Asset Management ADVocate

Unique Views into the Regulation of Asset Management

As we touched upon briefly in our previous post on the SEC’s recent Fund-of-Fund (“FOF”) rule proposal, proposed Rule 12d1-4 includes a provision that would limit an acquiring fund’s ability to redeem shares of an acquired fund. Specifically, proposed Rule 12d1-4(b)(2) would prohibit a fund that acquires more than 3% of an acquired fund’s outstanding shares from attempting to redeem more than 3% of the acquired fund’s shares in any 30-day period. Unlike most…
On December 21, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced enforcement actions against two robo-advisers, Wealthfront Advisors LLC (“Wealthfront”) and Hedgeable Inc. (“Hedgeable”), for making false statements about investment products and publishing misleading advertising. “Robo-advisers” are investment advisers that provide automated, software-based portfolio management services. In a press release related to these actions, the Chief of the SEC Enforcement Division’s Asset Management Unit stated that “[t]echnology is rapidly changing the way investment advisers…
On December 19, 2018, the SEC released a set of rule proposals (the “Proposals”) intended to streamline the regulatory framework for fund-of-funds (“FOF”) arrangements under the Investment Company Act of 1940 (the “1940 Act”). Investment advisers managing FOFs should consider looking closely with counsel at the impact these Proposals could have on their businesses and compliance programs. They might also consider responding to the substantive comment requests included in the Proposals.…
Recently, the Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert (the “Alert”) identifying six categories of mutual funds and mutual fund advisers it plans to examine: (i) index funds tracking custom-built indexes; (ii) smaller and thinly-traded exchange traded funds (“ETFs”); (iii) funds with aberrational underperformance relative to their peers; (iv) funds with higher allocations to securitized assets; (v) advisers “new” to managing mutual funds; and (vi) advisers who also manage private funds with similar strategies or that share…
This post continues my recap of where things stand regarding the treatment of tokens, coins, cryptocurrencies, and other digital assets under the federal securities laws. My prior post discussed actions and statements made by the SEC in 2017. This post reviews significant enforcement actions and statements this year prior to the recent Coburn enforcement action.…
The Securities and Exchange Commission’s (“SEC”) recent action against a digital trading platform illustrates the continued uncertainty surrounding the treatment of tokens, coins, cryptocurrencies, and other digital assets under the federal securities laws. Senior SEC officials have expressed concern that a significant amount of activity in this industry may not comply with federal securities laws and increasing SEC enforcement activity evinces these concerns. This set of posts offers a recap of the SEC’s previous enforcement…
On November 8, the SEC announced an enforcement action charging the founder of a digital “token” trading platform for operating as an unregistered national securities exchange. The SEC has previously brought enforcement actions relating to unregistered broker-dealers and unregistered ICOs, including some of the tokens traded on EtherDelta. Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, commented that “EtherDelta had both the user interface and underlying functionality of an online national securities exchange and was…
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…
The following post gives an overview of the portfolio holding disclosure requirements contained in proposed Rule 6c-11 (“ETF Rule”). As further set forth below, the SEC is proposing full transparency of portfolio holdings and is not proposing to permit non-transparent or partially transparent ETFs (although they did request comment on the subject).…