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These are some of the compliance-related stories that recently caught my attention. The Shift from Active to Passive Investing: Potential Risks to Financial Stability? by Patrick McCabe, Board of Governors of the Federal Reserve System In our working paper, we examine four channels by which the active-to-passive shift may affect financial stability: (1) effects on liquidity transformation and redemption risk for investment funds; (2) growth of passive products with strategies that amplify asset-price volatility;…
Last month, I wrote about the complaint filed by Securities and Exchange Commission against Reginald Ringgold and his Blockvest initial coin offering. One of the Blockvest’s marketing ploys was to note its membership in the Blockchain Exchange Commission. The SEC managed to obtain an emergency court order to halt a planned initial coin offering of Blockvest, which falsely claimed that it was approved by the SEC. The order also halts ongoing pre-ICO sales. After…
Some do, and it backfires. In a working paper by Gregory W. Brown, Oleg R. Gredil, and Steven N. Kaplan they studied cash flows and NAV reports for a sample of 2,071 buyout and venture funds. The study was motivated by the potential incentive for fund managers to exaggerate performance to attract investors to a follow-on fund. They looked for evidence consistent with funds manipulating their self-reported net asset values around the time commitments are…
While I was preparing for Thanksgiving on Wednesday, the Securities and Exchange Commission put 43 of its rules on the chopping block. As you know, it’s not so simple to just eliminate a rule. Eliminating a rule is itself a rulemaking, requiring notice and comment periods. Of course, the SEC would also need to justify why the rule which was at one time deemed to work, no longer works. The Regulatory Flexibility Act requires requires…
The Financial Crimes Enforcement Network announced the issuance of revised Geographic Targeting Orders. The threshold for reporting has been reduced down to $300,000 for all-cash purchases of residential real estate. The geographic scope has been expanded to now include nine cities: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle. The GTO requires U.S. title insurance companies to identify the natural persons behind all-cash…
These are some of the compliance-related stories that recently caught my attention. Little bits to grow your building knowledge base. Steve Cohen Will Pay Extra for Compliance Tips by Matt Levine How did this happen, you might well ask. There are some obvious answers. For one thing, a culture of compliance at Point72 really might be a delicate bud that needs to be carefully nurtured with constant cheerleading and incentive programs.  For another, I mean, it’s…
The SEC’s Office of Compliance Inspections and Examinations has issued a risk alert announcing its intention to conduct a series of examination initiatives focused on issues affecting certain registered investment companies and investment advisers. According to the Risk Alert, examiners have six initiatives: Index funds that track custom-built indexes Smaller ETFs and/or ETFs with little secondary market trading volume Mutual funds with aberrational underperformance relative to their peer groups Mutual funds with higher allocations to certain…
Stan Lee, the legendary writer and publisher of Marvel comics who helped created countless superheroes, has died. He was 95. On his own and through his work with collaborators Jack Kirby, Steve Ditko, Bill Everett. and others, Mr. Lee created Spider-Man, the X-Men, the Mighty Thor, Black Panther, Iron Man, the Fantastic Four, the Incredible Hulk, Daredevil and Ant-Man and many other comic book heroes. His catchphrase of “Excelsior!” means ever upward. I’m looking…
Crypto Currency can be a Commodity A federal judge in Massachusetts agreed with the Commodity Futures Trading Commission’s view that virtual currencies are commodities under the Commodity Exchange Act and subject to federal regulation. See CFTC v. My Big Coin Pay, Inc., (D. Mass. Sept. 26, 2018). The CFTC sued a virtual currency company and several affiliated companies and individuals alleging fraud and misappropriation in the sale of the virtual currency “My Big Coin.” The…
These are some of the other compliance-related stories that recently caught my attention. Time to Renew Registrations for RIAs and BDs; SEC Allows Mutual Fund Boards to Rely on CCOs, and NFA kicks out Members for Failure to Pay Dues: Regulatory Update for November 1, 2018by Hardin Compliance Consulting LLC Annual Renewal Program for IARD System: Get out your checkbooks!  It is time for the annual renewal of investment adviser (IA) firms and…