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May 24, 2013
Why Your Market Data Budget Deserves Closer Attention
Developed by Mentem Partners, LLC (members of CHFA)
As a line item, market data costs are usually the second largest behind wages and salaries. Many firms believe that they are on top of their costs but without professional market data managers looking at these services the cost base is typically higher than it needs to be. Here are the common issues facing most firms:
- There is no one owner of the market data budget or vendor relationships;
- The market data budget has continued to increase over a number of years;
- Management have concerns whether services reflect the changing business needs;
- Vendor invoices no longer reflect service contracts
Read the entire white paper here [PDF] >
May 13, 2013
The Benefits to Families of a More Structured View of Risk
by Aladin Abughazaleh, Founder & CEO, ATA RiskStation, LLC
Most families, like many portfolio managers, invest a great deal of time and energy into understanding the potential return streams from their investments. This paper explores the benefits of allocating some of that focus and energy to better assessing the risks that they may be assuming. The benefits of taking a more structured view of risk can extend well beyond portfolio performance to include more confident decision making, enhanced alignment between the stakeholders and a calmer mindset during turbulent markets.
May 9, 2013
Best Laid Plans Gone Awry: Practices for Rule 10b5-1 Trading Plans
Written by Sarah A. Good, Cindy V. Schlaefer, Brian M. Wong, Gabriella A. Lombardi and Laura C. Hurtado - Pillsbury
Rule 10b5-1 trading plans are in the limelight due to investigations initiated by U.S. Attorney's Offices and the SEC into possible abuses by corporate executives of such plans. Now, more than ever, companies and their boards of directors should review and strengthen their insider trading policies concerning Rule 10b5-1 trading plans.
Rule 10b5-1 trading plans are no stranger to controversy. First introduced in 2000 by the Securities and Exchange Commission (SEC), Rule 10b5-1 trading plans permit a corporate insider to adopt a plan of acquisition or disposition of his or her company's stock when not in possession of material nonpublic information so that trades may be executed by a broker at predetermined times regardless of whether the insider then possesses material nonpublic information. Read more >
For more information, visit Pillsbury's Investment Fund Law Blog
April 29, 2013
Jay Gould of Pillsbury, a CHFA Founders' Club and Board Member, was interviewed by Deirdre Bolton on Bloomber TV's "Money Moves". Jay discusses lifting the ban on hedge fund advertising.
Click on the image below for the full video.
April 16, 2013
Private Equity Fund Managers as Unregistered Broker Dealers - Sanctions and Rescission
By Jay Gould, Pillsbury
On April 8, 2013, we reviewed a recent speech by David Blass, the Chief Counsel of the Division of Trading and Markets of the Securities and Exchange Commission (the "SEC"), in which Mr. Blass provided his views on whether certain investment fund managers might be operating in a way that would require registration as a broker dealer. For hedge fund managers, the problem typically arises in the context of paying internal sales people based on the amount of capital raised. As we noted, the widespread misreading or abuse of Rule 3a4-1, the issuer's exemption safe harbor on which so many hedge fund managers rely, is now clearly on the SEC's radar. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
April 8, 2013
SEC puts Hedge Fund Managers on Notice regarding Compensation Arrangements for Sales
By Jay Gould, PIllsbury
In a speech before the American Bar Association's Trading and Markets Subcommittee on April 5, 2013, David Blass, the Chief Counsel of the Division of Markets and Trading, put hedge fund managers and private equity fund managers on notice that they may be engaged in unregistered (and therefore, unlawful) broker dealer activities as a result of the manner by which hedge fund managers compensate their personnel and, in the case of private equity fund managers, the receipt of investment banking fees with respect to their portfolio companies. The good news is that Mr. Blass indicated that the Staff of the Securities and Exchange Commission (the "SEC") is willing to work with the industry to come up with an exemption from broker dealer registration for private fund managers that would allow some relief from the prohibitions against certain sales activities and compensation arrangements regarding the sales of private fund securities. This post will address only the sales compensation activities of hedge funds with an explanation of the private equity investment banking fee discussion to follow. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
March 12, 2013
SEC Hammers Private Equity Fund Manager
By Jay Gould, Pillsbury
Last month, the Securities and Exchange Commission (the "SEC"), published its examination priorities for 2013. As we suggested in our Blog posting at that time, the SEC is fixated on examining and bringing enforcement against its newest class of investment adviser – managers of private equity funds. Fast forward four weeks, and we should not be surprised to see that the SEC is doing what they said they would do. Today, the SEC charged two investment advisers at Oppenheimer & Co. with misleading investors about the valuation policies and performance of a private equity fund of funds they manage. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
March 11, 2013
SEC Issues Additional Guidance Regarding the Custody Rule After Finding Wide Spread and Varied Non-Compliance By Investment Advisers
By Jay Gould and Michael Wu, Pillsbury
Last week the SEC issued a Risk Alert and an Investor Bulletin on the Custody Rule after its National Examination Program ("NEP") observed significant deficiencies in recent examinations involving custody and safety of client assets by registered investment advisers. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
February 25, 2013
NEP's Examination Priorities for 2013
By Jay Gould and Michael Wu, Pillsbury
On February 21, 2013, the Staff of the Securities and Exchange Commission (the "Staff" and the "SEC," respectively) published its 2013 priorities for the National Examination Program ("NEP") in order to provide registrants with the opportunity to bring their organizations into compliance with the areas that are perceived by the Staff to have heightened risk. The NEP examines all regulated entities, such as investment advisers and investment companies, broker dealers, transfer agents and self-regulatory organizations, and exchanges. This article will focus only on the NEP priorities pertaining to the investment advisers and investment companies program ("IA-ICs"). read more >
For more information, visit Pillsbury's Investment Fund Law Blog
February 6, 2013
Annual Compliance Obligations -- What you need to know
By Pillsbury
As the new year is upon us, there are some important annual compliance obligations Investment Advisers either registered with the Securities and Exchange Commission (the "SEC") or with a particular state ("Investment Adviser") should be aware of. See upcoming deadlines and read more >
For more information, visit Pillsbury's Investment Fund Law Blog
January 7, 2013
SEC staff preview top hedge fund enforcement trends for 2013
By Emily Perryman, HedgeWeek
In a recent speech before the Regulatory Compliance Association, Bruce Karpati, chief of the Securities and Exchange Commission's enforcement division's asset management unit, suggested where the SEC may be heading regarding hedge fund oversight in the months to come. read more >
For more information, visit Hedgeweek.com
December 13, 2012
Dodd-Frank Protocol Carries Burdens and Benefits for Pension Plans
By Jeffrey Stern, Dulcie D. Brand and Anthony H. Schouten, Pillsbury
The Commodity Futures Trading Commission has issued new "know your customer" and external business conduct rules to give effect to certain provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under these rules, major dealers in swaps and derivatives ("Swap Dealers") will be required to, among other things, conduct diligence on counterparties, verify their status as "eligible contract participants" and ensure that swap recommendations are suitable for them. In addition, these rules impose heightened duties on Swap Dealers that trade with employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, governmental plans as defined in ERISA Section 3, endowments, state and federal agencies, and other protected counterparties ("Special Entities"). read more >
For more information, visit Pillsbury's Investment Fund Law Blog
December 3, 2012
Beware Fund Managers Seeking Capital from U.S. Investors (and vice versa)
By Jay Gould, Pillsbury
The Securities and Exchange Commission (the "SEC") recently charged and entered into consent decrees with four India-based brokerage firms for providing brokerage services to U.S. investors without being registered as broker dealers under the U.S. securities laws. This otherwise mildly interesting enforcement action by the SEC should serve as a cautionary tale to hedge fund managers based outside the U.S. that seek to raise capital from U.S. investors, as well as U.S. fund managers that seek to sell their fund shares in foreign countries. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
November 29, 2012
Limiting Private Equity Fund Exposure to the ERISA Obligations of Portfolio Companies
By Peter J. Hunt, Susan P. Serota, Matthew C. Ryan, Pillsbury
In welcome news for private equity ("PE") funds, a recent district court opinion determined that two PE funds and their bankrupt portfolio company were not a "controlled group" and thus the PE funds were not responsible for pension liabilities at the portfolio company. The decision, Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, explicitly rejected a prior Pension Benefit Guaranty Corporation ("PBGC") ruling on the same question and illuminated best practices for structuring future PE fund investments. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
November 1, 2012
Hold Your JOBS Act Horses
by Jay Gould, Pillsbury
When can private fund managers start posting performance numbers on their websites and sponsoring the Super Bowl? Not yet, according to Senator Carl Levin (D-MI) in letters dated October 5, 2012 and October 12, 2012, (the "Levin Letters") rebuking the SEC for having missed the point of the legislation in the SEC rulemaking process. As you recall, on August 29, 2012, the SEC proposed rules pursuant to Section 201 of the Jumpstart our Business Startups Act ("JOBS Act") that, if adopted in final form, would allow private issuers, including private funds, to generally solicit and advertise as long as the investors are all "accredited investors." read more >
For more information, visit Pillsbury's Investment Fund Law Blog
October 23, 2012
California Adopts New Exemption--Should Fund Managers Still Register in California?
