February 6, 2018
As a reminder, an SEC-registered investment adviser (an "Adviser") with a December 31st fiscal year-end must submit an annual amendment to its Form ADV on or before March 31, 2018. Since an Adviser will be required to complete the newly amended Form ADV, we recommend preparing the annual amendment as soon as possible. The following is a list of certain new items required by the amended Form ADV.1
December 15, 2016
In light of the Department of Labor’s adoption of the “DOL Rule”, which is designed to address conflicts of interest in retirement advice, the SEC’s Division of Investment Management (“IM”) has provided guidance on how to approach the related disclosure issues and procedural requirements associated with offering variations in Fund sales loads and new Fund share classes. Variations in Sales Loads IM confirms that a Fund may sell shares at prices that reflect scheduled variations in, or elimination of, sales loads as long as each sales load variation is disclosed in the prospectus. If Funds are considering new variations to sales loads that would apply uniformly to investors that purchase Fund shares through a single intermediary (or category of multiple intermediaries), the prospectus must: (1) briefly describe the arrangements that result in breakpoints in, or elimination of, sales loads; (2) identify each class of individuals or transactions to which the arrangements apply; and (3) state each different breakpoint as a percentage of both the offering price and net amount invested. Therefore, the disclosure should specifically identify each intermediary whose investors receive a sales load variation. This information must be presented in a clear, concise, and understandable manner, and should include tables, schedules, and charts where doing so would facilitate understanding. In addition, the narrative explanation to the Fund fee table must alert investors to the existence of sales load discounts or waivers and provide a cross-reference to the section and page of the prospectus and SAI that describes these arrangements. Appendix Approach To address the expected resulting lengthy prospectus disclosure, IM will allow this disclosure to be presented in an appendix to the statutory prospectus. In adopting the “appendix approach” however, the following requirements must be met: The applicable section of the prospectus should include a prominent statement to the effect that different intermediaries may impose different sales loads and that these variations are described in an appendix to the prospectus (NOTE: The specific appendix should be named) The cross-reference in the narrative explanation to the fee table must cite to the appendix The appendix must specifically identify the name of the intermediary, and should include sufficient information to allow an investor that purchases Fund shares through a specific intermediary to determine which scheduled variation applies to its investment Further, the appendix may be created as a standalone document as long as the Fund provides for the following: Incorporates the appendix into the prospectus by reference and files the appendix with the prospectus Includes a legend on the front cover page of the appendix explaining that the information disclosed in the appendix is part of, and incorporated in, the prospectus Includes a statement on the outside back cover page of the prospectus that information about the different sales loads variations is provided in a separate document that is incorporated by reference into the prospectus Delivers the appendix with the prospectus Posts the appendix on the Fund website consistent with Rule 498(e) under the Securities Act, if the Fund uses a summary prospectus Rule 485(a) Filing If a Fund is adding prospectus disclosure about sales load variations, the Fund will need to file the amendment to its registration statement under Rule 485(a) under the Securities Act. If a Fund is considering new share classes that differ with respect to sales loads, transaction charges, and certain ongoing expenses, the addition of this new class of shares will require a filing under rule 485(a). With such a filing, the Staff will then focus on the disclosure of Fund fees, performance, and distribution arrangements. Administrative Procedures The Guidance provides additional insight into undertaking filings for staff review, encouraging Funds to consider seeking either (or both) of the following: Selective Review – Consider if only certain disclosures about the Fund are changing. Specifically, this option should be considered for a filing that contains disclosure that is not substantially different from the disclosure contained in one or more prior filings by the Fund or other Funds in the complex. Thus, the Guidance notes that a request for selective review may be appropriate for a Rule 485(a) filing of a Fund that first reflects a new share class or sales load variation that is expected to be introduced for other Funds in the complex. A request for selective review should be