SEC Risk Alert: Observations from Cybersecurity Examinations of Investment Advisers

August 14, 2017

On August 7, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) of U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert which details its examination of the cybersecurity preparedness of 75 broker-dealers, investment advisers and investment companies in the U.S.  In comparison to prior cybersecurity examinations, this exam involved more active testing and validation of the firms’ procedures and controls related to cybersecurity. Click here to read the Risk Alert.

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DoL Proposes Fiduciary Rule Delay

August 11, 2017

The United States Department of Labor (“DoL”) indicated in a court filing yesterday, August 9, 2017, that it would be seeking an eighteen-month delay in implementing the second phase of the fiduciary rule. This phase, originally scheduled to go into effect on January 1, 2018, would require investment advisers who receive variable compensation to comply with the Best Interest Contract Exemption (“BICE”). A signature feature of the Fiduciary Rule, BICE permits investment advisers to receive variable compensation only if they sign a contract with clients promising to put the clients’ interest before their own. The second phase also implements exemptions for principal transactions and insurance agents.

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Department of Labor Fiduciary Rule – August FAQs

August 09, 2017

The United States Department of Labor (“DoL”) recently released the latest round of Frequently Asked Questions for the Department’s new Fiduciary Rule. Containing only three sets of questions and answers, the release clarifies issues relating to 408(b)(2) defined contribution plans and other retirement plan advisors. Click here to read the DOL’s August FAQs.

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Documenting Client Meetings

July 17, 2017

Is your investment adviser firm consistently covering certain key issues during client meetings and then carefully documenting these discussions and follow-up items?

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SEC Fines Investment Adviser for Failure to Disclose Material Conflicts of Interest to Clients

June 20, 2017

The United States Securities and Exchange Commission (“SEC”) recently obtained final judgments by consent against an investment adviser firm and its chief executive officer, who allegedly failed to disclose material conflicts of interest to some of the firm’s clients. The investment adviser firm and its chief executive officer consented to the decree without admitting or denying the allegations in the SEC’s complaint.

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United States Department of Labor Declines to Extend Fiduciary Rule Delay

May 30, 2017

The U.S. Department of Labor (“DoL”) recently confirmed that it would not seek to extend the Fiduciary Rule delay. Originally scheduled to go into effect on April 10, 2017, the DoL issued a rule delay earlier this year postponing the applicability date to June 9, 2017 pending a review of the rule ordered by U.S. President Donald Trump. Until this week, it was unclear whether the rule would go into effect on June 9 or be subject to further delay.

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THE CHIEF COMPLIANCE OFFICER’S ROLE & THE RISKS OF OUTSOURCING

May 10, 2017

The Chief Compliance Officer serves an important role in an investment adviser firm’s business. A role that requires expertise, independent judgment, and dedication, an increasing number of investment adviser firms are choosing to outsource the Chief Compliance Officer position to third party compliance professionals. Despite the potential cost-savings, outsourcing this vital role is generally not a wise business strategy and will likely increase the firm’s risk of exam by the U.S. Securities and Exchange Commission (“SEC”) or affect the depth of inquiry an investment adviser firm is subject to once an exam has begun.

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Wyoming Investment Adviser Registration Requirements

May 09, 2017

As of July 1, 2017 the State of Wyoming will require investment advisers to register with Wyoming securities regulators if the investment adviser has less than $100 million of assets under management (AUM) unless it meets another criteria for registering with the U.S. Securities and Exchange Commission (“SEC”). Wyoming had been the only state that did not regulate investment advisers.

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Colorado Proposes Cybersecurity Rule for Investment Adviser Firms

April 21, 2017

The Colorado Division of Securities recently proposed two new rules that would require investment adviser firms and broker-dealers to assess cybersecurity risks and implement written policies and procedures “reasonably designed to ensure cybersecurity.” Click here to read the Rulemaking Notice. Given the sensitive and confidential nature of their work, cybersecurity is an important and evolving concern for investment adviser firms.

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DoL Fiduciary Rule Delayed 60 Days

April 07, 2017

Today, the Department of Labor (DoL) published a rule delay for the fiduciary rule, delaying its applicability date by 60 days. The initial applicability date of the fiduciary rule was April 10, 2017.  The 60 day delay moves the applicability date to June 9, 2017.  This action also extends (for 60 days) the applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs.

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