October 30, 2013

Adviser Charged with Engaging in an Inflated Brokerage Commissions

The SEC brought an enforcement action against Fry Hensley and Company (FHC) and its owner Nicholas L. Fry, II, each based in Cincinnati, Ohio, for obtaining undisclosed compensation in the form of payments from inflated commissions, markups and markdowns charged to their clients by the broker-dealer that FHC and Fry…

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October 28, 2013

Hedge Fund Cost of Compliance Study Released

KPMG, AIM and MFA issued a study entitled “The Cost of Compliance.” The study reports the results of a survey of 200 hedge fund advisers. The study, not surprisingly, concluded that hedge fund compliance costs have risen and likely are to continue to rise as the industry becomes more regulated.

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October 28, 2013

Three Advisers Charged with Violating the Custody Rule

The SEC brought enforcement actions against three investment advisers for violating Rule 206(4)-2 under the Advisers Act, the “custody rule,” which requires them to meet certain requirements when maintaining custody of their clients’ funds or securities. The SEC found that these advisers failed to maintain client assets with a qualified…

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October 23, 2013

SEC Brings Enforcement Actions Against Advisers for Having Inadequate Compliance Programs

The SEC brought enforcement actions against three investment advisers for repeatedly ignoring problems with their compliance programs. The SEC stated that the enforcement actions arise from its “Compliance Program Initiative,” which targets firms that have been previously warned by SEC examiners about compliance deficiencies but failed to effectively act upon…

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October 23, 2013

SEC Proposes Crowdfunding Rule

The SEC  proposed rules under the JOBS Act to permit companies to offer and sell securities through crowdfunding. Crowdfunding is an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product…

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October 22, 2013

SEC Division of Investment Management Director Speaks at Independent Directors Conference

Norm Champ, the SEC’s Director, Division of Investment Management, spoke at the Annual Fall Meeting of the Independent Directors Council.  He began by speaking about the role of independent directors. He stated that mutual fund directors must abide by the duty of care and the duty of loyalty they owe…

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October 22, 2013

SEC Chairman Speaks at Compliance Conference

SEC Chairman Mary Jo White spoke at the NSCP’s National Membership Meeting in Washington, D.C.  After reviewing the role of a CCO at an adviser, she stated that the SEC has 450 professionals to examine investment advisers and investment companies. They are tasked with inspecting nearly 11,000 registered advisers who…

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October 18, 2013

SEC Chairman Speaks About Hedge Fund Transparency

SEC Chairman Mary Jo White spoke at the 2013 Managed Funds Association Outlook Conference in New York about the transparency and openness of hedge funds. She stated that hedge funds have entered into a new era of transparency as a result of the Dodd-Frank Act and the JOBS Act.

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October 18, 2013

Charges Brought Against New Jersey Adviser for Misleading Investors About CDO Investments

The SEC brought charges against Harding Advisory LLC, an investment adviser based in Morristown, New Jersey, and Wing F. Chau, its owner, for misleading investors in a collateralized debt obligation (CDO) and breaching their fiduciary duties. The SEC alleges that the firm compromised its independent judgment as collateral manager to…

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October 17, 2013

SEC’s Division of Investment Management Issues IM Guidance Update Addressing Status of Advisers that Temporarily Serve in such Capacity to Mutual Funds at Cost

The SEC’s Division of Investment Management issued its latest IM Guidance addressing whether a company that temporarily serves a mutual fund “at cost” or for no compensation is an investment adviser under the 1940 Act. Section 2(a)(20) of the 1940 Act defines an investment adviser of an investment company to include, in relevant part, any person “who pursuant to contract with such company regularly furnishes advice to such company with respect to the desirability of investing in, purchasing or selling securities or other property, or is empowered to deter-mine what securities or other property shall be purchased or sold by such company.” Section 2(a)(20)(iii), however, excludes from this definition “a company furnishing such services at cost to one or more investment companies, insurance companies, or other financial institutions.”

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