made in the cover letter accompanying the filing and should provide: A statement as to whether the disclosure in the filing has been reviewed by the staff in another context A statement identifying prior filings that the registrant considers similar to, or intends as precedent for, the current filing A summary of the material changes made in the current filing from the previous filings Any specific areas that the registrant believes warrant particular attention Template Filing Relief – Consider requesting relief under rule 485(b)(1)(vii) of the Securities Act if sales load variation disclosures will be substantially identical across multiple Funds within a fund complex. Thus, the Guidance notes that a Template Filing Relief request may be appropriate to avoid the need to file multiple rule 485(a) filings so that a registrant could file a single “Template filing” for staff review, together with a Template Filing Relief request for those other Funds with substantially identical disclosure. To request Template Filing Relief, the filing should be made in correspondence filed on the EDGAR system under the CIK of the Template filing, and the request should provide: The reason for making the post-effective amendment The identity of the Template filing The identity of the registration statements that intend to rely on the relief (“Replicate filings”) The Template Filing Relief request must include the following representations: The disclosure changes in the Template filing are substantially identical to disclosure changes that will be made in the Replicate filings The Replicate filings will incorporate changes made to the disclosure included in the Template filing to resolve any staff comments thereon The Replicate filings will not include any other changes that would otherwise render them ineligible for filing under rule 485(b) NOTE: Any rule 485(b) filing relying on Template Filing Relief should include a cover letter or an explanatory note in the filing explaining that it is relying on this relief. Click here to access the Guidance:
October 21, 2016
The Securities and Exchange Commission (the "SEC") voted recently to adopt new Rule 22e-4 under the Investment Company Act of 1940, as amended (the "1940 Act"), (the "Rule")1 that will require registered open-end management investment companies, including mutual funds and exchange-traded funds ("ETFs")2 (each a "fund") (but excluding money market funds), to adopt and implement written liquidity risk management programs designed to assess and manage liquidity risk.3
April 16, 2014
The SEC proposed the last set of rules for swaps as required by the Dodd-Frank Act. The proposed rules cover recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants and would establish additional recordkeeping requirements for broker-dealers to account for their security-based swap activities.
April 15, 2014
OCIE issued a Risk Alert providing additional information concerning its initiative to assess cybersecurity preparedness in the securities industry. The Risk Alert provides a sample list of requests for information that OCIE may use in conducting examinations of registered entities regarding cybersecurity matters. Some of the questions track information outlined…
April 8, 2014
The SEC brought an enforcement action against Keiko Kawamura of Honolulu, Hawaii for fraudulently raising assets from subscribers to a web site and investors in a hedge fund she allegedly managed. The SEC found that she engaged in two separate fraudulent schemes in connection with the purchase and sale of…
March 31, 2014
SEC Chairman Mary Jo White spoke at the SIFMA Compliance & Legal Society Annual Seminar in Orlando, Florida, about the SEC’s “all-encompassing enforcement” efforts. The three prongs of these efforts are the use of criminal, civil and regulatory tools to enforce the securities laws. Her speech focused on the criminal prong.
March 31, 2014
The SEC’s Division of Investment Management issued guidance, including a list of Q&As, on the testimonial rule and social media in its March 2014 IM Guidance Update. The Guidance Update focuses on an investment adviser’s use of social media and its publication of advertisements that feature public commentary about the adviser that appears on independent, third-party social media sites. It is designed to assist advisers in applying Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder to their use of social media.
March 17, 2014
Norm Champ, the Director of the SEC’s Division of Investment Management, spoke at the ICI’s 2014 Mutual Funds and Investment Management Conference in Orlando, Florida about a variety of topics.
March 14, 2014
Private Fund Adviser Found to Have Mislead Investors in Connection with Fund Purchases of Pre-IPO Stock
Frank Mazzola, Felix Investments, LLC, a brokerage firm, and Felix Advisors, LLC, an investment adviser, settled fraud charges that were brought by the SEC in a matter involving the purchase shares of Facebook and other technology companies prior to their initial public offerings.