by Jay Gould and Peter Chess, Pillsbury
While you were touring the Champagne region or sipping umbrella drinks at the beach this summer, the California Department of Corporations (the "DOC") was busy overhauling the rules applicable to investment advisers. On August 27, 2012, the DOC adopted final rules, available here, that provide for an exemption from registration for certain private fund managers pursuant to specific conditions. This exemption, along with the rules previously adopted by the Securities and Exchange Commission (the "SEC"), now permits certain investment advisers that provide advice only to private funds to operate without being fully registered with either the SEC or the State of California. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
October 13, 2012
NASAA President Criticizes New SEC Rule Allowing General Advertising
by Jay Gould and Peter Chess, Pillsbury
Heath Abshure, President of the North American Securities Administrators Association (NASAA) and Arkansas State Securities Commissioner, sharply criticized the Securities and Exchange Commission's (the SEC's) new rulemaking that will lift restrictions on general solicitation and general advertising for hedge funds and other private investment vehicles in a press-teleconference on October 9, 2012. At the heart of the criticism is the contention that hedge funds and private equity funds could be among the amended rule's biggest users and beneficiaries. "The SEC's proposed rule would open the door for private equity and hedge funds, typically only offered to the most sophisticated investors, to advertise to the general public without putting in place basic disclosure requirements that would allow investors to make informed decisions about the products being offered. "This is the wrong way to go," remarked Heath Slavkin Corzo, senior legal and policy advisor of the AFL-CIO's Office of Investment during the teleconference. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
October 9, 2012
SEC to Conduct "Presence Exams" of Newly Registered Investment Advisers
by Jay Gould and Peter Chess, Pillsbury
The Securities and Exchange Commission (SEC) announced the launch of an initiative to conduct focused, risk-based examinations of investment advisers to private funds that recently registered with the SEC. These "Presence Exams" are part of a two year initiative with three primary phases: engagement, examination and reporting. During the examination phase, staff from the National Exam Program (NEP) will review one or more of five areas identified by the SEC as "high-risk" areas for the business and operations of advisers. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
October 1, 2012
Third Party Marketers Must File PPMs with FINRA
By Jay Gould and Peter Chess, Pillsbury
Effective December 3, 2012, hedge funds and other private funds that rely on Section 3(c)(1) of the Investment Company Act ("3(c)(1) Funds") and which sell their interests through third party marketers, must ensure that their private placement memoranda ("PPM") are filed with FINRA, the Financial Industry Regulatory Authority. The Securities and Exchange Commission recently approved new FINRA Rule 5123, Private Placements of Securities, which is part of an ongoing approach by FINRA to enhance oversight and investor protection in private placements. Under Rule 5123, each firm that sells a security in a private placement, subject to certain exemptions, must file a copy of the offering document with FINRA within 15 calendar days of the date of the first sale. read more>
For more information, visit Pillsbury's Investment Fund Law Blog
September 11, 2012
Pillsbury meets with the CA Department of Corporations
On August 30, 2012, Ildi Duckor and Michael Wu, members of Pillsbury's Investment Funds and Investment Management practice, met with executives and staff of the California Department of Corporations at the Department's invitation. The purpose of the meeting was to provide the Department's investment adviser and broker dealer divisions (live in San Francisco and via teleconference in the Sacramento and Los Angeles offices) with a broad overview of the hedge fund industry. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
September 7, 2012
The JOBS Act: The JOBS Act Will Accelerate the Institutionalization of Hedge Funds
The JOBS Act is bringing change to the hedge fund industry, and, most likely, this change will accelerate the trend towards institutionalization. The lifting of the "advertising ban" opens the playbook, allowing hedge funds to engage in a wide range of strategic communications and marketing activities. For some, this will offer a new opportunity to compete for assets with traditional managers adept at managing their brands and marketplace perceptions. Others will resist, possibly to their detriment, as funds will no longer have the luxury of hiding "under the radar." read more >
For more information, visit Pillsbury's Investment Fund Law Blog
September 4, 2012
SEC Releases Study on Financial Literacy While Retail Investors Wait for the Movie
By Jay Gould, Pillsbury
On August 30, 2012, the Securities and Exchange Commission (the "SEC") released the Dodd Frank Act's mandated study (the "Study") on the financial literacy of retail investors which concludes, as you might have predicted, that retail investors are essentially clueless about investing and financial matters generally. That slapping sound you heard was the high-fiving by stockbrokers everywhere across America. Among the selected findings were that retail investors lack "basic financial literacy" and that such investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud. It should come as no surprise that certain subgroups, such as women, African-Americans, Hispanics, the elderly, and the poorly educated have even less basic financial knowledge than the general population. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
August 15, 2012
JOBS Act Rulemaking and Implementation Update
MFA remains engaged to provide important industry viewpoints as U.S. regulators work to finalize rulemaking requirements to implement provisions included in the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act eliminates the prohibition on general solicitation or advertising in connection with the non-public offering of securities. Once the SEC adopts and implements a final rule to carry out the mandate under the JOBS Act, it will have a tremendous impact on how hedge funds communicate with investors and the broader public. MFA believes eliminating the ban on general solicitation or advertising can help promote greater transparency and understanding surrounding the hedge fund industry’s role in the financial services landscape.
In July, MFA sent a comment letter to the Commodity Futures Trading Commission (CFTC), urging it to harmonize its regulations with the JOBS Act. MFA submitted the letter under the CFTC’s Regulation 4.5 Harmonization Proposal, requesting that the Commission under the Harmonization rulemaking harmonize Rules 4.7(b) and 4.13(a)(3) with the JOBS Act. In the alternative, MFA requested that the CFTC consider the letter as a petition for rulemaking and a request for interim, temporary no-action relief for a commodity pool operator of a privately offered pool from certain marketing restrictions.
For more information, contact the Managed Funds Association (MFA).
August 7, 2012
MFA and Other Trade Associations Submit Summary of LSOC Issues to CFTC Commissioners
On August 7, MFA, jointly with SIFMA AMG ICI, and IAA, sent the Commissioners of the Commodity Futures Trading Commission (CFTC) a summary of our concerns with the customer protections provided by the CFTC’s legally segregated operationally commingled (LSOC) segregation model for cleared swaps. The trade associations stressed that LSOC should protect all customer margin from fellow-customer risk and that futures commission merchants should be required to report to derivatives clearing organizations the identity, positions and margin of each of their customers. The trade associations made specific recommendations to the CFTC Commissioners about how the CFTC should utilize rule revisions, interpretative guidance and/or FAQs to address any ambiguities or inconsistencies.
For more information, contact the Managed Funds Association (MFA).
July 25, 2012
CFTC Adopts Final End-User Exception to Mandatory Clearing and Proposes Exemption for Certain Cooperatives - Attorney Advertising
On July 10, 2012 the Commodity Futures Trading Commission (the "CFTC") adopted final regulations (the "Final Rules") governing the "end-user exception" from mandatory clearing. The Commodity Exchange Act, as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, gives the CFTC the authority to mandate that certain swaps must be cleared through a derivatives clearing organization. No such clearing mandate shall apply with respect to swaps entered into by persons able to rely on the so-called "end-user exception" to the clearing requirement. At this time, the CFTC has not identified any swaps that will be subject to the mandate, however we expect they may make this determination relatively soon. The Final Rules will go into effect September 17, 2012, though no clearing mandate is likely to be in place on that date.
Also on July 10, 2012 the CFTC proposed a rule (the "Proposed Rule") to extend the scope of the end-user exception to cooperatives meeting certain conditions. Comments on the Proposed Rule must be received before August 16, 2012.
Please click HERE to view the update in PDF format
This update was provided by Sidley Austin
July 20, 2012
SEC Staff Publishes Update to Form PF FAQs
The SEC's Division of Investment Management, on July 19, 2012, updated its Form PF FAQs. Among other items of note, the updated FAQs indicate that the types of transactions reported as "borrowings" should include short sales, securities lending transactions and certain synthetic borrowings (among others) and provide guidance on the treatment of counterparty credit exposure.
A Large Hedge Fund Adviser subject to the August 29, 2012 deadline that is unable to incorporate the guidance provided by the SEC staff prior to filing its initial report may make the initial filing without incorporating the guidance, provided that (i) the adviser's assumptions in completing its initial report were reasonable based on the facts and circumstances governing at the time its reporting system was being developed, (ii) the assumptions or other approaches taken by the adviser in reporting information on Form PF that are inconsistent with Staff guidance are identified in Question 4, and (iii) future required reports reflect the Staff guidance.
