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The SEC Division of Investment Management stated that it would not recommend enforcement against an adviser under Advisers Act Section 206(4) (Prohibited Transactions by Investment Advisers) and Rule 206(4)-2 ("Custody Rule") if the adviser treats a state-created 529 plan trust that is a college savings plan for which the adviser is a Program Manager as a "pooled investment vehicle" for purposes of the Custody Rule. In light of the relief granted by the letter, advisers are not required to have a surprise audit on their activities relating to 529 plans. The relief, however, is subject to

This SEC letter is intended to provide information to newly registered investment advisers as to the National Exam Program, and to provide information about upcoming examinations and the topical areas that may be examined. Among the areas on which examination is expected to focus are the following: Marketing Portfolio Management Conflicts of Interest Safety of Client Assets (custody) Valuations View letter here (links externally to SEC website).

The SEC reported that 1,504 advisers to hedge funds and other private funds have registered with the agency since the Dodd-Frank Act mandated such registration. "Prior to the Dodd-Frank Act, regulators only saw a slice of the pie but didn’t know how big the pie was," said SEC Chairman Mary L. Schapiro. "The law enables regulators to better protect investors by providing a more comprehensive view of who’s out there and what they’re doing.#8221; Lofchie Comment: The report provides numbers, with pie charts (in disconcerting colors), as to the number of advisers registered with the SEC, the

The SEC issued (i) a Risk Alert for investment advisers as to compliance with its custody rule and (ii) a related Investor Bulletin designed to inform advisory clients how to monitor their assets and protect their accounts from theft or misuse of their funds and securities by their advisers. According to the SEC, the alert was issued after a review of recent examinations by the SEC's Office of Compliance Inspections and Examinations ("OCIE") showed that, among firms that had significant deficiencies, one third had custody-related violations (oddly, the alert does not give a percentage of all