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 … Read more »
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 … Read more »
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. … Read more »
Don’t Lie About Being GIPS Compliant
The Global Investment Performance Standards (GIPS) attempts to be a set of standardized, industry-wide principles that guide investment firms on how to calculate and present their investment results to prospective clients. An SEC-registered investment adviser touting that it is GIPS Compliant in advertising, moves GIPS from an accounting concern to a regulatory concern. ZPR Investment … Read more »
Compliance Bricks and Mortar for June 13
These are some of the compliance related stories that recently caught my attention. Thinking About the Applicability of SOX Whistleblower Protection to Private Company Employees by Kevin LaCroix in the D&O Diary Since their 2002 enactment, the whistleblower protections in Section 806 of the Sarbanes-Oxley Act have been presumed to apply only to employees of … Read more »
Bad Actors on Form ADV and Under Rule 506(d)
The Securities and Exchange Commission has layered two tests for bad actors on to private fund managers. On Form ADV, the fund manager will need to disclose bad actor events. Then the second test comes under the new Rule 506(d) that also requires disclosure for bad actors in private placements and a bar for recent … Read more »
GM Shows That Lying Can Be Worse Than The Problem
General Motors had a problem with its cars and didn’t fix it. Then the company apparently tried to cover up the mistake and lied about the mistake. As a result, GM lost the story and ended up with a headline of GM Lied and People Died. The problem seems to come from a mistake made … Read more »
Compliance Bricks and Mortar for June 6
These are some of the compliance-related stories that recently caught my attention. The key to hedge-fund riches: your retirement dollars by Timothy Spangler in The Guardian First, there is the misconception that “there are no restrictions on what they can invest in.” This is true. They can invest the same way Sir Richard Branson or … Read more »
Spot the Fraudster
One of the challenges that consumers face when dealing with a financial adviser is what it means to be a “financial adviser.” The terms financial planner, wealth consultant, stockbroker, investment adviser, financial consultant, and others get thrown around, leaving you how that person gets paid for helping you with your money. A fraudster may sling … Read more »
Secure Borders
What do compliance and border security have in common? More than you might initially think. Try reading Sylvia Longmire’s Border Insecurity. Some of the issues with border security will resonate with compliance professionals. (Hopefully, you don’t have to deal with illegal immigration, human trafficking, terrorism and drug smuggling as the compliance issues at your company.) … Read more »