continues our discussion of the SEC’s April 18, 2018, fiduciary rulemaking proposal (the “Proposal”). Here we address the Proposed Interpretation Regarding Standard of Conduct for Investment Advisers and Request for Comment on Enhancing Investment Adviser Regulation portion of the Proposal which would, in sum, (i) restate advisers’ fiduciary duties under the Advisers Act and (ii) impose a variety of new requirements on advisers similar to those applicable to broker-dealers.…
On April 18, 2018, the SEC held an open meeting where it approved the long‑awaited and much-discussed fiduciary rulemaking proposal package. The proposal primarily recommends disclosure- and principles and procedures-based rules, and has garnered three main criticisms: (1) it would establish a “best interest” standard without defining the term; (2) while intending to provide clarity, it would likely generate litigation around the scope of the restated investment adviser fiduciary duty; and (3) it fails to…