In August 2004, the U.S. Securities and Exchange Commission (“SEC”) adopted Rule 204A-1 under the Investment Advisers Act of 1940 (“Investment Advisers Act”) that required registered investment advisers to adopt codes of ethics. Under SEC Rule 204A-1, an investment advisory firm must adopt and implement a code of ethics, establishing rules and conduct all supervised persons must adhere to as a fiduciary. SEC Rule 204A-1 was adopted in attempt to create a standard of conduct that would “prevent fraud by reinforcing fiduciary principles that must govern the conduct of advisory firms and their personnel.” Section 206 of the Investment Advisers Act imposes a fiduciary duty on investment advisers by making it unlawful for an investment adviser to engage in fraudulent, deceptive or manipulative conduct. In its role as a fiduciary, an investment adviser has a duty to serve the best interest of its clients; a duty to have a reasonable, independent basis for investment advice; a duty to ensure that its investment advice is suitable to the client’s objectives, needs and circumstances; and a duty to be loyal to client.
Category Archives: SEC
SEC Gives Further Guidance on Social Media Use by Advisers
January 17, 2012
On January 4, 2012, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations released a regulatory alert discussing the use of social media by investment advisers.
SEC Brings Enforcement Action for Misrepresentations on Form ADV
January 11, 2012
The U.S. Securities and Exchange Commission (“SEC”) recently issued an Order Instituting Administrative and Cease-and-Desist Proceedings against Calhoun Asset Management, LLC (“Calhoun”) and its principal for, among other things, making false and misleading statements on Calhoun’s Form ADV.
SEC Modifies Standard for Accredited Investors
January 04, 2012
The U.S. Securities and Exchange Commission (“SEC”) has modified the rules used to determine whether an individual is qualified to invest in certain unregistered securities offerings. The amendments were adopted as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).
Form ADV Annual Amendment Filings
January 03, 2012
For most registered investment advisers, it is now time to file an amendment to your Form ADV. Pursuant to Rule 204-1 under the Investment Advisers Act of 1940 (“Advisers Act”), all investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) must file an amendment to the Form ADV at least annually, within 90 days of the investment adviser’s fiscal year end and more frequently if required by the instructions to Form ADV. Most state securities regulators have similar rules and the Form ADV Instructions specifically indicate that the update instructions apply to “SEC and State Registered Advisers.”
Earlier this year, the U.S. Securities and Exchange Commission (“SEC”) adopted rule changes under the Investment Advisers Act of 1940 in order to implement Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act. One of the more significant rule changes impacts all registered investment advisers as it centers on revisions to the Form ADV Part 1. Beginning January 1, 2012, all investment advisers registered with the SEC will have 90 days to complete and submit the revised Form ADV Part 1 confirming their eligibility to remain SEC registered. Investment advsiers registered with the SEC with November, December, January and February fiscal year ends are reminded they must also file their official Form ADV Part 1 Annual Amendment within 90 days of their fiscal year end and will likely choose to file their SEC eligibility amendment and annual amendment in conjunction.
The U.S. Securities and Exchange Commission (“SEC”) recently announced that during its previous fiscal year, enforcement actions against registered investment advisers increased thirty percent over the 2010 fiscal year. During the 2011 fiscal year, which ended in September, the SEC filed a total of 146 enforcement actions against investment advisers and investment companies. For a point of reference, from 2006-2009 the SEC filed on average 82 enforcement actions against registered investment advisers.
Professor Suggests Using External Auditors to Increase Investment Adviser Examinations
November 04, 2011
Section 914 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) required the U.S. Securities and Exchange Commission (“SEC”) to review the frequency of investment adviser examinations and to consider various ways to increase the frequency of such examinations, such as forming an investment adviser self-regulatory organization (“SRO”). As a result, Congress has begun to look at different ways to increase the frequency of examinations of investment advisers. The solutions that have been proposed and are being debated include forming an independent SRO, giving FINRA the authority to serve as the investment adviser SRO, increasing the SEC’s funding, charging investment advisers a user fee, or shifting the regulatory authority to the Bureau of Consumer Financial Protection. James Angel, a professor at Georgetown University’s McDonough School of Business has proposed another solution. In his article titled “On the Regulation of Investment Advisory Services: Where do we go from here?” Angel suggests that the best solution to provide increased regulatory oversight of investment advisers is to require investment advisers to hire external auditors to conduct compliance reviews. Angel’s research paper was supported by a grant from TD Ameritrade and his research paper indicates that his research included numerous conversations with broker, regulators, advisors, scholars and industry trade groups.
2011 Review – Are You Aware of the Regulatory Changes Made in 2011?
October 27, 2011
For registered investment advisors, 2011 gave way to many changes as various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) became effective. Understanding the changes made over this past year may help to confirm that your investment advisor is in compliance with the recent regulatory changes. Below is a brief overview of some of the regulatory changes that occurred during this past year.
Notice for Mid-Sized Investment Adviser Firms Transitioning to California State Registration
October 17, 2011
On October 7, 2011 the California Department of Corporations issued a notice to mid-sized investment adviser firms transitioning to California state registration. According the release, current investment adviser firms that are regulated under the U.S. Securities and Exchange Commission (“SEC”) that are considered mid-sized investment adviser firms (with assets under management between $25 and $100 million), are highly encouraged to file as soon as possible the appropriate state application and paperwork to transition to regulation under the State of California. The California Department of Corporations is anticipating a “high volume of transition applications, which will be reviewed in the order received.” The release also advised investment adviser firms to respond promptly to any requests for additional information and/or application revisions. The release highlighted some important dates for investment advisers to note:
