As information technology and electronic communication continue to expand, identity theft poses an increasingly common threat to individuals. On April 10, 2013, the U.S. Securities and Exchange Commission (“SEC”) voted unanimously to adopt rules requiring broker-dealers, mutual funds, investment advisers, and certain other entities regulated by the SEC to adopt programs to detect red flags and prevent identity theft. These rules, jointly adopted with the Commodity Futures Trading Commission (“CFTC”), were adopted in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), which amended the Fair Credit Reporting Act of 1970 (“FCRA”) to add the SEC to the list of federal agencies that must jointly adopt and individually enforce identity theft red flags rules.
Category Archives: SEC
In a release issued by the SEC on October 9, 2012, the U.S. Securities and Exchange Commission (“SEC”) announced “Presence Exams” for certain newly-registered investment advisers (investment advisers registered after July 21, 2011). The presence exams are to be conducted by SEC’s Office of Compliance Inspections and Examinations (“OCIE”) through the new National Exam Program (“NEP”) initiative. These “focused, risk-based examinations” will be conducted of investment advisers to private funds registered with the SEC. These Presence Exams will take place over a two-year period and have three primary phases:
On February 21, 2013, the U.S. Securities and Exchange Commission (“SEC”) released its examination priorities for 2013 for the National Examination Program (“NEP”) of the Office of Compliance Inspections and Examinations. The release states that the NEP published these examination priorities to communicate with investors and SEC registered investment advisers about areas that are perceived by NEP staff to have heightened risk, and to support the SEC’s mission “…to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The 2013 examination priorities “…are aligned with the SEC’s mission by seeking to improve compliance, prevent fraud, inform policy, and monitor firm-wide and systemic risk.”
Note to SEC Registered Investment Advisers Concerning Form ADV Annual Updating Amendments
February 06, 2013
On February 06, 2013, the U.S. Securities and Exchange Commission (“SEC”) released an important notice concerning Form ADV Annual Updating Amendment for December fiscal year end advisers. According to the notice, those investment advisers registered with the SEC with a fiscal year end of December 31, 2012, are required to file their annual updating amendment within 90 days after their fiscal year end, thus, by March 31, 2013. As March 31, 2013, falls on a Sunday and because the IARD system will be closed on Friday, March 29, 2013, investment advisers with a December 31, 2012, fiscal year end will be allowed to file their annual updating amendments no later than Monday, April 1, 2013. The SEC adds: “Rule 0-4 under the [Investment Advisers Act of 1940] provides that fillings (sic) required to be made through the IARD system on a day that the IARD system is closed will be considered timely filed with the commission if filed through the IARD system no later than the following business day. (see Title 17: Commodity and Securities Exchanges Part 275 – Rule and Regulations, Investment Advisers Act of 1940.)”
Conducting an Annual Review of a Registered Investment Adviser
November 01, 2012
Under SEC Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) are required to maintain written policies and procedures reasonably designed to prevent and detect violations of the Investment Advisers Act and the SEC’s related rules by the investment adviser or any of its supervised persons. Many state securities regulators have similar requirements regarding written policies and procedures. As part of developing the investment adviser’s written policies and procedures, the investment adviser should identify the areas of risk that need to be addressed.
SEC Announced Plans to Cancel Registration for Approximately 300 Investment Advisers Due to Failure to File Form ADV Amendments Related to Switch
October 24, 2012
On October 19, 2012, the U.S. Securities and Exchange Commission (“SEC”) issued a release indicating that the SEC intended to cancel the registrations of approximately 300 investment advisers due to failure to file an amendment to their Form ADV in the first quarter of 2012 indicating whether the firm remained eligible for registration with the SEC or who submitted an amended Form ADV indicating that they are no longer eligible to remain registered with the SEC as an investment adviser but have not filed the Form ADV-W to withdraw their registration.
Conducting a Risk Assessment of an Investment Adviser
October 23, 2012
Under Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) are required to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act and the rules that the SEC has adopted under the Investment Advisers Act. Well-designed policies and procedures should also be able to detect violations that have occurred and to promptly correct any violations that have occurred. Most state securities regulators have adopted similar rules requiring investment advisers to develop and implement written compliance policies and procedures. As an investment adviser, the first step in developing written policies and procedures should be to identify the areas of risk related to the investment adviser’s practice and business model. This process of identifying risks that make the investment adviser vulnerable to violations of the Investment Advisers Act is often referred to as a “Risk Assessment,” a “Gap Analysis,” or the compilation of a “Risk Inventory.”
Mid-Sized Investment Advisers Required to Register with the SEC Rather than New York Investor Protection Bureau
August 31, 2012
New York City houses one of the financial epicenters of the world so many may find it surprising that investment advisers with their principal office and place of business in New York are not subject to an examination by the New York Investor Protection Bureau. The New York Investor Protection Bureau is charged with enforcing the New York State securities laws and requires investment advisers to register with the New York Attorney General’s Office. Because the New York Investor Protection Bureau does not conduct examinations of investment advisers with a principal office and place of business who are registered with the New York Attorney General’s Office, the U.S. Securities and Exchange Commission (“SEC”) will handle the registration and examination of mid-sized investment advisers (investment advisers with between $25 million and $100 million of assets under management) with a principal office or place of business in New York.
Bachus Shuts Down SRO Bill for Investment Advisers
August 02, 2012
Last week, U.S. House Financial Services Committee Chairman Spencer Bachus (R – AL), decided to at least temporarily put the Investment Adviser Oversight Act of 2012 (“Investment Adviser Oversight Act”) on hold. This decision came on the heels of Representative Maxine Waters’ (D – CA) introduction of the Investment Adviser Examination Improvement Act of 2012 (“Investment Adviser Examination Improvement Act”).
Illinois Becomes Third State to Pass Privacy Law Conflicting with SEC Social Media Compliance Regulations for Investment Advisers
August 01, 2012
Today Illinois Governor Pat Quinn signed a new law that makes it unlawful for employers to request passwords to social media accounts or from demanding access to social media accounts from potential and current employees. Illinois became the third state to pass such legislation after Maryland and Delaware recently adopted similar laws in May and July. After signing the law Governor Quinn said, “Members of the workforce should not be punished for information their employers don’t legally have the right to have. As use of social media continues to expand, this new law will protect workers and their right to personal privacy.”