The updated Form PF FAQs are at: http://www.sec.gov/divisions/investment/pfrd/pfrdfaq.shtml
This update was provided by Sidley Austin
June 28, 2012
SEC Finalizes Rule for Compensation Committee Listing Standards and Compensation Consultant Conflicts
Amid the global focus on executive compensation, the independence of compensation committees has emerged in the United States as a cornerstone for assuring good corporate governance and accountability for the boards of directors of public companies. Accordingly, on June 20, 2012, the Securities and Exchange Commission (the "SEC") adopted Rule 10C-1 of the Securities Exchange Act of 1934 and amended Item 407(e) of Regulation S-K to implement the provisions of Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. In the press release accompanying the final rule, SEC Chairman Mary Schapiro singled out the independence of compensation consultants and advisers as being a key consideration, stating "[t]his rule will help to enhance the board’s decision-making process on executive compensation matters, particularly the selection, engagement and oversight of compensation advisers, and will provide more transparency with respect to conflicts of interest of consultants engaged by boards."
For more information, contact Paul Hastings
June 28, 2012
OFAC Settlement Highlights Importance of Proactive Compliance Monitoring
By Scott Flicker, Kevin Petrasic, and Amanda Jabour, Paul Hastings
The U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") recently announced a $619 million settlement to address apparent violations by a foreign bank of U.S. economic sanctions.1 The settlement is the largest OFAC settlement of any kind and marks the end of OFAC's investigation into alleged manipulation by the bank of information regarding transactions with U.S.-sanctioned parties in more than 20,000 financial and trade transactions routed through banks located in the United States between 2002 and 2007. The apparent violations primarily involved the Cuban Assets Control Regulations, 2 but also include the Sudanese 3 and Burmese 4 Sanctions Regulations, the Iranian Transactions Regulations, 5 and the now-repealed Libyan Sanctions Regulations.6 The OFAC settlement was part of a global settlement including the U.S. Attorney's Office for the District of Columbia, the Department of Justice, and the New York County District Attorney's Office. read more >
For more information, contact Paul Hastings
June 18, 2012
The California Corporations Commissioner is proposing further amendments to Section 260.204.9 of Chapter 3 of Title 10 of the California Code of Regulations, originally published in the June 6, 2012 California Register (No 2012, No. 1Z). This rulemaking action relates to an exemption for certain advisers to "private funds." The period within which to comment on these amendments ends on July 3, 2012.
Click HERE for the 15-Day Comment Period documents.
June 14, 2012
SEC Extends Compliance Date for Ban on Third-Party Solicitation under the Pay to Play Rule
by Jay Gould and Peter Chess, Pillsbury
On July 1, 2010, the Securities and Exchange Commission (the "SEC") adopted Rule 206(4)-5 under the Investment Advisers Act of 1940, as amended, which prohibited an investment adviser from providing advisory services for compensation to a government client for two years after the advisers or certain of its executives or employees make a contribution to certain elected officials or candidates. Rule 206(4)-5, also known as the Pay to Play Rule, also included a third-party solicitor ban that prohibited an adviser or its covered associates from providing or agreeing to provide, directly or indirectly, payment to any third-party for a solicitation of advisory business from any government entity on behalf of such adviser, unless such third-party was an SEC-registered investment adviser or a registered broker or dealer subject to pay to play restrictions. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
June 12, 2012
FINRA Issues Additional Guidance on New Suitability Rule
by Jay Gould and Peter Chess, Pillsbury
The Financial Industry Regulatory Authority ("FINRA") released new guidance last month regarding new FINRA Rule 2111 (the "Suitability Rule"), which requires a broker-dealer to have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through reasonable diligence by the broker-dealer. The Suitability Rule codifies and clarifies the three main suitability obligations that previously had been discussed largely in case law:
- Reasonable-basis suitability. A broker must perform reasonable diligence to understand the nature of the recommended security or investment strategy involving a security or securities, as well as the potential risks and rewards, and determine whether the recommendation is suitable for at least some investors based on that understanding.
- Customer-specific suitability. A broker must have a reasonable basis to believe that a recommendation of a security or investment strategy involving a security or securities is suitable for the particular customer based on the customer's investment profile.
- Quantitative suitability. A broker who has control over a customer account must have a reasonable basis to believe that a series of recommended securities transactions are not excessive. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
June 11, 2012
CFPB Procedural Rule Highlights Breadth and Scope of Agency's Nonbank Supervision Program
By Kevin Petrasic and Amanda Jabour, Paul Hastings
The alert discusses a proposed rule recently issued by the Bureau of Consumer Financial Protection ("CFPB") seeking comment on procedural requirements for when the agency may designate a nonbank financial firm to be subject to its ongoing examination and supervisory jurisdiction. The Proposed Rule would implement a provision of the Dodd-Frank Act that gives the CFPB authority to supervise a nonbank covered person when it has reasonable cause to determine, after notice and an opportunity to respond, that the person is engaging or has engaged in conduct that poses risks to consumers with regard to the offering or provisions of consumer financial products or services.
Read the full alert here [PDF].
For more information, contact Paul Hastings
May 29, 2012
Mutual Fund Lobby Trashes General Solicitation for Private Funds (Surprise!)
The recently enacted JOBS Act[1] requires the Securities and Exchange Commission ("SEC") to promulgate rules that would effectively repeal the ban on general solicitation and general advertising under Rule 506 of Regulation D by private issuers, including private funds. Pursuant to the JOBS Act, the SEC has 90 days from the date of enactment (July 4, 2012) to adopt rules implementing this provision. In advance of publishing proposed rules, the SEC has started accepting comment letters on all aspects of the JOBS Act, including the repeal of the ban on general advertising. read more >
For more information, visit Pillsbury's Investment Fund Law Blog
May 25, 2012
Private Fund Managers May Face BEA Reporting Requirements - Attorney Advertising
The Bureau of Economic Analysis ("BEA") collects data on U.S. direct investment abroad, foreign direct investment in the U.S., and U.S. international services transactions through quarterly, annual and 5-year benchmark surveys. All U.S. persons that meet the reporting thresholds must provide survey reports, regardless of whether they are contacted by the BEA. U.S. investment advisers that manage hedge fund, private equity fund, or venture fund structures that involve non-U.S. entities may be covered, particularly through non-U.S. master funds. Although the BEA reporting requirements have been in place for years, many covered persons have not filed reports, and BEA staff have indicated they may increase enforcement efforts in the future.
Please click HERE to view the update in PDF format
This update was provided by Sidley Austin
May 15, 2012
Important ERISA 408(b)(2) Disclosure Deadline Approaching for Managers of Plan Assets (Including Hard-Wired Plan Assets Feeder Funds)
Regulations issued under Section 408(b)(2) of ERISA require that "covered service providers" provide certain fee disclosures to ERISA plans. Covered service providers include (a) managers of plan assets funds, (b) managers of hard-wired plan assets feeder funds, and (c) managers of separate accounts for ERISA plans. The deadline for providing these disclosures is July 1, 2012.
Failure to comply with these requirements could result in the manager having to refund fees paid by plan investors and the imposition of excise taxes.
This update was provided by Sidley Austin
May 11, 2012
CFTC and SEC Finalize Key Dodd-Frank "Entity Definitions"
The Commodity Futures Trading Commission ("CFTC") and Securities and Exchange Commission recently finalized the definitions of "swap-dealer," "security-based swap dealer," "major swap participant," "major security based swap participant" and "eligble contract participant," and the CFTC adopted final regulations treating commodity options similarly to swaps." These so called "entity definitions" and the commodity option provisions are key elements of implementation of the OTC derivatives reforms mandated by the Dodd Frank Act. read more >
For more information, contact Sidley Austin
May 11, 2012
Fed Gives Green Light for Controlling Investments in U.S. Banks by Mainland Chinese Entities
On May 9, 2012, the Board of Governors of the Federal Reserve System ("Federal Reserve") announced its approval of an application submitted by Industrial and Commercial Bank of China Limited ("ICBC"), China Investment Corporation ("CIC"), and Central Huijin Investment Ltd. ("Huijin"), all based in the People's Republic of China, to become bank holding companies pursuant to Section 3 of the Bank Holding Company Act of 1956, as amended ("BHCA"). ICBC, CIC and Huijin had applied to acquire up to 80% of the voting shares of The Bank of East Asia (U.S.A.) National Association ("BEA-USA"), located in New York City. read more >
For more information, contact Paul Hastings
May 8, 2012
Investment Fund Law Blog - Private Funds and the JOBS Act
The Jumpstart Our Business Startups Act (the "JOBS Act" or the "Act"), signed into law by President Obama on April 5, 2012, seeks to encourage economic growth through the easing of certain restrictions on capital formation and by improving access to capital. The JOBS Act contains a number of provisions that will directly impact private funds and their general partners, managers and sponsors. Here is a summary of the Act’s provisions that directly affect private funds, including ongoing requirements for funds that at this time do not appear to be affected by the Act.
Section 4 of the Securities Act. The JOBS Act amends Section 4 of the Securities Act of 1933, as amended ("Securities Act"), so that offers and sales exempt under Rule 506 of Regulation D will not be deemed public offerings as a result of general advertising or general solicitation. Private funds relying on the exception in Section 3(c)(1) ("3(c)(1) Fund") of the Investment Company Act of 1940, as amended ("Investment Company Act"), will be able to continue to avail themselves of this exception so long as all of their investors are accredited investors, as defined in Rule 501 of Regulation D ("Accredited Investors"). read more>
For more information, visit Pillsbury's Investment Fund Law Blog
Note: Pillsbury and KPMG, along with the California Hedge Fund Association, will be sponsoring a "Managers Only" event on the JOBS Act and the new world of "general solicitation" for Funds on June 14.
May 7, 2012
A Changing Landscape for Private Equity Firms
By Sheri Lejman, CPA, Lead Partner of the Alternative Investment Group for Southern California, Marcum, LLP
In the world of alternatives, hedge fund managers have had their fair share of attention and scrutiny from politicians, the media and the public in general. More recently, joining the ranks of hedge funds are their close brethren: Private Equity Firms. Unlike hedge funds, private equity firms have traditionally avoided the limelight, but that is all changing. read more [PDF] >>
April 28, 2012
Hedge Fund Law Report on Form PF
The Form PF (PF is short for "private funds") is a new Securities and Exchange Commission reporting form for investment advisers to private funds that have at least $150 million in private fund assets under management. Comprising 42 pages and divided into 4 sections with corresponding subsections, Form PF may appear daunting at first. The task of completing and filing the Form also entails categorizations, specific and nuanced reporting requirements and Form-specific calculations, not to mention the fact that improperly completed Forms may be delayed or even rejected. However, with the proper tools and plan of attack, an adviser will be able to fulfill its reporting requirements and improve its data platform for a host of other reporting and filing requirements. Form PF necessitates working with large amounts of data. So, early planning, coordination and organization are essential for success. In a guest article, Jay Gould, a Partner at Pillsbury Winthrop Shaw Pittman LLP and leader of Pillsbury's Investment Funds & Investment Management practice team, and Kelli Brown, Director of Private Funds at Data Agent, LLC, describe ten steps that a hedge fund manager should take for successful Form PF completion and filing. The article can be accessed on the Hedge Fund Law Report's website (subscription required).
Please contact Jay Gould, Pillsbury, if you have any further questions or seek further information about Form PF.
April 28, 2012
JOBS Act Gives Confidential Review Option for U.S. Emerging Growth Company IPOs
New guidance outlines key rules for the new confidential review option for initial public offerings by emerging growth companies in the United States.
The Jumpstart Our Business Startups Act (also known as the JOBS Act) became a U.S. federal law on April 5, 2012 and immediately authorized a confidential submission option for registered securities offerings in the United States by emerging growth companies (EGCs). The U.S. Securities and Exchange Commission (SEC)'s Division of Corporation Finance staff promptly announced its procedure for accepting confidential draft registration statements using this option. The staff has also given written and oral guidance on a number of relevant frequently asked questions. This alert explains the background and expected benefits of the confidential submission option and reviews the SEC staff guidance.
For more information, visit Pillsbury's Investment Fund Law Blog
April 25, 2012
Hedge Funds 2.0: Evolution in Action
In 2012, the evolution of the hedge fund industry continues, bringing with it new players and paradigms. Rothstein Kass' annual Industry Outlook report highlights this ongoing evolution and explores the issues that will impact the hedge fund industry in 2012 and beyond.
Hedge Funds 2.0: Evolution in Action features the findings of a first quarter 2012 survey of 400 hedge fund managers, representing more than 770 hedge fund vehicles. Survey participants weighed in on a broad range of topics, including investment outlook, operational issues and regulatory concerns.
CHFA Members: Log-in and select "Hedge Funds 2.0 from the drop down menu.
April 25, 2012
Managed Funds Association (MFA) Launches New Comment Letter Database
Click here for MFA Comment Letter Database. The database includes all of MFA's letters to global regulators and governments since 2005.
April 25, 2012
Bachus Introduces Revised Retail Investment Adviser Oversight Legislation
This afternoon, House Financial Services Committee Chairman Spencer Bachus (R-AL) and Representative Carolyn McCarthy (D-NY) introduced legislation that would “authorize self-regulatory organizations (SROs) for registered investment advisers, funded by membership fees, to supplement the Securities and Exchange Commission’s (SEC) oversight of investment advisers.” Reports indicate that the House Financial Services Committee could markup the legislation soon after the House returns from its recess on Monday, May 7.
Click here to read the legislative text of Chairman Bachus's measure introduced today.
For more information, contact the Managed Funds Association (MFA)
April 25, 2012
Helping Hedge Fund Investors Understand & Remember Your Fund
by Bruce Frumerman, CEO, Frumerman & Nemeth Inc.
This article by Bruce Frumerman, Frumerman & Nemeth Inc., first appeared in the March issue of Canadian Hedgewatch and was re-printed with permission
Hedge funds are revealing too little about themselves. This complaint comes from the very institutional investors to whom hedge funds are marketing. SEI recently released the results from its fifth annual survey of institutional hedge fund investors, conducted in collaboration with Greenwich Associates, The Shifting Hedge Fund Landscape. Three recommendations in this 2012 report clearly indicate that the surveyed investors are asking hedge funds to "provide more windows into investment processes and decision-making," as SEI puts it. All hedge fund firms know that they have to deliver marketing collateral into the hands of institutional investor prospects who may take months before getting around to looking at those documents again when discussing the hedge fund and its strategy in an investment committee meeting. But hedge funds' communications have not been doing a good enough job. read more >
April 24, 2012
SEC and CFTC Adopt Rules Defining Swaps-Related Terms
On April 18, 2012, the Securities and Exchange Commission ("SEC") and the Commodity Futures Trading Commission ("CFTC") voted to adopt rules defining "swap dealer," "security-based swap dealer," "major swap participant," and "major security-based swap participant," among other terms, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"). The Dodd-Frank Act assigns to the SEC the regulatory authority for security-based swaps and assigns to the CFTC the regulatory authority for swaps. read more >
The full text of the SEC press release and fact sheet is available here.
The full text of the CFTC release is available here.
For more information, visit Pillsbury's Investment Fund Law Blog
April 24, 2012
Financial Institutions Regulatory Update: Federal Reserve Clarification of Volcker Rule Conformance Period - Attorney Advertising
On April 19, 2012, the Board of Governors of the Federal Reserve System (the "Board") announced that banking entities subject to Section 13 of the Bank Holding Company Act of 1956, the so-called "Volcker Rule," would have the full two-year period provided by statute to come into conformance with the Volcker Rule’s restrictions on proprietary trading and investment in and sponsorship of covered funds. The announcement was part of a joint statement released by the Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the Securities and Exchange Commission.
Please click here to view the update in PDF format.
For more information, contact Sidley Austin
April 20, 2012
Hedge Fund Assessment Fails to Advance During HFSC Markup
The House Financial Services Committee, by a vote of 31-26, rejected an amendment offered by Ranking Member Barney Frank (D-MA) and Representative Luis Gutierrez (D-IL) that would have imposed a risk-based tax on hedge funds with $10 billion or more in assets under management on a consolidated basis and on other financial companies with $50 billion or more in total consolidated assets.
For more information, contact the Managed Funds Association (MFA)
April 18, 2012
CFTC and SEC Hold Open Meetings to Approve Final Entity Definitions Rule under Title VII of the Dodd-Frank Act
On Wednesday, April 18, both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) held open meetings to vote on the Final Rule on Further Definition of "Swap Dealer," "Security-Based Swap Dealer," "Major Swap Participant," "Major Security-Based Swap Participant," and "Eligible Contract Participant" (the so-called entity definitions rule, jointly issued by the CFTC and the SEC) related to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC approved the final entity definitions with a unanimous 5-0 vote. The CFTC also approved the final entity definitions rule by a 4-1 vote, with Commissioner O’Malia dissenting.
For more information, contact the Managed Funds Association (MFA)
April 5, 2012
President Signs JOBS Act Into Law
At a White House signing ceremony, President Obama signed H.R. 3606, the Jumpstart Our Business Startups (JOBS) Act, into law.
The JOBS Act will amend securities laws to increase the ability of small businesses to raise capital. The legislation encompasses several provisions, including provisions that would: remove the ban on general solicitation under Regulation D for sales to accredited investors; and, raise the shareholder reporting trigger under Section 12(g) of the Securities Exchange Act of 1934 from 500 to 2,000.
For more information, contact the Managed Funds Association (MFA)
April 5, 2012
Revised FINRA Rules Regarding Communications with the Public Adopted
The U.S. Securities and Exchange Commission has approved a significant revamping of the Financial Industry Regulatory Authority's ("FINRA") current rules regarding communications with the public (the "FINRA Communications Rules"). These rule changes complete a multi-year effort by FINRA to reorganize and simplify its Communications Rules and to incorporate into those Rules much of its Interpretive Materials under former NASD Rules 2210 and 2211. The revised FINRA Communications Rules also include some substantive changes, particularly regarding such items as the definition of correspondence, the Rules' application to closed-end funds, and the manner in which illustrations regarding tax-free compounding are presented. The final FINRA Communications Rules also address a number of industry concerns regarding the treatment of internal communications and the use of social media.
