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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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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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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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SEC Issues Second Exemptive Relief from Pay-to-Play

It’s been about a year since the Securities and Exchange Commission granted its first exemptive order Rule 206(4)-5 when an adviser accidentally violated the pay-to-play rule. The SEC has now issued its second relief order. Ares Real Estate Management Holdings filed for exemptive relief after a senior partner wrote a $1,100 check to Colorado Governor […]

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Cheating Your Way to Marathon Victory

Tabitha Manning ran the Chickamauga Battlefield Marathon setting a personal best record time of 2:54:21. But it looks like she pulled a Rosie Ruiz. For those of you not familiar with the history of the Boston Marathon, Rosie Ruiz was declared the winner of the 1980 Boston Marathon with a time of 2:31:56. At that […]

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Compliance Bricks and Mortar for October 24

These are some of the compliance-related stories that recently caught my attention. SEC Charges Athena Capital in First HFT Case in the Corporate Crime Reporter The Securities and Exchange Commission (SEC) has sanctioned a New York City-based high frequency trading firm for placing a large number of aggressive, rapid-fire trades in the final two seconds […]

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Association for Corporate Growth’s Compliance & Regulatory Survey

The Association for Corporate Growth released a report identifying the top compliance and regulatory concerns impacting small and midsize private equity firms. The results are unsurprising, but reinforce concerns. The top five regulatory issues were found to be: SEC Examinations (75%) Investment Adviser Act Compliance (66%) Valuation Issues (58%) General Solicitation rules (54%) Legislation (tax […]

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