May 11, 2018

SEC Staff Updates FAQs on Upcoming Fund Reporting Changes to Address Form N-SAR Filing Obligations

The staff of the SEC Division of Investment Management (the “IM staff”) recently updated its frequently asked questions and answers (“FAQs”) document related to the investment company reporting modernization reforms adopted in October 2016 and revised in December 2017. Form N-SAR is scheduled to be rescinded on June 1,…

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May 11, 2018

SEC Proposes Amendments to Auditor Independence Loan Rule

On May 2, 2018, the SEC proposed amendments to its rule regarding the analysis of auditor independence with respect to lending relationships between the auditor and certain shareholders of an audit client. The proposed amendments would (1) focus the analysis regarding auditor independence solely on beneficial ownership rather than…

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April 20, 2018

Standards of Conduct for Broker-Dealers and Investment Advisers

On April 18, 2018, the Securities and Exchange Commission (the “Commission”) voted to propose two rules and an interpretation relating to the standards of care for investment advice provided by broker-dealers and investment advisers. The proposals seek to enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers while preserving retail customer access to transaction-based brokerage accounts and a broad range of investment products.

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April 11, 2018

Reminder of Compliance Deadline for Financial Crimes Enforcement Network’s Customer Due Diligence Rule

As a reminder, May 11, 2018 is the deadline for compliance with the Financial Crimes Enforcement Network (FinCEN)’s customer due diligence rule (CDD Rule). The CDD Rule strengthens existing customer due diligence requirements and requires mutual funds as well as banks, brokers and other financial companies to identify and verify beneficial owners of legal entity customers.

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February 9, 2018

OCIE Releases Its 2018 Examination Priorities

On February 7, 2018, the SEC's Office of Compliance Inspections and Examinations ("OCIE") released its 2018 National Exam Program Examination Priorities. The examination priorities are broken down into five categories: (1) compliance and risks in critical market infrastructure; (2) matters of importance to retail investors, including seniors and those saving for retirement; (3) FINRA and MSRB; (4) cybersecurity; and (5) anti-money laundering programs.

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February 5, 2018

SEC sanctions Gemini Fund Services for inflated NAV

Last week, the SEC instituted cease-and-desist proceedings pursuant to Section 203(k) of the Investment Advisers Act against Gemini Fund Services for its calculation of an inflated NAV when it was aware of inconsistencies with the custodian bank’s records.

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January 22, 2018

Letter to ICI and SIFMA Lays out Concerns of Staff of SEC’s Division of Investment Management about Funds Investing Primarily in Cryptocurrencies

On January 18, 2018, the staff of the Securities and Exchange Commission ("SEC") Division of Investment Management (the "IM staff") issued a letter to the Investment Company Institute ("ICI") and the Securities Industry and Financial Markets Association ("SIFMA"). In this letter, the IM staff highlights significant investor protection issues presented by certain features of cryptocurrencies and cryptocurrency-related products that the IM staff believes must be addressed before funds investing in cryptoassets are offered to retail investors.1 In particular, the IM staff raised questions related to (1) valuation, (2) liquidity, (3) custody, (4) arbitrage and (5) market manipulation.  The IM staff also formally announced its position that until the questions raised by the IM staff can be addressed satisfactorily, it does not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products. In addition, the IM staff announced that it does not believe existing funds should file post-effective amendments under Rule 485(a) to register a fund that invests substantially in cryptocurrency or related products.

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January 18, 2018

SEC Division of Investment Management Issues FAQs on Investment Company Liquidity Risk Management Programs

The staff of the Division of Investment Management (Staff) of the U.S. Securities and Exchange Commission has issued guidance in the form of frequently asked questions (FAQs or guidance) related to the SEC's investment company liquidity risk management rule adopted in October 2016.  As discussed in our October 2016 memorandum, the SEC adopted new Rule 22e-4 (Rule) under the Investment Company Act of 1940, as amended,1 which requires each registered open-end management investment company, including mutual funds and exchange-traded funds (ETFs) but excluding money market funds, to adopt and implement a written liquidity risk management (LRM) program reasonably designed to assess and manage the fund's liquidity risk.

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December 11, 2017

SEC Modifies Approach to Form N-PORT Filing Requirements

On Friday, December 8, 2017, the Securities and Exchange Commission (“Commission”) announced the adoption of a temporary final rule that effectively delays the required submission of reports on Form N-PORT via EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system) by nine months.

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October 24, 2017

New Customer Due Diligence Requirements for Financial Institutions

In May 2016, the Financial Crimes Enforcement Network (FinCEN), U.S. Department of the Treasury, issued final rules under the Bank Secrecy Act (BSA) to clarify and strengthen customer due diligence requirements. These new rules generally apply to financial institutions, including brokers or dealers in securities and mutual funds. The rules explicitly require certain due diligence efforts, as well as require the identification and verification of the identity of all beneficial owners of legal entity customers, subject to certain exceptions.

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