To read the full alert, click here
For more information, contact Paul Hastings
April 4, 2012
Private Fund Adviser Exemption 2nd Emergency Readoption
The California Corporations Commissioner is providing notice that on April 4, 2012, the Department will file an emergency regulation extending the effectiveness of Rule 260.204.9 of Title 10 of the California Code of Regulations. Rule 260.204.9 currently exempts from registration investment advisers who are deemed "private advisers." This emergency regulatory action will become effective on April 17, 2012, the same day as the expiration of the current emergency regulation, and will expire on July 16, 2012.
Please click here for the Private Fund Adviser Exemption Emergency Regulations Second Readopt.
March 22, 2012
Senate Adopts STOCK Act, President Expected To Sign Into Law
This afternoon, the Senate, by a vote of 96-3, adopted S. 2038, the House-passed Stop Trading on Congressional Knowledge Act (STOCK Act), legislation that would clarify that Members of Congress and their staff are subject to the prohibitions under Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's Rule 10b-5, including the prohibition on insider trading. The legislation will now be sent to President Obama, who is expected to sign the measure into law.
Click here to download the legislative text of the STOCK Act.
Senate Adopts Amended JOBS Act, Keeps House "Reg D" Language
The Senate, by a vote of 73-26, adopted, as amended, H.R. 3606, the House-passed Jumpstart Our Business Startups Act (JOBS Act), a legislative package that would amend securities laws to increase the ability of small businesses to raise capital. The Senate adopted one amendment to the underlying bill, a measure offered by Senator Jeff Merkley (D-OR) that would modify provisions related to "crowdfunding." The amended JOBS Act, which will now be sent back to the House of Representatives for consideration, includes provisions that would:
- Remove the ban on general solicitation under Regulation D for sales to accredited investors;
- Raise the shareholder reporting trigger under 12(g) of the Securities Exchange Act of 1934 from 500 to 2,000;
- Raise the registration and de-registration thresholds in 12(g), but only for banks and bank holding companies; and,
- Amend the 1933 and 1934 Acts to add a new type of company, called an "emerging growth company."
Senate Rejects Modifications to 12(g), Regulation D Provisions
The Senate, by voice vote, rejected a last minute amendment offered by Senator Jack Reed (D-RI) that would amend Section 12(g) of the Securities Exchange Act of 1934 to require companies to register based on the number of "beneficial owners" of the company rather than the long-standing notion of tying the disclosure requirement to a company’s "record holders."
Earlier in the week, the Senate rejected a separate amendment offered by Senator Reed that would have significantly modified provisions related to the removal of the ban on general solicitation under Regulation D and the shareholder reporting trigger under 12(g) of the Securities Exchange Act of 1934. The failed amendment would have given the SEC discretion to continue to subject hedge fund offerings to the solicitation ban. With regard to the 12(g) thresholds, the amendment would have used "beneficial owners" to calculate "share holders" for the reporting trigger in addition to raising the shareholder trigger to 750.
The Senate, by a vote of 55-44, also rejected an amendment that would have reauthorized the Export-Import Bank until 2015 and increased its budget by $40 billion.
For more information, contact the Managed Funds Association (MFA)
March 19, 2012
House Passes Bill Simplifying IPO Process and Private Capital Formation
On March 8, 2012, the U.S. House of Representatives passed the Jumpstart Our Business Startups Act, or "JOBS Act." The JOBS Act, which combines several bills that were introduced in the House last year, aims to reduce the costs of going public for private companies and facilitate increased capital formation.
For more information, contact Paul Hastings
March 14, 2012
CFTC Eliminates Key CPO Registration Exemption - What does this Mean for Fund of Funds?
The Commodity Futures Trading Commission (the "CFTC") recently amended its registration rules regarding Commodity Pool Operators ("CPOs") and Commodity Trading Advisors ("CTAs"), which will require many general partners and managers of private investment funds that previously relied on an exemption from registration to now register with the CFTC. After a public comment period in which the industry overwhelmingly supported the continuation of these exemptions, the CFTC decided to rescind the CPO exemption under CFTC Rule 4.13(a)(4) and amend the CPO exemption under CFTC Rule 4.13(a)(3). read more >>
Download the CFTC amendment
For more information, visit Pillsbury's Investment Fund Law Blog
March 9, 2012
House-Passed JOBS Act Amends Regulation D, 12(g) Securities Laws
The House of Representatives, by a vote of 390-23, adopted H.R. 3606, the Jumpstart Our Business Startups (JOBS) Act, a legislative package that would amend securities laws with the intent to increase the ability of small businesses to raise capital. The package comprises six bills, four of which have already passed the House of Representatives as stand-alone measures. Notably, the White House issued a Statement of Administration Policy in support of the legislative package, and Senate Majority Leader Harry Reid (D-NV) has already announced his intent to introduce a capital formation package in the Senate as early as next week.
For more information, contact the Managed Funds Association (MFA)
March 8, 2012
SEC Releases Draft Form PF XML Filing Guide
This morning, the SEC released a draft Form PF XML Filing Guide to assist managers in filing Form PF through the XML submission process. The Filing Guide can be found at the IARD website here. The IARD website includes additional information regarding the new Private Fund Reporting Depository (PFRD), and describes how users can choose to participate in testing the system beginning later this month.
The PRFD is a new electronic filing system that facilitates investment adviser reporting of private fund information via Form PF. FINRA is the developer and operator of the PFRD system, which has been developed according to the requirements of its sponsor, the SEC.
For more information, contact the Managed Funds Association (MFA)
March 7, 2012
NYSE Implements New Restrictions on Broker Discretionary Voting
As the 2012 proxy season begins, public companies should be aware of recent changes to Rule 452 of the New York Stock Exchange that restrict broker discretionary voting on certain types of corporate governance proxy proposals. As a result of these changes, public companies may find it more difficult and more expensive to obtain stockholder approval of certain corporate governance related proxy proposals that are supported by company management. Each public company should consider the impact of the Rule 452 changes based on its own circumstances, including what constitutes a quorum at its annual meeting and the percentage ownership represented by institutional investors, as it determines how to proceed with the solicitation of proxies in favor of proposals supported by management. read more >>
For more information, contact Paul Hastings
FTC Announces Revised Thresholds for Clayton Act Antitrust Reviews
The Federal Trade Commission announced it has revised the thresholds that determine whether companies are required to notify federal antitrust authorities about a transaction under the Hart-Scott-Rodino Antitrust Improvements Act. These filing thresholds are required to be adjusted annually to keep pace with inflation, unlike the pre-merger filing fees, which have not changed in more than a decade. read more >>
March 2, 2012
2012 Annual Compliance Obligations: What You Need To Know
In light of the current regulatory environment, now more than ever, it is critical for you to comply with all of the legal requirements and best practices applicable to Investment Advisers. The beginning of the year is a good time to review, consider and, if applicable, satisfy these requirements and best practices.
As the new year is upon us, there are some important annual compliance obligations Investment Advisers either registered with the Securities and Exchange Commission (the SEC) or with a particular state (Investment Adviser) should be aware. read more >>
For more information, visit Pillsbury's Investment Fund Law Blog.
February 29, 2012
U.S. Treasury Calls for Large Position Reports
The U.S. Department of Treasury announced a call for Large Position Reports from entities whose reportable positions in the 1-1/4% Treasury Notes of January 2019 equaled or exceeded $2 billion as of close of business Tuesday, February 21, 2012.
Entities with reportable positions in this note equal to or exceeding the $2 billion threshold must report these positions to the Federal Reserve Bank of New York. Reports must be received by the Government Securities Dealer Statistics Unit of the Federal Reserve Bank of New York before noon Eastern Time on Friday, March 2, 2012, and must include the required positions and administrative information. Large Position Reports may be faxed to (212) 720-5030 or delivered to the Bank at 33 Liberty Street, 4th floor.
For more detail on the Treasury's call for Large Position Reports, please see Treasury's Press Release and Large Position Rules FAQs.
