January 13, 2017
SEC Issues No-Action Relief in Connection with the Reallocation of a Unitary Fee without Shareholder Approval
In a recent no-action letter, the staff of the Division of Investment Management (the “Staff”) indicated that it would not recommend enforcement under Section 15(a) of the 1940 Act against American Century Funds or the investment adviser, American Century Investment Management, Inc. (“ACI” or the “Adviser”), if the Adviser reallocates (“brings up”) the unitary fee that it collects from the underlying funds to the target-date investing funds (“Investing Funds”) without shareholder approval.
December 20, 2016
In a recent no-action letter, the SEC provided assurances that it would not recommend enforcement action under Section 17(e) of the 1940 Act if certain registered open-end management investment companies utilize a broker that is an “affiliated person” of the Funds’ investment adviser to effect foreign currency transactions as agent for the Funds in return for the receipt of remuneration (within the parameters of Section 17(e)(2) of the Act). Section 17(e) was designed to eliminate the potential for self-dealing that exists when a person affiliated with a RIC receives compensation in connection with transactions involving the RIC.
December 20, 2016
Two recent settlements between investment advisers and the Securities and Exchange Commission (“SEC”) demonstrate the importance of correctly valuing bonds within a fund’s portfolio and ensuring that the valuation methods used take into account all factors that affect a bond’s value. Failure to do so can result in an inflated NAV, which can lead to disgorgement, heavy penalties and shareholder reimbursements.
September 26, 2016
The Securities and Exchange Commission ("SEC") recently announced that it settled charges with two investment advisory firms related to compliance failures within their wrap fee programs. For violations of Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder, the firms agreed to pay penalties of $600,000 and $250,000, respectively.
September 15, 2016
OCIE Undertakes Initiative to Examine Registered Investment Advisers that Employ Individuals with a History of Disciplinary Events
In a recent risk alert, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) stated that it intends to examine compliance oversight and controls of registered investment advisers that employ individuals with disciplinary histories in the financial services sector. A recent study found that such individuals pose an increased risk of future misconduct that may harm clients. Thus, advisers may want to consider heightened supervision of such individuals. OCIE’s examinations will focus on the effectiveness of the adviser’s compliance programs, supervisory oversight practices, particularly of those persons that may pose increased risks to clients, and disclosures to clients and prospective clients relating to the potential risk associated with financial arrangements initiated by individuals with a disciplinary history.
September 7, 2016
In a recent no-action letter, the staff of the Division of Investment Management of the Securities and Exchange Commission (the “Staff”) indicated that it would not recommend enforcement under Section 12(d)(3) of the Investment Company Act of 1940 (the “1940 Act”) against the AFL-CIO Housing Investment Trust (“HIT”), an open-end management investment company registered under the 1940 Act, if HIT organizes and acquires securities issued by a wholly owned and controlled subsidiary, organized as a limited liability company, that will operate as an investment adviser (the “Adviser Sub”), and will be registered under the Investment Advisers Act of 1940 (the “Advisers Act”).
September 7, 2016
On August 25, 2016, the Securities and Exchange Commission (the “SEC”) adopted amendments to Form ADV and the Books and Records Rule to enhance investment adviser information reporting and disclosure. The amendments are designed to improve the depth and quality of information that the SEC collects on investment advisers, facilitating…
August 31, 2016
Investment Adviser Settles Charges of Failing to Disclose Key Terms in Application for Exemptive Relief
The Securities and Exchange Commission (“SEC”) recently announced its settlement of charges against a registered investment adviser (the “Adviser”) for failing to disclose material terms in, among other documents filed with the SEC, an application for exemptive relief. The SEC determined that the Adviser had violated Section 34(b) of the Investment Company Act of 1940, as amended (the “1940 Act”), by not disclosing a side agreement with a subadviser, the terms of which were inconsistent with concerns raised by the SEC’s Division of Investment Management (the “Staff”) in its review of the application.
June 29, 2016
On June 28, 2016, the SEC released a rule proposal that would require registered investment advisers to adopt and implement written business continuity and transition plans detailing the adviser’s policies and procedures in case of significant disruptions to, or discontinuation of, the adviser’s operations, with the purpose of minimizing client and investor harm.
June 27, 2016
Testifying before the U.S. Senate Committee on Banking, Housing, and Urban Affairs (the “Committee”) on June 14, 2016, Securities and Exchange Commission (“SEC”) Chair Mary Jo White spoke to the “Oversight of the [SEC]” and the current work and initiatives underway at the agency, providing insight into the timing of major regulatory initiatives affecting the investment management industry.