From our friends at SEC3, their December Regulatory Roundup, where they provide practical advice on the latest regulatory headlines. They start this issue with the SEC’s 2024 enforcement results, which fell somewhat short after its 2023 banner year. They also say goodbye to SEC Chair Gary Gensler, who tendered his resignation after Donald J. Trump won his presidential bid. Given the president-elect’s views on government, I expect the next chair to have a less aggressive regulatory agenda. For firms following the ongoing drama in the Fifth Circuit Court of Appeals about the Corporate Transparency Act, the current answer as of December 26 is that the requirements to report Beneficial Ownership are stayed. But stay tuned since that answer may change once again. Finally, they have included a few enforcement cases, one on the misappropriation of client funds and two on cherry-picking. Read more here.
All posts by Clifford E. Kirsch, Editor
August Regulatory Updates
From our friends at SEC3 , the August regulatory updates you need to know about:
- More Flack on WhatsApp, Hypothetical Performance SmackDown, A Timely Warning on the Pay-to-Play Rule, and Updates to Qualifying Venture Capital Fund Exemption
- 26 More Firms Slammed with $390 Million in Fines for Failure to Retain Texts and Chats
- Adviser Ordered to Stop Using Hypothetical Performance on Public Website
- Adviser Pays $95,000 Fine for Pay-to-Play Foot Fault in a Timely Reminder this Election Season
- Venture Capital Funds Adjustment for Inflation
Read all about them here.
Unfinished Business: IAs Are Potentially Back on the Hook for AML and Counterterrorism Reporting Requirements
In its latest attempt, the U.S. Department of Treasury, Financial Crimes Enforcement Network (“FinCEN”), will require certain investment advisers to implement compliance measures to detect and report suspected money laundering and the financing of terrorism. The newly proposed rule brings investment advisers under the purview of the Bank Secrecy Act (“BSA”), which requires financial institutions to implement risk-based anti-money-laundering and counterterrorism programs to protect the national security of the United States and aid law enforcement in the fight against money laundering. If the proposed rule is finalized, FinCEN could require investment advisers to collect records, such as those related to fund transfers, and file suspicious activity reports with FinCEN. The proposed rule would also allow information sharing between FinCEN and the SEC, who will be delegated with examination authority over investment advisers for compliance with the new rule.
Read more here.
Are CCOs Really In The SEC’s Crosshairs?
Last month, SEC Enforcement Director Gurbir Grewal gave a speech at the New York City Bar Association’s Compliance Institute addressing chief compliance officer liability. While the speech likely provided some comfort to CCOs, unfortunately, it raised more questions than answers, such as:
- Are compliance officers on the front line?
- Are compliance officers responsible for implementing and executing policies and procedures, or is their function to provide advice?
- Do compliance officers need to become experts of “everything everywhere all at once” at their firms?
- What is a “wholesale failure” to carry out compliance responsibilities?
Eversheds Sutherland Partners Brian Rubin and Adam Pollet share their thoughts here on these questions, as well as information about what the SEC and FINRA could use in future cases brought against CCOs .
SEC shortens filing deadlines for beneficial ownership reports required under sections 13(d) and 13(g) of the Exchange Act
On October 10, 2023, the SEC adopted amendments to the rules governing beneficial ownership reporting under Sections 13(d) and 13(g) of the Exchange Act, shortening the filing deadlines.
- For Schedule 13D, the amendments shorten the initial filing deadline from 10 days to five business days and require that amendments be filed within two business days.
- For Qualified Institutional Investors and Exempt Investors required to file Schedule 13G, the amendments shorten the initial filing deadline to 45 days after the end of the calendar quarter in which the investor beneficially owns more than 5% of the covered class of equity securities, Passive Investors filing Schedule 13G must complete the filing within five business days.
All Schedule 13G filers must file an amendment within 45 days after the calendar quarter in which a material change occurred.
Read more here.