Category: SEC Guidance


SEC Issues Risk Alert Regarding Reg S-P, Privacy, Safeguarding, and Registrant Compliance

Posted on April 26th, by in Investment Advisers, OCIE, SEC, SEC Guidance. Comments Off on SEC Issues Risk Alert Regarding Reg S-P, Privacy, Safeguarding, and Registrant Compliance

The SEC’s OCIE recently issued a Risk Alert focusing on compliance issues related to Regulation S-P, the primary SEC rule governing compliance practices for privacy notices and safeguard policies for investment advisers and broker-dealers. The Risk Alert summarizes the OCIE’s findings from two-year’s worth of issues identified in deficiency letters to assist investment advisers and broker-dealers in adopting and implementing effective policies and procedures for safeguarding customer records and information pursuant to Regulation S-P.


The SEC Speaks . . . and Cooperation is Key

Posted on April 12th, by , and in SEC, SEC Guidance, Self-Reporting. Comments Off on The SEC Speaks . . . and Cooperation is Key

SEC Speaks, the SEC’s annual conference in Washington, D.C., often provides valuable insight into developments at the agency, as well as pronouncements about policy evolution and enforcement priorities. At this year’s conference, “cooperation” emerged as one of the themes that the SEC has been prioritizing over the past year – and is committed to prioritizing in the future. Indeed, the co-directors of the SEC’s Division of Enforcement remarked that, “cooperation is as important now as it has ever been,” and that the “full range” of remedies are available to entities that provide meaningful cooperation to the SEC. Interestingly, the staff emphasized that the SEC is making a concerted effort to use its press releases and orders to highlight the importance, components, and benefits of cooperation – all in an effort to promote earlier, more meaningful, and more … Read More »


OCIE Issues Risk Alert on Issues Related to Best Execution by Investment Advisers

Posted on July 23rd, by in Best Execution, Examinations, Investment Advisers, OCIE, Risk Alert, SEC, SEC Guidance. Comments Off on OCIE Issues Risk Alert on Issues Related to Best Execution by Investment Advisers

Pursuant to their fiduciary duties, investment advisers have certain obligations to seek out “best execution” for client transactions. The SEC’s Office of Compliance Inspections and Examinations (OCIE) recently issued a Risk Alert identifying deficiencies found during examinations of investment advisers’ compliance with their best execution obligations.

In this alert, partner Jim Lundy and associate Kellilyn Greco outline OCIE’s findings, including background on best execution, notable deficiencies, and recommended best practices.

Read the full alert.


SEC Share Class Selection Disclosure Initiative to Encourage Self-Reporting

Posted on April 6th, by and in Enforcement, SEC Guidance, Self-Reporting. Comments Off on SEC Share Class Selection Disclosure Initiative to Encourage Self-Reporting

On February 12, 2018, the U.S. Securities and Exchange Commission (SEC) announced a “Share Class Selection Disclosure Initiative” (“SCSD Initiative”), led by the Asset Management Unit of the Division of Enforcement (“Enforcement”). To encourage self-reporting and participation in the SCSD Initiative, Enforcement advises in the release that it “will agree not to recommend financial penalties against investment advisers who self-report violations of the federal securities laws relating to certain mutual fund share class selection issues and promptly return money to harmed clients.” Enforcement also warns that it “expects to recommend stronger sanctions in any future actions against investment advisers that engaged in the misconduct but failed to take advantage of this initiative.”

The deadline for self-reporting is June 12, 2018. Firms contacted by Enforcement before the announcement regarding possible violations related to their failures to disclose the conflicts of interest associated … Read More »


SEC Names Co-Directors of Enforcement

Posted on June 12th, by and in Enforcement, General, SEC Guidance. Comments Off on SEC Names Co-Directors of Enforcement

Last week, the Securities and Exchange Commission (SEC) announced that Acting Enforcement Director Stephanie Avakian and former federal prosecutor Steven Peikin had been named Co-Directors of the Division of Enforcement. In making the announcement, SEC Chairman Jay Clayton advised:

There is no place for bad actors in our capital markets, particularly those that prey on investors and undermine confidence in our economy. Stephanie and Steve will aggressively police our capital markets and enforce our nation’s securities laws as Co-Directors of the Division of Enforcement. They have each demonstrated market knowledge, impeccable character, and commitment to public service, and I am confident their combined talents and experience will enable them to effectively lead the Division going forward.

Prior to being named Acting Director in December 2016, Ms. Avakian served as Enforcement’s Deputy Director since June 2014. Mr. Peikin joins the SEC … Read More »


Compliance and Legal Officer Guidelines to Prevent Non-Line Supervisory Liability

Posted on April 7th, by and in Compliance Rule, Guidance, SEC Guidance. Comments Off on Compliance and Legal Officer Guidelines to Prevent Non-Line Supervisory Liability

Chicago partner Jim Lundy and associate Carrie DeLange, members of Drinker Biddle’s SEC & Regulatory Enforcement Team, authored “Compliance and Legal Officer Guidelines to Prevent Non-Line Supervisory Liability” for the National Society of Compliance Professionals’ (NSCP) professional journal, Currents, March 2017 edition.

