August 31, 2011

SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act

The SEC is seeking comment on the treatment of asset-backed issuers as well as real estate investment trusts (REITs) and other mortgage-related pools under the Investment Company Act of 1940 (1940 Act).  Additionally, through a separate concept release, the SEC is seeking public comment on interpretations of a provision in the 1940 Act – Section 3(c)(5)(C) – that may be used by some companies engaged in the business of acquiring mortgages and mortgage-related instruments such as some REITs. The SEC describes a concept release to be an SEC-approved document that poses an idea or ideas to the public to get their views.

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August 31, 2011

SEC Seeks Public Comment on Use of Derivatives by Mutual Funds and Other Investment Companies

The SEC is seeking comment on a wide range of issues raised by the use of derivatives by mutual funds and other investment companies regulated under the Investment Company Act of 1940 (1940 Act).  The SEC staff is considering issuing a “Concept Release” that would solicit public comment on funds’ use of derivatives and on the current regulatory regime under the 1940 Act as it applies to funds’ use of derivatives. The SEC would review the comments to the Concept Release and determine whether regulatory initiatives or guidance is needed in this area.

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August 31, 2011

FINRA Issues Guidance On Use of Social Media

FINRA issued Regulatory Notice 11-39 to clarify the application of rules governing communications with the public to social media sites.  The Notice reminds firms of the recordkeeping, suitability, supervision and content requirements for such communications.  These concerns were initially addressed in Regulatory Notice 10-06 issued in January 2010. FINRA noted that Regulatory Notice 11-39 is not intended to alter the principles or the guidance provided in Regulatory Notice 10-06.

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August 29, 2011

House Financial Services Committee Likely to Introduce Adviser SRO Bill After September 13 Hearing

It is widely expected that the House Financial Services Committee will introduce legislation calling for a self-regulatory organization (SRO) for investment advisers soon after the committee's subcommittee on capital markets holds a September 13 hearing on the issue.  The September 13 hearing will also examine the regulation of investment advisers and broker-dealers, while the full committee plans to hold a hearing on September 15 on the need to reform the SEC.

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August 26, 2011

Fraud Charges Brought Against an Adviser for Showing Fictitious Performance Returns

The SEC brought an administrative action against Renee Marie Brown, a Minnesota-based investment adviser, finding that she defrauded clients into transferring their money to Investors Income Fund X, LLC.

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August 24, 2011

Court Backs Advisers in Mutual Fund Fee Case

The Ninth Circuit Court of Appeals upheld the lower court’s decision in favor of Capital Research and Management (CRMC) in a suit brought by plaintiff shareholders claiming CRMC’s advisory fees were excessive.  Plaintiffs had argued that CRMC had misused advisory fees earned from investment companies over the year, which amounted to over $6 billion.  They further argued that the shareholders of the funds did not receive any benefits from the economies of scale realized by CRMC.  The District Court had ruled that the plaintiffs failed to prove that the advisory fees charged by CRMC were so disproportionately large that they bore no reasonable relationship to the services rendered.  In upholding the District Court’s ruling, the 9th circuit stated that the District Court had meticulously applied the Gartenberg standard for determining when fees are excessive. 

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August 19, 2011

SEC and CFTC Seek Public Input for Joint Stable Value Contract Study

The SEC and the CFTC have approved for publication in the Federal Register a request for public comment that is expected to assist in conducting a joint study on stable value contracts.

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August 12, 2011

SEC’s New Whistleblower Program Takes Effect

The SEC launched a new webpage for people to report a violation of the federal securities laws and apply for a financial award.  The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) provided the SEC with the authority to pay financial rewards to whistleblowers who provide new and timely information about any securities law violation.  Among other things, to be eligible, the whistleblower’s information must lead to a successful SEC enforcement action with more than $1 million in monetary sanctions. 

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August 11, 2011

SEC Charges Former Investment Fund Associate with Insider Trading

The SEC charged Toby G. Scammell with making illegal profits of over $192,000 from insider trading after he learned from his girlfriend about the impending acquisition of Marvel Entertainment, Inc. by the Walt Disney Company.

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August 10, 2011

SEC Adopts Technical Amendments to Rules and Forms Related to the FASB’s Accounting Standards Codification

The SEC adopted technical amendments to various rules and forms under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940. These revisions were necessary to conform those rules and forms to the FASB Accounting Standards Codification. The technical amendments include revision of certain rules in Regulation S-X, certain items in Regulation S-K, and various rules and forms prescribed under the Securities Act, Exchange Act and Investment Company Act. The technical amendments will be effective on the date of publication in the Federal Register.

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