Don’t assume you can disclose away all conflicts of interest – that’s the latest warning and reminder from the SEC to investment advisers and broker-dealers from a recently-published staff bulletin.

As a reminder, an SEC-registered adviser owes clients a fiduciary duty of loyalty to eliminate a conflict of interest or, at a minimum, make full and fair disclosure of the conflict of interest such that a client can provide informed consent to the conflict.

In the bulletin, the staff pointed out several circumstances where conflicts must be eliminated and not merely disclosed. For example, the staff believes that eliminating a conflict is appropriate where the conflict is of a nature and extent that it would be difficult for the adviser to provide full and fair disclosure, and the investment adviser cannot mitigate the conflict such that full and fair disclosure and informed consent are possible.

Read more here.

Signaling its increasing scrutiny on investment advisers managing crypto assets, the SEC and CFTC recently jointly proposed a rule that would require private fund managers who are required to file Form PF to report information on digital asset investments held by their private funds.

The release defines a “digital asset” as an asset that is issued or transferred using distributed ledger or blockchain technology including, but not limited to, virtual currencies, coins, and tokens.

Among other things, reporting managers would need to provide a good faith estimate of the percentage of the reporting fund’s net asset value invested in digital assets as well as the dollar value of long and short positions in digital assets.

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Recently the SEC indicated that advisory firms should have policies and procedures in place to ensure that electronic signatures are not being exploited to perpetrate fraud that could harm advisory clients.

To that end there are various methods that can be employed to ensure that the person receiving the request for electronic signature is the intended recipient/signer. Among other things, the recipient can be required to authenticate their identity before reviewing/signing the document through various methods including

• the sending of a code via text to a mobile number that the sender already has on file prompting the recipient to enter the validation code to confirm its identity
• requiring the recipient to answer questions about the recipient’s identity/background to validate that the recipient is the intended signer.

Advisers should utilize only those electronic signature services that have a validation method, such as the above, to authenticate that the person signing the document is the intended recipient/signer.

Read more here.