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.
February 9, 2018
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.
February 5, 2018
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.
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.
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.
December 11, 2017
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.
October 24, 2017
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.
September 27, 2017
In a no-action letter dated September 22, 2017 (the "September 2017 Letter"), the Office of Chief Counsel of the SEC's Division of Investment Management (the "Staff") extended the temporary assurances it previously provided to a fund group (the "fund"), where in response to the fund's request in June 2016, the Staff stated that it would not recommend enforcement action against the fund if it continued to fulfill its regulatory requirements by using the audit services of a non-compliant auditing firm under the circumstances represented by the fund.
July 26, 2017
The Division of Investment Management (the "Division") recently issued a set of interpretive answers ("Guidance") to questions relating to the investment company reporting reforms adopted by the Securities and Exchange Commission in October 2016. The Guidance, which focuses on various aspects of new Forms N-PORT and N-CEN and the amendments to Regulation S-X, includes the following information:
May 31, 2017
In October 2016, the Securities and Exchange Commission ("SEC") adopted new rules and forms, as well as amendments to existing rules and forms, to enhance transparency and modernize reporting requirements for registered investment companies. The SEC adopted new Form N-PORT (and rescinded Form N-Q), which requires registered investment companies and exchange-traded funds organized as unit investment trusts, but not money market funds and small business investment companies, to report information about their monthly portfolio holdings to the SEC in a structured data format. The SEC also adopted new Form N-CEN (and rescinded Form N-SAR), which requires registered investment companies, other than face-amount certificate companies, to annually report certain census-type information to the SEC in a structured data format. In addition, the SEC adopted amendments to Regulation S-X, which require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. This memorandum provides a brief summary of the new requirements and the respective compliance dates, certain of which begin in June and August 2017, as indicated below. A summary of compliance dates is also presented in a table at the end of this memorandum.