October 29, 2014

Hedge Fund Adviser Sanctioned for Delivering Audited Financial Statements After the Custody Rule Deadline

The SEC brought an enforcement action against Sands Brothers Asset Management, LLC (SBAM), Steven Sands, Martin Sands and Christopher Kelly failed to timely distribute audited financial statements to the investors of hedge funds managed by SBAM in violation of Rule 206(4)-2 under Section 206(4) of the Advisers Act – the “custody rule”. In 2010, SBAM was the subject of a settled administrative proceeding, In re Sands Brothers Asset Management LLC, et al., Release No. 3099 (Oct. 22, 2010), by which the SEC censured SBAM, ordered it to cease and desist from violating the Advisers Act, including Rule 206(4)–2, and ordered it to pay a $60,000 civil money penalty. The SEC also found that they violated the 2010 order by failing to implement any procedures or safeguards to ensure compliance with that Rule.

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October 29, 2014

SEC Division of Investment Manager Director Speaks on Complex Products

Norm Champ, the SEC’s Director of the Division of Investment Management, spoke at the SIFMA Complex Products Forum in New York on specialized products. He began by noting that his Division views the exemptive application process as the laboratory where it examines new ideas from market participants, most recently including a proposed non-transparent ETF structure. In addition, he stated that the Division’s role of reviewing disclosure and fund financial reporting also affords its staff the opportunity to identify and monitor industry-wide risks. For example, last year, the disclosure review staff noticed an increase in the number of funds using the word “protected” in their fund names. In response, the staff raised concerns because the fund’s name suggests safety or protection from loss.

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October 20, 2014

Marc Wyatt Named Deputy Director of National Exam Program

The SEC appointed Marc Wyatt to be Deputy Director of the agency's Office of Compliance Inspections and Examinations (OCIE). OCIE conducts the SEC's National Exam Program through examinations of SEC-registered investment advisers, investment companies, broker-dealers, self-regulatory organizations, clearing agencies, and transfer agents.

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