For more information, contact the Managed Funds Association (MFA)
February 28, 2012
Portforlio Risk Management: The Challenges of Doing it and Communicating it to Institutional Investors
Article published February 28, 2012 by Reuters Hedgeworld
SEI's recently released fifth annual global survey of institutional hedge fund investors, The Shifting Hedge Fund Landscape, shines a spotlight of attention on the subject of risk management; both how it is being carried out and how it is being communicated. Risk Management expert Sam Won, CEO of Global Risk Managmeent Advisors (www.grmainc.com) and communications marketing expert, Bruce Frumerman, CEO of Frumerman & Nemeth, Inc. (www.frumerman.com), sat down to discuss SEI's findings and the implications for hedge fund firm owners. read more >>
February 27, 2012
FDIC Updates Guidance on Payment Processor
In its recently issued Financial Institution Letter, FIL-3-2012, the Federal Deposit Insurance Corporation ("FDIC") updated the agency's November 2008 guidance on the potential risks to insured depository institutions of payment processor relationships. The updated guidance is in response to the increased number of deposit relationships between insured institutions and payment processors utilizing institutions' deposit accounts to process payments for third-party merchants and, in some cases, other payment processors. read more >>
SEC Revises "Qualified Client" Dollar Thresholds for Investment Adviser Performance Fee Rule
Recently, the Securities and Exchange Commission announced that it is adopting amendments which will adjust certain dollar thresholds set forth in Rule 205-3 of the Investment Advisers Act of 1940, the rule which permits investment advisers to charge a performance fee to "qualified clients." The amendments also: (i) require adjustments of these dollar amount thresholds every five years for inflation, (ii) exclude the value of a person’s primary residence and certain associated debt in determining whether a person has sufficient net worth to be considered a "qualified client," and (iii) add several transition provisions to the Rule.
read more >>
For more information, contact Paul Hastings
February 27, 2012
FINRA Publishes Debt Research Rule Proposal
The Financial Industry Regulatory Authority, Inc. ("FINRA") published its debt research conflicts of interest proposal ("rule proposal" or "proposed rule") in Regulatory Notice 12-09. While the rule proposal addresses certain comments submitted in response to FINRA's March 2011 concept proposal on managing debt research conflicts of interest ("concept proposal"), it maintains many of the core themes set forth in the concept proposal. In particular, the rule proposal incorporates many of the general prohibitions, restrictions and disclosure requirements applicable to equity research reports. Of note, however, the scope of the rule proposal is broader than the equity research rules in certain respects, in that it addresses potential conflicts of interest and permissible communications between debt research analysts and sales and trading and principal trading personnel, in addition to investment banking personnel. The proposed rule text is included as Attachment A to Regulatory Notice 12-09. read more >>
For more information, contact Sidley Austin LLP
February 23, 2012
Fund Tax Services ("FTS") provides an update on developments in the alternative investment fund tax space
FATCA Update
The Treasury and IRS issued long-awaited proposed FATCA regulations on February 8, 2012. Also on the same day, the U.S. issued a Joint Statement with France, Germany, Italy, Spain and the UK that sets out potential framework for intergovernmental approach to FATCA compliance.
Click here for some key takeaways for asset managers by FTS
Click here to download the detailed FATCA update from Ernst & Young
FBAR Update
On February 14, 2012, the Financial Crimes Enforcement Network (FinCEN) released Notice 2012-1 to further extend the due date for certain officers and employees with signature authority but no financial interest over company-owned foreign financial accounts to file their Form TD F 90.22-1, Report of Foreign Bank and Financial Accounts (FBAR), from June 30, 2012 until June 30, 2013. Please see the FTS tax update in July 2011. FTS will continue to monitor various issues regarding FBAR and FATCA and encourage you to reach out to them if you have further questions.
2011 New Hedge Fund Study
This short memorandum from Seward & Kissel summarizes some key trends in terms of investment strategies, fees, liquidity terms and structures relating to hedge funds launched in 2011.
White House Budget Proposal on Carried Interest -
Building on the principles he laid out in his State of the Union address last month, President Obama on February 13 unveiled a fiscal year 2013 budget package that thematically aligns with his campaign promises to provide tax incentives for domestic manufacturers, continue current-law tax rates for middle-income taxpayers, and shift the tax burden to multinationals and upper-income individuals. read more >>
Treasury issues guidance on withholding on total return swaps
On January 19, 2012, the U.S. Treasury issued both temporary and proposed regulations concerning the treatment of dividend equivalent amounts made pursuant to a specified notional principal contract ("SNPC"). While some questions remain open, this guidance should be helpful to taxpayers in structuring their transactions. read more >>
Alternative Investment Funds Buy Another Year as Reconciliation of Schedule D and 1099B is deferred
To facilitate reconciliation between the cost basis reported to taxpayers on Form 1099-B and the cost basis reported by the taxpayer on Schedule D, the IRS has released for use with 2011 individual tax returns a revised Schedule D and a new Form 8949 "Sales and Other Dispositions of Capital Assets." read more >>
The information for this update was provided by Fund Tax Services (FTS).
February 22, 2012
SEC Adopts Revised Qualified Client Standards for Performance Fees, Including Exclusion of Primary Residence From Net Worth Calculation
On February 15, 2012, the SEC adopted amendments to Rule 205-3 under the Investment Advisers Act of 1940, the rule that permits SEC-registered advisers to charge performance-based fees to “qualified clients.” The amendments (i) revise the net worth test in the definition of qualified client to exclude the value of a natural person’s primary residence; (ii) include “grandfathering” provisions that allow advisers to maintain certain existing performance fee arrangements; and (iii) codify the higher dollar amount thresholds for qualified client status (at least $1 million under management with the adviser immediately after entering into the advisory contract or a net worth of more than $2 million at the time of entering the advisory contract) that were previously set by order and took effect on September 19, 2011. The amendments will be effective 90 days after publication in the Federal Register, but advisers may rely on the grandfathering provisions in the meantime. read more >>
Download the PDF update
For more information, visit Sidley Austin's News & Resources
February 22, 2012
Treasury Releases Framework for Business Tax Reform
This morning, Treasury Secretary Timothy Geithner and two senior Treasury officials detailed in a conference call The President's Framework for Business Tax Reform, which sets out five primary elements of business tax reform, as summarized below. Among other elements, The President's Framework calls for lowering the corporate tax rate to 28%, in part through expanding the tax base. In particular, on page 7, The President's Framework discusses eliminating preferential treatment for pass-through entities in order to broaden the tax base and lower the corporate rate. In addition, the proposal on page 10 restates previous Administration policy calling for carried interest to be treated as ordinary income rather than capital gains.
Click here to read The President's Framework for Business Tax Reform.
Click here to read the Treasury's Press Release on The President’s Framework for Business Tax Reform.
For more information, contact the Managed Funds Association (MFA).
February 22, 2012
CFPB Proposes Parameters for Jurisdiction of Larger Participants in Debt Collection and Consumer Reporting Markets
As a follow up to the Consumer Financial Protection Bureau's ("CFPB") June 2011 notice of proposed rulemaking ("Notice") on determining which markets it should cover and which entities in such markets should be deemed "larger participants" under its nonbank supervision program, the agency issued its first proposed rule defining "larger participants" ("Proposal").
The Proposal addresses two of the six consumer financial product and service markets the CFPB identified in the Notice - (i) consumer debt collection, and (ii) consumer reporting activities. Under the "larger participant" authority set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act ("DFA"), the CFPB is required to define the "larger participants" subject to its nonbank supervision program by July 21, 2012." Thus, the remaining four areas identified in the June 2011 Notice - (i) consumer credit and related activities, (ii) money transmitting, check cashing, and related activities, (iii) prepaid cards, and (iv) debt relief services - are expected to be addressed by the CFPB in the relatively near future.
For more information and to read other recent alerts from Paul Hastings, follow this link.
February 16, 2012
The UK Financial Conduct Authority: How Will the New Supervisory Regime Affect Investment Firms? Securities & Futures Regulatory Update
In June 2011, the UK Government published a White Paper and draft Bill (the “Financial Services Bill”) setting out its plans to replace the FSA with two new bodies – the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”).1 On 26 January 2012, an amended version of the Bill received its first reading in the House of Commons. read more >>
For more information, visit Sidley Austin's News & Resources
February 14, 2012
Levin Introduces Modified Carried Interest Tax Proposal
This afternoon, House Ways and Means Committee Ranking Member Sander Levin (D-MI) introduced a carried interest tax proposal, the Carried Interest Fairness Act of 2012, which includes changes to the enterprise value tax provisions incorporated in prior carried interest tax proposals. The legislation is unlikely to receive consideration in the House Ways and Means Committee, but the proposal is expected to be offered by Democratic Members as a revenue offset to various measures considered on the House and Senate floors throughout the remainder of the 112th Congress. Reports indicate that Senator Carl Levin (D-MI) is likely to introduce an identical bill in the Senate in the near-term.
The description prepared by the Joint Committee on Taxation and Representative Levin’s legislative “background” document both indicate that the bill is intended to change the tax treatment of carried interest without changing the tax treatment of enterprise value at an investment management firm.
Carried Interest Fairness Act of 2012
Legislation Description - as Prepared by the Joint Committee on Taxation
For more information, contact the Managed Funds Association (MFA).
February 13, 2012
President Obama Releases FY2013 Budget Proposal
Today, President Obama sent to Congress his budget proposal for the 2013 fiscal year. In it, he has included a carried interest tax proposal, which is estimated to raise $13 billion over a 10-year time preiod.
Click here to read the President's FY2013 budget proposal in full.
Later in the day, the Department of Treasury released the "Greenbook", which provides detailed descrptions of the revenue proposals included in the President's FY2013 proposed budget.
Click here to read the Department of Treasury's "Greenbook".
