Compliance Bricks and Mortar for September 29

These are some of the compliance-related stories that recently caught my attention.


SEC forced to try new ways of pursuing bad financial advisers by Bruce Love in the Financial Times

The US investment regulator’s powers to recoup losses from financial advisers who break the law were dealt a blow by a landmark Supreme Court decision this summer. But the Securities and Exchange Commission has stressed to the FT that the court’s decision will have a limited impact on its ability to go after wrongdoers. In a June case, the court unanimously agreed that the SEC can recover money from individuals found guilty of violating federal securities laws only within five years of the incidents taking place. Previously there was no time limit. [More…]


SEC Probes Departure of PepsiCo’s Former Top Lawyer by Andrew Ackerman, Joe Palazzolo and Jennifer Maloney in the Wall Street Journal

Federal securities regulators are investigating an allegation by PepsiCo Inc.’s former top lawyer that the company fired her in retaliation for the way she handled an internal probe into potential wrongdoing in Russia, according to people familiar with the matter and internal documents. [More…]


Compliance Apologists: Being Liked vs. Being Respected by Roy Snell in the SCCE’s Compliance & Ethics Blog

You can’t have it both ways. You can either stop the problem and not be liked or you can back off, have big problems, and not be liked. When I was a compliance officer, I was not liked by everyone, particularly the people whose integrity was a little suspect. But, I was respected by people with integrity. [More…]


SEC Data Breach: Not Insider Trading, and Not Necessarily Subject to SEC Jurisdiction by John Reed Stark

In other words, with cyber thieves who trade on information stolen during a data breach, the SEC is extending unlawful insider trading to a third and new category of securities miscreant — “outsiders” — who do not work for (or with) the company, and who do not owe a duty to anyone. [More…]


3(c)(1) Funds vs. 3(c)(7) Funds by Alexander Davie

Indeed, avoiding investment company registration under the Act is often one of the critical first steps for a new private fund because it allows the fund to avoid the Act’s requirements of SEC registration, ongoing disclosure, disinterested directors, and its prohibitions on affiliated transactions and trading activities such as short sales and derivatives trading. In order to be exempt from registering as an investment company under the two most frequently used exemptions under the Act, the fund must (1) not make, or propose to make, a public offering of its securities and (2) either (a) limit the fund to no more than 100 investors (the 3(c)(1) exemption) or (b) limit the fund to “qualified purchasers” (the 3(c)(7) exemption).[More…]


The Evolution of the Private Equity Market and the Decline in IPOs by Michael Ewens, California Institute of Technology, and Joan Farre-Mensa, Cornerstone Research in the Harvard Law School Corporate Governance and Financial Regulation Blog

Taken together, our results suggest that the growth in the supply of private capital has allowed late-stage startups to continue financing their growth while remaining privately held. A natural question then follows: Are these startups increasingly staying private as a second-best response to their inability to go public—or are they choosing to stay private even though the option to go public remains open to them?[More…]


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