HSR Violation Without a Stock ‘Purchase’. . .It could happen to you

July 20, 2016 BDIA Editors Leave a comment

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.

International, Regulatory

Brexit: What Alternative Asset Managers Can Expect

July 20, 2016 BDIA Editors Leave a comment

On 23 June 2016, the British public voted to leave the European Union after 43 years of membership. Although the results of the referendum are not binding in law and there remains a possibility of a constitutional challenge, the early indications from Prime Minister Theresa May and leading figures within the ruling Conservative Party are that the United Kingdom will proceed with the so-called Brexit. How might Brexit affect alternative asset managers in the United Kingdom and the United States?

Enforcement

SEC Charges PE Adviser for Unregistered Brokerage Activity

June 20, 2016 BDIA Editors Leave a comment

The U.S. Securities and Exchange Commission (SEC) on June 1, 2016 announced a settled enforcement action against a private equity fund manager (Adviser) for acting as a broker-dealer without registering. The case is significant because it calls into doubt certain compensation practices that became nearly universal among private equity firms following SEC staff guidance.

The issue of unregistered brokerage activities by private equity fund advisers has been raised in the context of examinations and other inquiries to unregistered entities. In many cases, private equity fund advisers have been able to respond to the SEC staff’s questions without enforcement action being taken. In light of this latest action, it remains to be seen whether there has been a shift in the SEC’s or its staff’s position, which could lead to wholesale revamping of private equity fund fee structures or result in the registration of fund advisers as broker-dealers. Private equity fund advisers may wish to review their fee structures and other activities in light of the SEC’s recent action.

Compliance, Regulatory

Déjà Vu All Over Again – FINRA Revisits Mutual Fund Sales Charge Waivers

June 10, 2016 BDIA Editors Leave a comment

The Financial Industry Regulatory Authority is once again taking a close look at member firm mutual fund sales practices and sales charge waivers (Mutual Fund Waiver Sweep) in the U.S. FINRA’s target exam letter seeks information about mutual fund sales to retirement plans and charitable accounts, as well as the sales charge waivers that mutual funds make available to eligible purchasers. FINRA’s Mutual Fund Waiver Sweep covers the period from January 1, 2011 through December 31, 2015 and, as drafted, seeks responses from FINRA member firms by June 10, 2016.

Regulatory

SEC/FDIC Propose Dodd-Frank BD Resolution Rules

April 20, 2016 BDIA Editors Leave a comment

Troubled financial institutions, some with substantial broker-dealer operations, played a prominent role in the 2008 financial crisis. In an effort to protect the financial system from serious threats posed by significant nonbank financial companies in financial distress, Congress enacted Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to provide for an orderly liquidation of such entities under the supervision of federal authorities. Federal regulators have proposed rules that would implement the provisions of Title II in regard to the resolution of a large broker-dealer. Most notably, the proposed rules address how a “bridge broker or dealer” could be used in connection with the liquidation of a “covered broker or dealer.”