NRS 29th Annual Compliance Conference

I’m trying out a new compliance conference this fall: the NRS 29th Annual Fall Investment Adviser & Broker-Dealer Compliance Conference. I have to admit that I’m attending mostly because they asked me to speak. My session is on Issues on Private Fund Management on Day Two. One of the challenges of staying up-to-date on compliance […]

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Life, Liberty and the Pursuit of Happiness

IN CONGRESS, July 4, 1776. The unanimous Declaration of the thirteen united States of America, When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which […]

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Guidance on Accredited Investor Verification

The Securities and Exchange Commission revised the private placement rules last year to permit public private-placements. Of course it took some prodding from Congress in the JOBS Act to get that change. The law and the new regulation require the issuer to take “reasonable steps” to determine that the investor is an “accredited investor.” The […]

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New Guidance on the Custody Rule for SPVs and Escrows

The Securities and Exchange Commission’s Division of Investment Management recently released updated guidance on the Custody Rule. Private funds, especially private equity funds, have been wrestling with the SEC’s Custody Rule. The rule clearly comes from the perspective of regulating retail investment advisers and hedge funds. It fails to deali n a useful manner with […]

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Weekend Reading: Fierce Patriot

General Sherman is known for burning Atlanta. That is as much I knew about him. Having been raised in Boston, my schooling in American History emphasized the Revolutionary War. But my friend and author Megan Kate Nelson has piqued my interest in the Civil War. Why did I read about Sherman? The publisher offered me […]

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Compliance Bricks and Mortar for June 27

These are some of the compliance-related stories that recently caught my attention. A Committee of Fund Manager Personnel May Not Be Able to Provide the Requisite Consent on Behalf of the Fund for a Principal Transaction by Steve Ganis in Securities Litigation & Compliance Matters So what constitutes sufficient consent for a principal transaction or […]

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Massachusetts Stops Real Estate Scam

Secretary of State William Galvin claims Cabot Investment Properties LLC and its principals, Carlton P. Cabot and Timothy J. Kroll, stole more than $5 million from Massachusetts residents. Cabot was offering tenant-in-common interests to investors. But I remember from law school that a tenant-in-common interest is real estate. So why are the defendants charged with […]

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SEC Charges Private Equity Firm With Pay-to-Play Violations

The SEC has brought its first case under the pay-to-play rule for registered investment advisers. It’s just as horrible as I thought it would be. The Securities and Exchange Commission enacted Rule 206(4)-5 to address pay-to-play abuses involving campaign contributions made by registered investment advisers and their key employees. The concern was contributions to government […]

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Comply With What?

The starting point for any compliance program is to determine what you are trying to comply with. Every company has some legal requirements or contractual requirements that govern how it operates its business. Every company will place different emphasis on which of those requirements it will put under its compliance program. Every company will operate […]

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Whistleblower Mistakes by a Private Fund

Paradigm Capital Management encountered a whistleblower and handled it poorly. The hedge fund had been conducting principal trades in violation of  Section 206(3) of the Investment Advisers Act. Paradigm’s head trader reported the violations to the Securities and Exchange Commission. It’s tricky to deal with a hedge fund making principal trades with an affiliated broker-dealer. […]

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