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[…]

How to Register as an RIA: Rule 203 A-2(c)

As you may remember from our earlier blogs on registered investment advisers (RIAs), whether a firm should be registered as an investment adviser with the U.S. Securities and Exchange Commission (SEC) or with a state is typically determined by the amount of regulatory assets the firm has that receive continuous and regular supervision or management (collectively known as a firm’s “regulatory assets under management” or “regulatory AUM”); with some exceptions, firms that have over $100 million of regulatory AUM must register with the SEC, while smaller advisers must register with state securities authorities instead. But, what if a new investment adviser doesn’t currently have over $100 million of regulatory AUM, but expects to soon? Is the firm required to wait until it has over $100 million of regulatory AUM to register with the SEC?

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Guidance on Third-Party Recordkeeping Services and SEA Rule 17a-4

As you may remember from our earlier post on the subject, under SEA Rules 17a-3 and 17a-4, a broker-dealer is required to make and keep books and records relating to its business and may maintain and preserve records by means of “electronic storage media.” The Securities and Exchange Commission (SEC) recently released guidance in response to a letter received from FINRA regarding contractual arrangements between broker-dealers and third-party recordkeeping service providers – more specifically, contractual arrangements that include provisions permitting the third-party recordkeeping service providers to delete or discard the broker-dealer’s records, typically due to non-payment by the broker-dealer of fees due under the contract.  FINRA recapped the guidance received from the SEC in its Regulatory Notice 18-31.

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Private Placement Basics – Part II

[Continued from Private Placement Basics – Part I]

Due Diligence and the Suitability of Private Placements

The SEC’s recent amendments to Regulation D in accordance with the JOBS Act do not diminish a firm’s responsibility to conduct adequate due diligence on its offerings to ensure that any recommendations made to potential investors to purchase securities in a private placement are suitable. Additionally, as private placement sales activities continue to be among FINRA’s list of regulatory hot topics, FINRA will examine firms’ private placement activity to determine if firms are taking reasonable steps to confirm that investors meet accredited investor standards.

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Private Placement Basics – Part I

Broker-dealers that are active in the sale or solicitation of private placement offerings have additional requirements under FINRA and SEC rules. These requirements include filing certain offering documents with reference to any investments solicited and/or sold to clients of the firm. Read More…

How to Register as an RIA: State Registration vs. SEC Registration

In our previous blog on Registered Investment Advisers (RIAs), “How to Register as an RIA: What is a Registered Investment Adviser?”, we discussed some important basics of RIAs – how does one define an RIA, what is Fiduciary Duty, why do RIAs need to register, what is the difference between state registration and SEC registration, etc. Today, we will return to the topic of state registration vs. SEC registration in order to provide a more thorough examination of the issue.

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What is Custody?

Custody remains a focus area for SEC and state regulators alike.  Firms should review the guidance released by the SEC to learn what steps can be taken to avoid having inadvertent custody requiring an independent surprise examination.

Guidance Issued by the SEC: Inadvertent Contractual Custody

In guidance notice No. 2017-01, “Inadvertent Custody: Advisory Contract Versus Custodial Contract Authority,” the SEC lists examples of problematic statements listed in agreements between clients and qualified custodians.  The staff has determined an investment adviser may inadvertently have custody of client funds or securities because of provisions in a separate custodial Read More…

The SEC’s Priorities in 2018

Recently, the Securities and Exchange Commission’s Enforcement Division released their annual report detailing its priorities for 2018.  The department will be guided by 5 principles: Focus on the Main Street Investor, Focus on Individual Accountability, Keep Pace with Technological Change, Impose Sanctions that Most Effectively Further Enforcement Goals, and Constantly Assess the Allocation of Resources. Read More…

Large Trader – Rule 13h-1 (Part 2)

For Part 1, please see  Large Trader-Rule 13h-1 (Part 1).  Part 2 A large trader is required to file a Form 13H Initial Filing promptly after effecting aggregate transactions equal to or greater than the Identifying Activity Level threshold.  After initial filing, Rule 13h-1(b)(1)(ii) specifies that an annual filing must be made within 45 days after[…]