The article provides guidance and recommendations to compliance officers and in-house attorneys with investment management and broker-dealer firms regarding the legal background and recommended practices to avoid supervisory liability with respect to the violative conduct of business personnel. Specifically, the article examines the applicable statutes and rules, the controversial “Gutfreund Standard,” and the SEC’s more recent guidance from a Division of Trading and Markets “FAQ” and speeches. Jim and Carrie build on this information to provide recommendations for investment management and broker-dealer compliance and in-house personnel to manage satisfying their compliance obligations while dealing with the potentially problematic conduct … Read More »


Ninth Circuit: You Don’t Need to Report Securities Violations to the SEC to Be Protected by the Dodd-Frank Anti-Retaliation Provision

Posted on March 10th, by and in Dodd-Frank, SEC Guidance, Whistleblower. Comments Off on Ninth Circuit: You Don’t Need to Report Securities Violations to the SEC to Be Protected by the Dodd-Frank Anti-Retaliation Provision

On March 8, 2017, a divided panel of the United States Court of Appeals for the Ninth Circuit held that the anti-retaliation provision of the Dodd-Frank Act protects individuals who make purely internal disclosures of alleged securities violations. The decision, Somers v. Digital Realty Trust, Inc., No. 15-17352 (9th Cir. March 8, 2017), aligns the Ninth Circuit with the Second Circuit, which reached the same result in Berman v. Neo@ogilvy, LLC, 801 F.3d 145 (2d Cir. 2015). These opinions stand in stark contrast to the position of the Fifth Circuit, which concluded in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), that in order to enjoy the protection of the anti-retaliation provision an individual must report the alleged securities violation to the SEC. While the Ninth Circuit’s decision is the latest entry in this evolving circuit … Read More »


OCIE Highlights the Top 5 Compliance Topics from Examinations of Investment Advisers

Posted on February 10th, by and in Compliance Rule, Custody Rule, Form ADV, Investment Advisers, OCIE, Office of Compliance Inspections and Examinations, SEC Guidance. Comments Off on OCIE Highlights the Top 5 Compliance Topics from Examinations of Investment Advisers

On February 7, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert discussing the five most frequent compliance topics identified in OCIE examinations of investment advisors. The Alert was compiled based on deficiency letters from over 1,000 investment adviser examinations completed during the past two years. The top five topics are: (1) the Compliance Rule; (2) Regulatory Filings; (3) the Custody Rule; (4) the Code of Ethics Rule; and (5) the Books and Records Rule.

The Compliance Rule

The Compliance Rule requires: (1) written and policies and procedures reasonably designed to prevent violations of the Advisers Act; (2) annual review of the policies and their implementation; and (3) a chief compliance officer who monitors the policies and procedures.  Examples of common Compliance Rule problems included:

Advisers did not follow their compliance policies and procedures;
Annual reviews were not performed or … Read More »


The SEC Announces Its 2017 Examination Priorities

Posted on January 23rd, by in Examinations, OCIE, Office of Compliance Inspections and Examinations, SEC Guidance. Comments Off on The SEC Announces Its 2017 Examination Priorities

On January 12, 2017, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced its examination priorities for 2017. This year’s priorities are focused around three topics: (1) retail investors, (2) senior investors and retirement investments, and (3) market-wide risks. These priorities affect investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers, national securities exchanges, and municipal advisers.

Protecting retail investors remains a primary concern of OCIE. So it’s no surprise that its detailed areas of focus continue to include: risks related to electronic investment advice (i.e. “robo-advising”), “wrap fee” programs where investors are charged a single fee for bundled advisory and brokerage services, and “Never-Before Examined Investment Advisers,” an initiative started in 2014. OCIE will also continue to focus on its Exchange-Traded Funds (ETFs).

To protect senior investors, OCIE will continue its ReTIRE initiative with focuses on investment … Read More »


Third Circuit Defined “Investment Adviser” In Sentencing Appeal

Posted on August 18th, by and in Investment Advisers, SEC Guidance. Comments Off on Third Circuit Defined “Investment Adviser” In Sentencing Appeal

Everett C. Miller pleaded guilty to securities fraud after he sold more than $41 million in phony, unregistered promissory notes in his firm, Carr Miller Capital, LLC, that falsely promised high returns with no risk. As part of his plea, Miller and the government stipulated to what they considered to be an appropriate offense level under the United States Sentencing Guidelines (the “Guidelines”). At sentencing, however, the district court applied the four-level investment adviser enhancement provided for by the Guidelines for securities laws violations perpetrated by “investment advisers,” as that term is defined by the Investment Advisers Act of 1940, 15 U.S.C. § 80b-2(a)(11). See U.S.S.G. § 2B1.1(b)(19)(A)(iii). Due to the enhancement, Miller received a 120-month sentence.

On appeal, Miller challenged, among other things, the application of the investment adviser enhancement, arguing that he was not an “investment adviser” under the … Read More »




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