February 9, 2012
CFTC Adopts Final Rules Amending CPO/CTA Registration and Compliance Obligations
On February 9, 2012, the Commodity Futures Trading Commission (“CFTC”) issued final rules (the “Final Rules”) eliminating a number of exclusions and exemptions relied on by commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) in connection with many privately offered funds and investment companies registered under the Investment Company Act of 1940 (“RICs”). The Final Rules (a) eliminate the exemption from CPO registration that is currently available under CFTC Rule 4.13(a)(4) for CPOs of certain privately offered funds, (b) reinstate prior trading criteria for RICs under CFTC Rule 4.5 (adding an alternative trading threshold and including CFTC-regulated swaps in the trading criteria), (c) require that under CFTC Rule 4.7 CPOs may no longer claim an exemption from the requirement of including certified financial statements in pool annual reports, (d) require the filing of annual reaffirmation notices to claim relief under CFTC Rules 4.5, 4.13 or 4.14, (e) require additional reporting on Forms CPO-PQR and CTA-PR and (f) amend the boilerplate risk disclosure statements required by CPOs and CTAs to include risks posed by the trading of swaps, among other changes. read more >>
For more information, visit Sidley Austin's News & Resources
February 9, 2012
IRS Releases FATCA Proposed Regulations Tax Update
The IRS has released proposed regulations under the Foreign Account Tax Compliance Act. The proposed regulations provide guidance regarding withholding and compliance requirements, phase in the implementation of reporting deadlines and extend the cutoff date for grandfathered obligations to December 31, 2012. read more >>
For more information, visit Sidley Austin's News & Resources
February 7, 2012
Form PF: Questions and Answers
1. What is the Form PF?
The Form PF (PF is short for "private funds") is a new form that focuses mainly on private fund reporting with regard to information such as counterparty dealings, leverage, and investment exposure. A "private fund" under the Form PF refers to any issuer that would be an investment company under the Investment Company Act of 1940, as amended, if not for the exemptions provided by Sections 3(c)1 or 3(c)7 of that Act. Under some circumstances, non-"private funds" such as money market funds registered with the SEC may be required to report on the Form, in addition to "private funds."
2. Do investment advisers need to file the Form PF?
Yes, in certain circumstances. Only investment advisers registered with the SEC that meet a $150 million threshold must report on the Form PF. The $150 million threshold refers to a specific and somewhat complicated calculation with regard to regulatory assets under management.
For more information, visit Pillsbury's Investment Fund Law Blog.
Extension of Comment Period - Corporate Securities Law of 1968
The California Corporations Commissioner published a Notice of Proposed Action in the January 6, 2012 edition of the California Regulatory Notice Register (Register 2012, No. 1-Z, page 3) concerning a Private Fund Adviser Exemption. The original comment period deadline was February 20, 2012.
The Department is extending the written comment deadline to March 25, 2012.
Please click on this link for the 45-Day Notice of Extension: http://www.corp.ca.gov/Laws/CSL/Default.asp.
February 3, 2012
Senate Overwhelmingly Approves Amended STOCK Act Legislation
The Senate, by a vote of 96-3, adopted S.2038, the Stop Trading on Congressional Knowledge Act (STOCK Act), as amended. Several amendments were adopted to modify the legislation, including the following:
- Securities trades and financial disclosure statements of about 300,000 Executive Branch employees to be published online;
- Mortgages of members of Congress, their staff and top level Executive Branch employees to be published online;
- "Political intelligence consultants" - who gather information to sell to investors - to disclose their activities and clients, similar to the way lobbyists do.
Winter 2012 Edition
Private Investment Forum - A Publication of Private Investment Issues, Published by Marcum LLP's Alternative Investment Group*
The Winter 2012 Edition includes the following articles:
- Proposed Update on Topic 946, Financial Services - Investment Companies
- MF Global Bankruptcy to Shape Managed Futures Regulation in 2012
- Invesetment Managers Face Growing Myriad of Foreign and State Tax Issues
- What's an Honest Hedge Fund Manager to do if "Aberrational Performance" is to be Investigated, not Celebrated?
*Note: The Private Investment Forum is available only to CHFA members. You must log-in to access the newsletter.
February 3, 2012
SEC Relief: Registration for Certain Investment Advisors and Related Advisers
On January 18, 2012, the Office of Investment Adviser Regulation, part of the Division of Investment Management, issued a no-action letter (the "2012 Letter") in response to a request for guidance from the American Bar Association's Subcommittee on Hedge Funds on issues regarding the registration of certain investment advisers that are related to investment advisers registered with the Securities and Exchange Commission (the "SEC"). read more >>
For more information, visit Pillsbury's Investment Fund Law Blog.
February 1, 2012
Thune Files Reg D Amendment to STOCK ACT
A number of amendments have been offered to the Stop Trading on Congressional Knowledge Act (STOCK Act). Among these amendments are proposals that would affect Regulation D filings and would mandate lobbying registration requirements for the so-called "political intelligence industry."
Senate Majority Leader Harry Reid (D-NV) has just announced his intentions to move forward with consideration of amendments to the STOCK Act, however, his action was objected to by Senators who are attempting to force votes on non-germane amendments. Majority Leader Reid stated that unless an agreement could be reached to consider only germane amendments, he might file a procedural motion (cloture) on the STOCK Act to limit debate and to proceed with consideration of the underlying bill.
On February 1, the Senate is scheduled to continue debating the STOCK Act. If an agreement can be reached between Senate leadership, consideration of amendments could begin. While votes on amendments are possible, none have been scheduled. read more >>
Relevant Amendments include:
Thune Regulation D Amendment (SA 1477)
Grassley "Political Intelligence" Registration Amendment (SA 1493, page S220)
For more information, contact the Managed Funds Association (MFA).
January 31, 2012
Winning Over More Institutional Investors With Your Hedge Fund Marketing
This article by Bruce Frumerman, Frumerman & Nemeth Inc., first appeared in FINAlternatives on January 30, 2012 and was re-printed with permission in Pillsbury's Investment Fund Law Blog:
It's one thing when people who are not part of the hedge fund investor universe say hedge funds are money management firms that reveal too little about themselves. It's another thing entirely when those folks investing in hedge funds are complaining about this.
In January SEI released part one of its results from its fifth annual survey of institutional hedge fund investors, conducted in collaboration with Greenwich Associates, The Shifting Hedge Fund Landscape. Three of the recommendations the report offers hedge fund firm owners give a glimpse into where surveyed investors are asking hedge funds to "provide more windows into investment processes and decision-making," as SEI put it. read more >>
January 24, 2012
California and Massachusetts Propose Further Regulations
In re-proposed custody rules, the California Department of Corporations ("DOC") has reflected the most important aspects of the comment letter that Pillsbury provided on July 27, 2011, such that all transactions and short positions need not be disclosed in the quarterly account statements. In general, the re-proposed custody rules define "custody," and subject to certain limited exceptions, require that advisers with custody maintain the assets with a qualified custodian. The re-proposed custody rules also specify details with regard to audits and require compliance by advisers with specific safeguards. read more >>
For more information, visit Pillsbury's Investment Fund Law Blog.
January 19, 2012
SEC's Division of Investment Management issues no-action letter in response to American Bar Association's Subcommittee on Hedge Funds
The SEC's Division of Investment Management issued a no-action letter, available by clicking HERE, in response to a request from the American Bar Association's Subcommittee on Hedge Funds, which provides expanded relief from registration under the Investment Advisers Act of 1940 to certain entities affiliated with an SEC registered adviser. In particular, today's no-action letter confirms prior SEC staff guidance from 2005, which provided relief from registration for a special purpose vehicle ("SPV") that met the following conditions... read more >>
Click HERE to read the SEC's no-action letter.
For more information, contact the Managed Funds Association (MFA).
January 18, 2012
U.S. House of Representatives Financial Services Joint Sub-Committee Hearing: "Examining the Impact of the Volcker Rule on Markets, Businesses, Investors and Job Creation"
Sub-Committees:
Capital Markets and Government Sponsored Enterprises and
Financial Institutions and Consumer Credit.
The witness panels will include:
- Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System
- Mary Schapiro, Chairman, Securities and Exchange Commission
- Gary Gensler, Chairman, Commodity Futures Trading Commission
- Martin Gruenberg, Acting Chairman, Fedral Deposit Insurance Corporation
- John Walsh, Acting Comptroller of the Currency, Office of the Comptroller of the Currency
For the full list of panelists and to view a live webcast, visit the Committee on Financial Services site.
January 17, 2012
New CFTC Final Rule: Registration of Swap Dealers and Major Swap Participants
The Commodity Futures Trading Commission (CFTC) released a Final Rule on January 11, 2012, on the Registration of Swaps Dealers (SDs) and Major Swap Participants (MSPs). The Final Rule establishes the process for the registration of SDs and MSPs and now requires SDs and MSPs to become and remain members of a registered futures association. Included in the CFTC rulemaking is a definition of an “associated person” of an SD or MSP and an implementation of a prohibition on an SD or MSP permitting an associated person who is statutorily disqualified from registration from effecting or being involved in effecting swaps of behalf of the SD or MSP. read more >>
For more information, visit Pillsbury's Investment Fund Law Blog.
January 11, 2012
MFA Submits Rulemaking Petition on Rule 502 of Regulation D
Managed Funds Association (“MFA”) submitted a comment letter (the “Letter”) to the Securities and Exchange Commission (“SEC”) on January 6, 2012 with a rulemaking petition requesting the SEC to amend Rule 502(c) of Regulation D under the Securities Act of 1933. The Letter urges the SEC to exempt private funds from the ban on general solicitation and advertising under Regulation D.
