Investment adviser firms and investment adviser representatives must maintain active registrations and/or notice filing statuses with applicable jurisdictions/states. Unless properly renewed, all investment adviser firm and investment adviser representative licensing approvals expire December 31 each calendar year. To ensure that investment adviser firms and their investment adviser representatives are properly licensed in all necessary jurisdictions for 2024, renewal fees must be paid through the Investment Adviser Registration Depository (“IARD”) system.
SEC Taking a Closer Look at Whether Investment Advisers Are Obtaining “Informed Consent” When Amending Advisory Agreements
October 17, 2023
New Exam Priority
The Division of Examinations of the U.S. Securities and Exchange Commission (“SEC”) recently issued the Fiscal Year 2024 Examination Priorities signaling areas of particular interest for the upcoming audits of investment advisers. Notably, this year’s exam priorities introduces what appears to be a new focus on whether investment adviser firms are obtaining “informed consent” from clients when making material changes to advisory agreements:
The U.S. Attorney’s Office (District of Connecticut) announced that it entered into a plea agreement with an owner/investment adviser representative of an investment adviser firm based in Connecticut. This CT investment adviser representative waived his right to be indicted and pled guilty to defrauding clients of $2.7 million through a cherry-picking scheme. Last month, the U.S. Securities and Exchange Commission (“SEC”) also issued a cease-and-desist order against this investment adviser representative and firm. This blog post will review the cherry-picking allegations and offer several best practices for a chief compliance officer (“CCO”) to detect such activity within his or her own investment adviser firm.
Regulatory Alert
During the last several years, the United States Securities and Exchange Commission (“SEC”) has intensified its scrutiny of liability hedge clauses within investment advisory client agreements used by investment adviser firms.
Google Extended: Another Tool for Investment Advisers to Protect Their Intellectual Property from Artificial Intelligence
October 03, 2023
In the ever-evolving landscape of artificial intelligence and intellectual property, Google has recently introduced a new tool called Google Extended which may be helpful to investment advisers desiring to protect their proprietary content on their website. This new tool allows web publishers such as investment adviser firms to have their websites indexed for search engine purposes while opting out of having their data used for training Google’s artificial intelligence (“AI”) models, including Bard. This development has far-reaching implications for various industries, including investment advisers who are increasingly reliant on digital platforms for client acquisition and engagement.
Privacy Risks and Best Practices for an Investment Adviser Using ChatGPT
September 24, 2023
Introduction
In the age of artificial intelligence and machine learning, the use of large language models like ChatGPT presents both opportunities and compliance challenges for investment adviser firms. This post aims to discuss at least one risk associated with an investment adviser firm’s supervised persons using the consumer version of ChatGPT, specifically focusing on the potential for an investment adviser to share inadvertently non-public personal information (“NPPI”) of clients and several best practices for mitigating this privacy risk.
Summary of SEC’s Finalized Private Fund Adviser Rules
September 19, 2023
Regulatory Alert
The United States Securities and Exchange Commission (“SEC”) recently issued a final set of rule amendments under the Investment Advisers Act of 1940, primarily aimed at enhancing the regulatory framework governing investment advisers to private funds. The new set of rules, as described in SEC Release No. IA-6383, is designed to protect investors who invest directly or indirectly in private funds. It focuses on increasing transparency in compensation arrangements and prohibiting conflicted arrangements involving private funds. Through an audited financial statement requirement, the new rules also aim to prevent fraudulent activities by registered investment advisers advising private funds. Finally, this set of new rules includes an amendment requiring all SEC-registered investment advisers to document in writing the annual review of their compliance policies and procedures.
SEC Fines Investment Adviser for Failure to File Form 13F
September 18, 2023
Introduction
The United States Securities and Exchange Commission (“SEC”) has initiated an administrative enforcement proceeding against an investment adviser firm registered with the SEC for allegedly failing to file the quarterly Form13F from February 2017 until April 2022.
Key Takeaways from NASAA’s 2023 Investment Adviser Coordinated Exam
September 15, 2023
Introduction
The North American Securities Administrators Association (“NASAA”) recently released its 2023 Investment Adviser Coordinated Exam findings. The report provides valuable insights and empirical data with respect to the most common deficiencies found during 683 routine examinations of state-registered investment advisers located throughout the U.S. and conducted from January 1 to July 31, 2023.
The SEC’s Crackdown on Whistleblower Retaliation: What Investment Adviser Firms Need to Know
September 09, 2023
In the ever-evolving landscape of securities regulation, it is crucial for investment adviser firms registered with the United States Securities and Exchange Commission (“SEC”) to stay vigilant and informed about current enforcement actions. A recent cease-and-desist proceeding instituted by the SEC against a clean energy company has sent a clear message regarding whistleblower protections and the use of severance agreements. As a result, we’ll explore the implications of this enforcement action and how it relates to investment adviser firms in light of SEC Rule 21F-17.
