safeguarding client data

Safeguarding Client Information

With the transition into the electronic storage of client data, Investment Advisers and Broker-Dealers are faced with more complex compliance issues regarding safeguarding client information and records. The United States Securities and Exchange Commission (“SEC”) OCIE Risk Alert from May 2019 addresses some of the issues and concerns identified with cloud-based storage and possible issues to consider regarding the protection of electronic client and business data.

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Principal Trading and Agency Cross Trading

Principal and Agency Cross Trading

Investment Adviser Principal and Agency Cross Trading practices was the topic of a recent OCIE Risk Alert. The Investment Adviser’s Act Principal Transactions Section 206(3) indicates “Investment Adviser’s acting as a principal for his own account, knowingly to sell any security to or purchase any security from a client, or acting as broker for a person other than such client, without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining consent of the client to such transaction” are prohibited unless the appropriate disclosures and consent procedures are addressed and completed according to the compliance requirements.

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Compliance

Compliance, Supervision, and Disclosures

Beginning in 2017, the United States Security and Exchange Commission (“SEC”) initiated a series of examinations aimed at compliance policies and procedures regarding individuals within these firms that had a prior disciplinary history.

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Best Interest

Regulation Best Interest and CRS Relationship Summary

In June, the U.S. Securities and Exchange Commission (SEC) passed “Regulation Best Interest: The Broker Dealer Standard of Conduct” and “Form CRS Relationship Summary; Amendments to Form ADV”. This legislation, Regulation Best Interest and CRS Relationship Summary, is the cumulation of many attempts to mesh the “fiduciary standard” for Investment Advisers and Broker-Dealer Representatives. The objective of this legislation and its requirements are to educate investors through disclosures regarding any conflicts, fees, costs, and whether the investment opportunities being offered are suitable for the investor. This legislation will impose new documentation requirements for both Investment Advisors and Broker-Dealer Representatives.

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Custody of Cryptocurrency

Custody of Cryptocurrency: Considerations for Broker-Dealers

It is evident that the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) are constantly putting efforts forward to navigate the unchartered waters of cryptocurrency. Just days before Blockstack’s Reg A+ token offering received SEC approval, the SEC and FINRA issued a joint statement to provide guidance and encourage innovation and ongoing discussions with market participants on the idea of the custody of cryptocurrency for broker-dealers.

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cryptocurrency

SEC Approved Cryptocurrency Reg A+ Offering

Last month, the U.S. Securities and Exchange Commission (SEC) finally gave a blockchain startup company, Blockstack, approval to sell bitcoin-like digital tokens directly to investors— to some extent.  The SEC has previously sued and fined several cryptocurrency companies for initial coin offerings (ICO) that the agency said violated securities law.

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The Senior Safe Act

The Senior Safe Act: “Immunity” with Conditions

On May 23, 2019, the SEC, NASAA, and FINRA published a year-end review of the Senior Safe Act which became federal law one year ago. In doing so, they also issued a Fact Sheet to help raise awareness with financial institutions and describe how the Act’s immunity provisions work.

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Custody for Private Fund Advisers

Custody for Private Fund Advisers

If you are a private fund adviser (i.e. hedge fund or pooled investment vehicle), do you know if you are deemed to have custody? If so, is your Form ADV Part I completed correctly? Custody for private fund advisers is regarded by the SEC as an extremely important topic and should be reviewed frequently by your firm.

Since there is a significant increase in compliance responsibilities for firms that have custody of client funds and/or securities, it’s critical that you consider whether or not your firm will be deemed to have custody.

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SEC Amends Disclosure Requirements

In August 2018, the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) adopted amendments to eliminate, integrate, update, or modify certain disclosure requirements that the Commission has deemed to have become duplicative, overlapping, or outdated in light of other SEC disclosure requirements, U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), or changes in the information environment. The amendments are intended to aid the disclosure of information to investors and to simplify compliance without significantly altering the total mix of information provided to investors.

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SEC Adopts Amendments to Rule 15c2-12 to Improve Municipal Securities Disclosure

In August 2018, the U.S. Securities and Exchange Commission (the “SEC”) announced that it has adopted amendments to Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in an effort to enhance transparency in the municipal securities market. The SEC has stated that the commission believes the amendments will provide[…]