Today, September 13, the House Committee on Financial Services conducted a hearing to discuss forming a self-regulatory organization (“SRO”) for investment advisers. There were three oversight options discussed, (1) having the U.S. Securities and Exchange Commission (“SEC”) charge a user fee to provide funds for more frequent regulatory examinations; (2) creating an independent SRO; and (3) giving FINRA the authority to serve as the investment adviser SRO. Eight individuals testified in front of the House Committee. The following chart shows which of the three approaches the individuals thought would be most effective.
Category Archives: SEC
The Benefits of Being Prepared for a Regulatory Examination
September 09, 2011
The best approach for an investment adviser firm to prepare for a regulatory examination begins with ongoing compliance training. A report released by the U.S. Securities and Exchange Commission (“SEC) on February 2011, stated “In most cases, the staff considers the quality of the [investment adviser’s] compliance systems and its internal control environment when determining the scope of the examination and the areas to be reviewed.” Investment advisers with a vigorous compliance program, including training and preparing for regulatory examinations, will find that regulatory audits are more likely to progress smoothly. Investment adviser firms that fail to demonstrate a solid understanding of their investment adviser’s compliance program will likely leave the securities regulator with concerns that the investment adviser is failing to protect the safety of its client’s assets. The examiners may deem it necessary to seek further information and request additional documentation from the investment adviser. Failure to provide requested documentation and a display of an inadequate compliance program will likely be the result of a deficiency letter, and/or remedial or enforcement action against your investment adviser firm. In the same report discussed above, the SEC has stated that unfortunately, “most examinations conclude with a deficiency letter.”
A lot of important information regarding the upcoming requirement for mid-sized advisors to switch from SEC to state registration was provided during the recent webinar, “The Switch is On Again for RIAs,” hosted by Advisor4Advisor and presented by Tammy Emsick of RIA Compliance Consultants. Therefore, we would like reiterate a few of the main points presented during this webinar.
Do You Understand the Responsibilities Related to Serving as an Investment Adviser’s Chief Compliance Officer?
August 09, 2011
Your investment adviser’s chief compliance officer (“CCO”) must be knowledgeable regarding the Investment Advisers Act of 1940, competent in regard to administering your compliance program and empowered to enforce compliance with your policies and procedures.
SEC Director Discusses the New Whistleblower Program and the Role Internal Investigations Will Play
August 09, 2011
In a recent speech, Robert Khuzami, the Director of the Division of Enforcement for the U.S. Securities and Exchange Commission (“SEC”), discussed the SEC’s new whistleblower program and the role internal investigations will play.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the U.S. Government Accountability Office (“GAO”) recently released a study regarding the feasibility of forming a self-regulatory organization (“SRO”) to oversee investment advisers to private funds. Click here for a copy of the study.
SEC Publishes Frequently Asked Questions Regarding Switch of “Mid-Size” Investment Advisers
July 21, 2011
The U.S. Securities and Exchange Commission (“SEC”) posted a webpage with frequently asked questions regarding the switch of “mid-size” investment adviser ($25 million to $100 million of assets under management) from the SEC to state securities regulator(s).
SEC Issues Order Raising Thresholds for Investment Advisers to Charge Performance Fees
July 18, 2011
On July 12, 2011 the U.S. Securities and Exchange Commission (“SEC”) issued an order that effectively raises two of the thresholds that determine whether an investment adviser can charge a performance fee. Under section 205(a)(1) of the Investment Advisers Act of 1940 (“Investment Advisers Act”) investment advisers are generally prohibited “from entering into, extending, renewing, or performing any investment advisory contract that provides for compensation to the adviser based on a share of capital gains on, or capital appreciation of, the funds of a client (also known as “performance compensation” or “performance fees”).” Section 205(e) of the Investment Advisers Act authorizes the SEC to exempt any investment advisory contract from the performance fee prohibition if the contract is with a person the SEC determines does not need the protections of the prohibition.
Kansas Securities Commissioner Issues Guidance Regarding SEC’s New Switch Rule for Mid-Size Investment Advisers
July 07, 2011
On July 5, 2011, the Kansas Securities Commissioner issued a letter to investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) that are also notice filed in Kansas regarding the SEC’s new rule switching mid-size investment advisers (with assets under management between $25 million to $100 million) from the jurisdiction of the SEC to state securities regulators.
