Regulatory Updates

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The SEC’s Office of Compliance Inspections and Examinations has released its Exam Priorities for 2016. Exam priorities and initiatives launched in 2015 will continue to hold the spotlight in 2016 as new risk-based initiatives address systemic issues. Each regulatory topic can be broken down into the following four categories: (1) protecting the individual investor; (2)…

FINRA shares many of the same 2016 priorities as the SEC with the notable addition of examining firm culture. Each of FINRA’s regulatory priorities can be broken down into the following five categories: (1) protecting the individual investor; (2) protecting the industry from market-wide risks; (3) using data analytics to identify signals of potential illegal…

New anti-money laundering (“AML”) rules are coming for registered investment advisors (“RIA”). The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the Department of the Treasury, has proposed a rule that would subject registered investment advisors, including hedge funds and private funds, to rules very similar to those that banks have had to comply with for…

The amendments to Form ADV became effective on October 1st. Unless you registered with the SEC on or after October 1st or have had a material change requiring an “other-than-annual” amendment since that date, you have not yet seen the following on the amended Form ADV. 1. Separately Managed Accounts Prior to the amendments, investment…

In August 2016 the SEC approved FINRA rules for a new category of advisers known as “Capital-Acquisition Brokers” or “CABs”. CABs are firms that engage in a limited range of activities, essentially advising companies and private equity funds on capital raising and corporate restructuring, and acting as placement agents for sales of unregistered securities to…

In September 2017, the OCIE issued a Risk Alert notifying advisors of the most common deficiencies related to the Advertising Rule. Interestingly, all the deficiencies identified involved misleading performance advertising. The takeaways from the Risk Alert are detailed below. Misleading Performance Results. The Staff observed advisers that presented performance results without deducting advisory fees. The…

Text messaging. We’re all doing it. It’s not only easy to do, but also a highly effective and efficient way to communicate. According to a survey conducted by Smarsh, a firm specializing in cloud-based archiving solutions, text messaging is the most requested channel for business use by employees in financial firms, up over 20 percent…

Beginning on October 1, 2017, investment advisers will be expected to comply with the various new disclosures required on the Form ADV. Earlier this summer, the SEC released additional guidance for investment advisers and compliance professionals in the form of frequently asked questions (“FAQ”) to help answer any remaining questions advisers may have on how…

Over the past few months several ICSGroup clients have had their very first SEC examination. We’ve noticed some noteworthy trends in the types of issues that are of most concern to regulators. Being aware of these issues will enable you to be more prepared for the inevitable SEC exam and may help you avoid being…

While accounting standards, valuation frameworks and industry guidelines have been moving towards standardization of valuation principles, private equity (“PE”) fund managers still have substantial freedom when valuing their portfolio companies. For example, there is inevitable temptations to present interim performance numbers in a particularly favorable light when raising a follow-on fund or limiting write-downs during…

The focus on environmental, social and governance (ESG) as a means of creating sustainable value is on the rise. Institutional investors are increasingly considering nonfinancial performance, such as ESG issues, when making investment decisions. The three factors of ESG and the corresponding investment-related sustainability issues are: Environmental – Is the company environmentally responsible? Does the…

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