Matthew Kutner

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The Securities and Exchange Commission (SEC) published an update to its regulatory agenda for the year on December 14, 2017, as part of a broad rulemaking agenda published by the Office of Management and Budget, which lists the rules that agencies and departments intend to propose or finalize within a year. The SEC’s list contains 26 items in proposed and final rule stages. Notable regulatory changes on the SEC’s horizon include: new rules and amendments
On December 8, 2017, citing the “importance of sound data security practices and protocols for sensitive, nonpublic information,” the Securities and Exchange Commission (SEC) adopted a temporary final rule postponing the filing of Form N-PORT on EDGAR until April 30, 2019 (originally July 30, 2018) for larger fund groups (those with net assets of $1 billion or more) and until April 30, 2020 for smaller fund groups (originally June 1, 2019).  The SEC also delayed…
In what has been reported as a market first, the independent directors and shareholders of an open-end fund (mutual fund) agreed to convert an approximately $1 billion open-end fund to an exchange-listed, closed-end fund. While open-end funds issue shares continuously, closed-end funds typically raise money through issuing a fixed amount of shares in an initial public offering.  In a more common type of conversion, closed-end fund shareholders pressure the fund (for example, if its share…
On September 14, 2017, the National Exam Program of the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) published a Risk Alert outlining registered investment adviser compliance issues relating to Rule 206(4)-1 under the Investment Advisers Act of 1940 (the “Advisers Act”).  According to OCIE, these issues were most frequently identified in SEC deficiency letters sent to registered investment advisers as part of the SEC’s examination initiative focusing on advisers’ use of accolades in their…
On July 24, 2017, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court ruling that a shareholder of a fund of funds lacks standing under Section 36(b) of the Investment Company Act of 1940, as amended (the “1940 Act”), to challenge investment advisory fees paid by the underlying funds. The plaintiff, a 401(k) plan on behalf of its participants, originally sued the investment adviser of six target-date funds in which it…
Introduction In an interpretive guidance letter issued to a registered closed-end fund on June 9, 2017, FINRA permitted the use of “related performance information” in communications that are distributed solely to institutional investors. For purposes of the interpretive letter, “related performance information” is the actual performance of separate or private accounts or funds: that have substantially similar investment policies, objectives, and strategies to those of a registered closed-end fund; and are currently managed or were…
In connection with the Department of Labor’s (“DOL”) fiduciary rule (the “Fiduciary Rule”), key provisions of which became applicable on June 9, 2017, SEC Chair Jay Clayton issued a public statement seeking retail investors’ (and other interested parties’) views in advance of any “possible” future SEC action in the area. The Chair said that he welcomed the public’s views on, among other things: Whether there is any confusion among retail investors about the type of…
On March 30, 2017, the SEC approved the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults) (see our related blog post about the proposal).  Among other things, Rule 2165 permits brokers to place holds on disbursements of funds or securities from the accounts of “specified adult” customers.  Specified adults include those 65 and older or those 18 and older who the broker “reasonably believes has a mental or physical impairment that renders…
On March 22, 2017, as previously anticipated by the market, the SEC adopted an amendment to Rule 15c6-1 under the Securities Exchange Act of 1934 to shorten the standard settlement cycle for most broker-dealer transactions from three business days after the trade date (T+3) to two business days (T+2).  The SEC proposed the amendment on September 28, 2016, in connection with a variety of related changes to the SEC’s rules and the rules of self-regulatory…