Category Archives: Compliance

Not Throwing Away Your Shot: Relying on Compliance Consultants to Defend Regulatory Actions

You are a CCO responsible for completing and filing Form ADV. You hire a compliance consultant to advise you on what information to include. You act in accordance with that advice, but you later find out that the SEC has instituted a proceeding against you and the firm due to the firm’s inadequate disclosures.

  • So, what now?
  • How do you defend yourself and the firm in this proceeding?
  • Is reliance on compliance consultants an available defense?
  • Will that succeed?

Who lives, who dies, and who tells your story (as Alexander Hamilton might say)?

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Additional contributor to this post:

Brian L. Rubinbrianrubin@eversheds-sutherland.com

The Custody Rule Clarified (Again)

In a recent Risk Alert, the staff of the Office of Compliance Examinations and Inspections (“OCIE”) of the Securities and  Exchange Commission (“SEC”) observed that one of the most frequent deficiencies identified in OCIE examinations was the failure of investment advisers to recognize that they might be deemed to have custody of client assets for purposes of Rule 206(4)-2
(“Custody Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”). On February 21, the staff of the SEC’s Division of Investment Management provided additional guidance under the Custody Rule that addressed three situations where there have been significant questions as to whether an investment adviser has custody of client assets:

  • when the adviser has limited authority to transfer client assets pursuant to a standing letter of instruction or other similar asset transfer authorization arrangement (“SLOA”) established by a client with a qualified custodian;
  • when an agreement between the client and its custodian appears to provide the adviser with access to client assets—even if the investment adviser is not a party to such agreement; and
  • when the adviser has the authority to move money between the client’s own accounts (“first-person transfers”).

Read More Here.

Additional contributor to this post:

Gregory T. Larkin,  gtlarkin@debevoise.com

TIC Form SHC 5-Year Benchmark Survey of U.S. Ownership of Foreign Securities: Due March 3, 2017

Investment advisers are reminded to review their filing obligations under the TIC Form SHC as reporting on this 5-year benchmark survey is due on March 3, 2017. The instructions for Form SHC are available here, FAQ may be found here and key issues for reporters are available here.

Continue reading TIC Form SHC 5-Year Benchmark Survey of U.S. Ownership of Foreign Securities: Due March 3, 2017

SEC OCIE Alert on Adviser Exams: 5 Most Frequent Deficiencies

The SEC’s OCIE office released its 5 most frequent deficiencies identified in examinations of Investment Advisers. They include the Compliance Rule, Regulatory Filings, Custody Rule, Code of Ethics Rule, and Books and Records.  According to the SEC staff, the Alert is based upon deficiencies cited from over 1,000 investment adviser exams over the past two years.  The document is helpful to the adviser legal and compliance personnel, not necessarily because there are surprises in the deficiencies cited, but because there is good amount of detail as to each of the cited deficiencies and thereby serves as a roadmap to be incorporated into the adviser’s annual compliance review.   View the Alert here: The Five Most Frequent Compliance T opics

Shortening the Settlement Cycle

In 2017, broker-dealers will be required to devote significant time and attention to preparing for a shortened settlement cycle.  As a means of reducing credit risk, counterparty risk and overall systemic risk, the Securities and Exchange Commission (SEC) has moved forward with proposed rules that would amend Rule 15c6-1(a) in order to reduce the settlement cycle to two business days (T+2).

Continue reading Shortening the Settlement Cycle