SEC Updates

  1. SEC proposed amendments to modernize the rules under the Investment Advisers Act addressing investment adviser advertisements and payments to solicitors. The proposed amendments are intended to update these rules to reflect changes in technology, the expectations of investors seeking advisory services, and the evolution of industry practices. The proposed amendments to the advertising rule would replace the current rule’s broadly drawn limitations with principles-based provisions. The proposed approach would also permit the use of testimonials, endorsements, and third-party ratings, subject to certain conditions, and would include tailored requirements for the presentation of performance results based on an advertisement’s intended audience. The proposed amendments to the solicitation rule would expand the current rule to cover solicitation arrangements involving all forms of compensation, rather than only cash, subject to a new de minimis threshold. They also would update other aspects of the rule, such as who is disqualified from acting as a solicitor under the rule. []
  2. The SEC charged Channing Capital Management with failing to adequately implement written policies and procedures governing the allocation of trading commission costs associated with aggregated (or block) securities trades on behalf of its institutional investor and pension fund clients. Channing’s written trade aggregation and allocation policies and procedures required it to allocate the transaction costs associated with block trades on a pro-rata basis amongst all clients participating in the same block trade. A separate written policy and procedure required Channing to follow the requirements and restrictions set forth in each client’s investment management agreement, including limitations placed on trading commissions. Certain of Channing’s institutional clients placed limitations on the amount they were willing to pay in commission rates for the execution of their brokerage transactions. Channing routinely conveyed those clients’ restrictions to executing brokers and requested that executing brokers apply lower commission rates for those clients while permitting them to participate in block trades with Channing’s other clients. This practice resulted in clients participating in the same block trade paying different commission rates.  []
  3. The Securities and Exchange Commission’s Division of Enforcement issued its annual report for fiscal year 2019. []
  4. The Securities and Exchange Commission filed charges against a New York investment adviser for operating a multimillion-dollar investment club that was actually a fraudulent Ponzi scheme targeting members of the local Haitian community as well as his family and friends. [ ]
  5. The Securities and Exchange Commission charged Bolton Securities Corporation d/b/a Bolton Global Asset Management, a registered investment adviser and broker-dealer with failing to disclose material conflicts of interest related to mutual fund 12b-1 fees and principal trading compensation generated from client investments. []
  6. Top Compliance Topics Observed in Examinations of Investment Companies and Observations from Money Market Fund and Target Date Fund Initiatives. []
  7. The SEC issued their annual agency report on November 13, 2019.  Exams are up 15% from 10%. []
  8. The SEC revoked the registration of New York-based investment adviser International Investment Group LLC, which the Commission charged with securities fraud for hiding losses in its flagship hedge fund and selling at least $60 million in fake loan assets to clients.  []