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financial regulation

What Does the Regulatory Scheme for Financial Services Look Like?

This: Click for the full PDF file SEC Commissioner Daniel M. Gallagher drew this picture of the new rules applicable to U.S. financial services holding companies since Dodd-Frank. “The stakes here are considerable: regulatory burdens divert capital away from the real economy—this acts as a barrier to entry for new market participants and further entrenches […]

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Referral Fee Disclosure and Conflicts

The Securities and Exchange Commission brought another enforcement case involving an investment adviser and private funds. PageOne is a registered investment adviser that recommended three private investment funds to its clients. The SEC found serious conflicts the were not disclosed or materially misrepresented. PageOne disclosed that is was paid a “referral fee” by the private […]

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SEC Guidance On Gifts and Entertainment Compliance

Any story about the SEC, funds, gifts will catch my attention. Last week, the Staff of the SEC’s Division of Investment Management issued IM Guidance Update No. 2015-1 on gifts and entertainment in the fund industry. The Guidance refers to section Section 17(e)(1), which did not seem familiar to me. The reference is to the […]

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The Lure of Wyoming

There is a long history of splitting financial regulatory oversight between state regulators and federal regulators. For investment advisers the split is based on Assets Under Management and Dodd-Frank raised the AUM level from $25 million to $100 million. Above that level you register with the SEC and below that level you register with the […]

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Testing for the Avalanche

As Nassim Nicholas Taleb famously explained in The Black Swan, it is the unexpected that is most unexpected. For compliance professionals, testing is one of the tools that tries to expose the unexpected. I was thinking about testing as I was out in the snowpack in my front yard. I tried out some of the […]

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face palm head in hands by Alex Prolmos

Making a Bigger Compliance Mistake After Making a Big Compliance Mistake

Total Wealth Management became one of the whipping boys for the Securities and Exchange Commission when it started its focus on private fund fees last year. The firm settled with the SEC and agreed to pay the fine. But the firm exacerbated the problem by allegedly misappropriating the money from its clients. Last year, the […]

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What Ever Happened to the SEC’s Cybersecurity Sweep?

The Securities and Exchange Commission put the financial sector in a tizzy when it announced a sweep exam addressing cybersecurity last April. Along with the announcement came a detailed document request list that would make most compliance officers’ heads spin. The problem with the cybersecurity sweep is that it seems to be coming from the […]

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Related Party Mistakes with Private Funds

Related party transactions are rife with problems in all areas of the financial services industry. It’s hard to know if someone is looking out for your best interest, if they have interests on the other side of a transaction. Most private equity funds have some structure set up in the organizational documents to deal with […]

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f squared

Backtesting Performance Failure

One area of performance advertising that the Securities and Exchange Commission has given great scrutiny, but not banned, is using backtested performance. Since, backtesting only shows theoretical past trades, it does not involve market risk. That means it’s inherently suspect. You can just keep fine-tuning the model to maximize results, with no ability to carry […]

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Stealing From Investors Through Fraudulent Expenses

The Securities and Exchange Commission charged a hedge fund manager, his investment advisory firm, and an employee with stealing from investors in two hedge funds. The theft was carried out by charging more than $1 million for fraudulent research expenses and fees. According to the SEC complaint, Steven R. Markusen, the owner of Archer Advisors […]

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