The SEC’s Office of Compliance Inspections and Examinations ran a sweep it called the Multi-Branch Initiative. It published a risk alert on November 9 with its findings. The Risk Alert is mostly a collection of typical compliance problems: Custody of client assets Fees and expenses Oversight and supervision of supervised persons Advertising Code of ethics Portfolio Management Oversight of investment recommendations Mutual fund share class selection and disclosure issues Wrap fee program issues Rebalancing Issues…

Advisers to private funds, usually rely on the audited financial statement method to satisfy the Custody Rule. The Chief Accountant’s Office of the Division of Investment Management released a “Dear CFO Letter” last week that raises issues about using combined financial statements to satisfy the custody rule. You may have missed this possibly important compliance change because this is not a usual source for compliance. Frankly, it’s not easy to find on the…

Rule one following a regulatory examination is to implement the changes you told the regulators you said you would. GGHC failed to do so and it was the CCO’s fault. Then the CCO did the worst thing in compliance. GGHC was duly registered as a broker-dealer and an investment adviser. It used both transaction based fees and annual fees for different accounts. “As disclosed in its new account documents, GGHC “uses an aggressive growth style…

A quirky feature of the Foreign Corrupt Practices Act is that you can ask the Department of Justice to opine on whether your proposed action would violate the FCPA. Generally, one or two of these FCPA opinions pop up each year. It’s been a six-year drought since the last one. Some of the FCPA opinions have provided great insight into how the DOJ thinks about FCPA compliance. This latest is not one of those. I…

Anti-money laundering 101 is to lookout for for terrorists, drug kingpins and oligarchs. You don’t want to do business with these people because they are on the government enforcement lists. AML 102 is to look out for “politically exposed persons.” The international Financial Action Task Force defines a “politically exposed person as: “an individual who is or has been entrusted with a prominent public function. Due to their position and influence, it is recognised that…

The Securities and Exchange Commission made some small changes to the definition of “accredited investor” last week. The changes had been first proposed last December. The definition of “accredited investor” is at the nexus of the Securities and Exchange Commission’s missions: (1) to protect investors, (2) to maintain fair, orderly, and efficient markets, and (3) to facilitate capital formation.  If you’re an accredited investor you have access to private offerings. That enables capital formation.…