Last week, at the Securities Enforcement Forum in Washington, DC, senior staff of the SEC’s Division of Enforcement shed light on risks that asset managers and fund boards should be aware of. Their comments followed a record enforcement year resulting in more than $4 billion in disgorgement and penalties. Fueled in part by data collection technology, the SEC brought 868 enforcement actions the past fiscal year. Approximately 20% involved investment advisers or investment companies, the highest percentage in history, including one that found a private equity adviser to be acting as an unregistered broker/dealer, and others that involved alleged insufficient disclosure around accelerated monitoring fees.
Read more here: SEC Enforcement Staff Touts Year of Firsts and Big Data
Fundamentals of Broker-Dealer Regulation 2016 (excerpt)
Speakers: Clifford E Kirsch, Eversheds Sutherland; Cece Baute Mavico, Vice President and Associate General Counsel, LPL Financial; Joseph Sheirer, District Director, FINRA
On July 12, 2016, the U.S. Department of Justice (the “DOJ”) announced that investment firm ValueAct had entered into a consent decree in which it agreed to pay $11 million to settle charges that two of its affiliated funds acquired large stakes in Halliburton Company (“Halliburton”) and Baker Hughes Incorporated (“Baker Hughes”) in violation of the notification and waiting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The DOJ asserted that ValueAct was required to make an HSR Act filing, but ValueAct had asserted that no such filing was required due to the “investment-only” or so-called “passive investor” exemption. On the heels of such announcement, the Securities and Exchange Commission (the “SEC”) provided clarification that it does not view the inability to utilize the “passive investor” exemption under the HSR Act as equivalent to an investor not being considered “passive” for purposes of Section 13(d) under the Securities Exchange Act of 1934 (the “Exchange Act”).
Read more here: Activism and Passivity: HSR Act and Section 13(d) Developments for Investors
On Aug. 10, 2016, Caledonia Investments plc (“Caledonia”) agreed to settle Federal Trade Commission (“FTC”) charges that Caledonia violated the premerger reporting requirements of the Hart-Scott-Rodino Act (“HSR Act”) in connection with the vesting of restricted stock units (“RSUs”) in Bristow Group Inc. (“Bristow”). Pursuant to the settlement, Caledonia agreed to pay $480,000 in civil penalties. According to the government’s complaint, the vesting of the Bristow RSUs was a reportable acquisition of voting securities for which a filing, and observance of the mandatory waiting period, was required.
Investors should be reminded of their continuing obligations to monitor their holdings, even after an HSR Act filing has been made. Violations similar to Caledonia’s have been an area in which the government has previously pursued enforcement actions and secured large civil penalties.
Read more here: Hart-Scott-Rodino Update: Investor Fined for Violation Even Without a Stock ‘Purchase’