Investment Company Act
The Knowledgeable Employee Exemption for Private Funds
When operating under the Section 3(c)(7) exemption from the Investment Company Act, the issue then becomes how a private investment fund can provide an equity ownership to key employees. Its unlikely that your key employees will have the $5 million in investments needed to qualify as an investor. (Each investor in a 3(c)(7) private investment… » Read More
Qualified Purchasers under the Investment Company Act
In a private fund exempt under 3(c)(1) investors only generally need to be accredited investors (and “qualified clients” if the fund manager is SEC registered. If you have more than 100 investors in the fund you will need to fall under the 3(c)(7) exemption. That means all of your investors must be “qualified purchasers.” A… » Read More
Private Fund Exemptions under the Investment Company Act
Private investment funds primarily use two exemptions to avoid being defined as an “investment company” under the Investment Company Act of 1940: Section 3(c)(1) or Section 3(c)(7). Less than 100 Investors Section 3(c)(1) of the Investment Company Act excludes from being an investment company any issuer whose outstanding securities are beneficially owned by not more… » Read More
Supreme Court Rules on When Mutual Fund Fees are too High
The Supreme Court issued its opinion in Jones v. Harris Associates, addressing the standard for when mutual fund fees are too high. Background Under §36(b) of the Investment Company Act of 1940 the “the investment adviser of a registered investment company shall be deemed to have a fiduciary duty with respect to the receipt of… » Read More
Mutual Fund Advertisements and Social Media
Much has been made about FINRA’s Regulatory Notice 10-06 and how that will affect the social media use by registered representatives. Looking beyond the broker/dealers, I thought it would be interesting to see what mutual fund companies are doing with social media. I’ve started seeing some mutual fund companies starting to dip their toes into… » Read More
Private Fund Investment Advisers Registration Act Status
OpenCongress allows you to create custom widgets for the status of bills in Congress. I decided to play around and create one for the House version of the Private Fund Investment Advisers Registration Act. oc_host_url = “http://www.opencongress.org/”; oc_bill_id = “111-h3818″; oc_frame_height = “205″; oc_bgcolor = “ffffff”; oc_textcolor = “3153e7″; oc_bordercolor = “153e7e”; I’ll create one… » Read More
Will the Supreme Court Affect Mutual Fund Fees?
On Monday, the Supreme Court heard the arguments on a case involving mutual fund fees. The case is trying to reconcile the standard for when mutual fund fees are too high. Under §36(b) of the Investment Company Act of 1940 the “the investment adviser of a registered investment company shall be deemed to have a… » Read More
IDC Task Force Report Identifies Key Characteristics for Strong Compliance Programs
Independent Directors Council published a new task force report on the characteristics of a strong mutual fund compliance program. These include an ethical, compliance-focused “tone at the top;” a collaborative approach by the fund’s chief compliance officer; a risk-based program tailored to the fund and the adviser’s business; transparency and candor among the CCO, fund… » Read More
A Flurry of Stories on Mutual Fund Fees
Over the last few days there has been renewed interest in the upcoming Supreme Court case that will should rule on the fees charged by mutual funds. Back in May, I published Supreme Court to Decide on Investment Company Act Case after they agreed to hear Jones v. Harris Associates, L.P. I didn’t expect much… » Read More
Supreme Court to Decide on Investment Company Act Case
There has been a lot of focus on the Supreme Court’s acceptance of the PCAOB case: Free Enterprise Fund v. PCAOB (08-861). It squarely addresses an interesting administrative law question. I also find it interesting that this case originates from the last bout of financial fraud in the press (the collapse of Enron) and comes… » Read More
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Compliance Building is published by Doug Cornelius, focusing on compliance and ethical issues for private equity real estate companies. Read more in About.