Under the existing framework, hedge funds generally must avoid engaging in any “general solicitation” or “general advertising” in connection with offers and sales of their securities. MFA believes that changes in the securities markets and regulations have rendered the restrictions of Regulation D, enacted 30 years ago, unnecessary and increasingly unclear in practice. read more >>
For more information, visit Pillsbury's Investment Fund Law Blog or the MFA Blog.
January 2012
Merlin Securities Releases White Paper: Understanding Investor Due Diligence
Executive Summary
The investor due diligence process has evolved with the growth of the hedge fund industry. What was once a short and rather perfunctory process has grown into one which today is highly quantitative and detailed. While there is no one-size-fits-all formula for investors, one certainty is that managers who understand the components of the due diligence process will have an easier time meeting the requests of investors.
This paper, based on numerous conversations with investors, seeks to identify and describe the components of a professional due diligence process – from simple annual return figures to detailed attribution analysis. The end goal is to provide a basic roadmap that can help fund managers understand the depth and breadth of this process and ultimately to help them achieve their fundraising goals.
January 9, 2012
SEC Focuses on Investment Advisers' Use of Social Media
On January 4, 2012, the Securities and Exchange Commission (SEC) released a National Examination Risk Alert (January Alert) addressing investment adviser use of social media. Investment advisers should have policies regarding the use of social media, and the SEC outlined specific factors that need to be addressed by these policies. The SEC’s guidance could be particularly important given the “crowdfunding” legislation Congress is currently considering.
The January Alert states that investment advisers’ use of social media must comply with various provisions of the federal securities laws, including the antifraud provisions, the compliance provisions, and the recordkeeping provisions. The January Alert stresses that particular attention with regard to the use of social media must be paid to third party content (if permitted) and the recordkeeping responsibilities.
read more >>
For more information, visit Pillsbury's Investment Fund Law Blog or the SEC website.
December 28, 2011
Readoption of California Emergency Regulation -- Private Adviser Exemption
The California Commissioner of Corporations (Commissioner) has released a notice regarding readoption of the emergency regulation on private adviser exemption.
On January 5, 2012, the Commissioner will file with the Office of Administrative Law (OAL) the readoption of emergency regulations to extend the effectiveness of Rule 260.204.9 (10 C.C.R. §260.204.9) for a period of no longer than 90 days. read more >>
For more information, visit the Department of Corporations’ home page or Pillsbury's Investment Fund Law Blog.
December 6, 2011
Joint Committee Hearing Held to Discuss Tax Treatment of Financial Products
The House Ways and Means Committee and Senate Finance Committee held a hearing to discuss the Joint Committee on Taxation (JCT) report on the present law and policy issues for the taxation of financial products. They focused on the role of financial instruments, specifically derivatives, in the global economy and the potentially inconsistent tax treatment of economically similar financial instruments.
Click Here to view the member statements, witness testimony, and a video of the hearing
For more information, contact the Managed Funds Association (MFA).
December 2, 2011
MFA Submits Comment Letter to CFTC on Customer Protections for Swaps and Futures in Light of MF Global Situation
MFA submitted a comment letter to the CFTC in response to its proposed rules on “Protection of Cleared Swap Customer Contracts and Collateral; Conforming Amendments to the Commodity Broker Bankruptcy Provisions”, which supplements MFA’s prior letter on the rules dated August 8, 2011. In particular, MFA offered some additional thoughts on customer protection in the swaps and futures markets to assist the CFTC in its consideration of the lessons learned from the MF Global situation.
For more information, contact the Managed Funds Association (MFA).
November 23, 2011
"Super Committee" Fails to Reach Deficit Reduction Deal
The Joint Select Committee on Deficit Reduction, aka the "Super Committee", released a statement announcing that they had failed to reach a deal to enact the $1.2 trillion in savings required to prevent the spending reductions of the Budget Control Act of 2011 from taking effect.
For more information, contact the Managed Funds Association (MFA).
October 9, 2011
Governor Brown Signs SB 398, Amendments to California Placement Agent Disclosures/Lobbyist Registration Laws
On Sunday, October 9, 2011 Governor Brown signed Senate Bill 398 into California Law. The changes to the previous law by this newly enacted and immediately effective bill include:
1. "Revises the definition of "external manager" to include a person who seeks, or is retained by a board or investment vehicle to manage a portfolio of securities or other assets for a fee, or a person who manages an investment fund who offers, sells, or has offered and sold an ownership interest in the investment fund to a board or investment vehicle."
2. "Defines "investment fund" to mean a private equity and public equity fund, venture capital fund, hedge fund, fixed income fund, real estate fund, infrastructure fund, or other pooled investment entity that is primarily engaged in the business of investing, owning, holding, or trading securities and other assets."
3. "Defines "investment vehicle" as a corporation, partnership, limited partnership, limited liability company, association, or other domestic or foreign entity that is managed by an external manager, as specified."
4. "Revises the definition of "placement agent" to include a person or an investment fund managed by an external manager directly or indirectly hired, engaged, or retained for a fee by an external manager to raise money for investment from a public retirement system or an investment vehicle in California."
5. "Revises the exemption to local government reporting and registration requirements for placement agents to include an employee, officer, director, or affiliate of an external manager if the external manager is registered with the SEC, as specified, or any appropriate state securities regulator; the external manager is participating in a competitive bidding process, or has been awarded a contract for services and has agreed to a fiduciary standard of care, as specified."
Read more from the Senate Rules Committee Bill Analysis.
Download a copy of SB 398
July 26, 2011
SEC Adopts Large Trader Reporting Regime
Washington, D.C.– The Securities and Exchange Commission today voted unanimously to adopt a new rule establishing large trader reporting requirements to enhance the agency’s ability to identify large market participants, collect information on their trading, and analyze their trading activity.
The new rule requires large traders to identify themselves to the SEC, which will then assign each trader a unique identification number. Large traders will provide this number to their broker-dealers, who will be required to maintain transaction records for each large trader and report that information to the SEC upon request.
"May 6 dramatically demonstrated the need to enhance the SEC’s ability to quickly and accurately analyze market events. The large trader reporting rule will significantly bolster our ability to oversee the U.S. securities markets in a time when trades can be transacted in milliseconds or faster,” said SEC Chairman Mary L. Schapiro. “This new rule will enable us to promptly and efficiently identify significant market participants and collect data on their trading activity so that we can reconstruct market events, conduct investigations, and bring enforcement actions as appropriate."
The new rule has two primary components:
· First, it requires large traders to register with the Commission through a new form, Form 13H.
o · Second, it imposes recordkeeping, reporting, and limited monitoring requirements on certain registered broker-dealers through whom large traders execute their transactions.
The new rule will be effective 60 days after its publication in the Federal Register. Read Chairmain's statement >>
July 12, 2011
Qualified Client Standard Raised
An order approved by the Securities and Exchange Commission ("SEC") on July 12, 2011 will impact all SEC registered investment advisers (and certain state registered investment advisers) that provide advisory services to investment funds and/or separately managed accounts and receive performance-based compensation for such advisory services. The SEC's order raises the financial thresholds necessary for an investor to qualify as a "qualified client" under the Investment Advisers Act of 1940 ("Advisers Act").
Rule 205-3 under the Advisers Act precludes an SEC registered investment adviser from charging a client a performance-based fee (such as an incentive allocation or fee) unless the client is a "qualified client". For the avoidance of doubt, the investors in an investment fund (rather than the investment fund itself) are considered clients for purposes of this analysis. Currently, under Rule 205-3 a "qualified client" is defined as an investor that has (i) at least $750,000 in assets under management with the investment adviser or (ii) has a net worth at the time of investment of at least $1.5 million, including the value the investor's primary residence. In calculating the $750,000 assets under management threshold, an investor can include the investment that is currently being made with the investment adviser through an investment fund or separately managed account. Effective September 19, 2011, the assets under management threshold is being raised from $750,000 to $1 million and the net worth threshold is being raised from $1.5 million to $2 million. In addition, an investor can no longer include the value of his or her primary residence in calculating whether he or she meets the $2 million net worth threshold. Many states (such as California) follow Rule 205-3 and, therefore, even if your investment advisory firm is state registered (versus SEC registered) these changes may be applicable to your advisory business.
Please note that, absent further guidance from the SEC, many law firms are advising their clients that the new "qualified client" definition only applies to (i) new investors in your hedge funds and/or separately managed accounts and (ii) existing investors in your hedge funds that make an additional capital contribution. Legal Advisors currently do not believe that you need to recertify existing investors in your hedge funds or separately managed accounts that are not making additional capital contributions. Likewise, with respect to private equity funds, if an investor has already made a capital commitment to the fund, they do not believe that subsequent draw-downs of capital by the fund from such investor will require you to recertify such investor. However, as with hedge funds, any investor that is making a new capital commitment to the private equity fund would need to meet the new definition of "qualified client".
We urge you to contact your legal counsel as soon as possible in order to update the subscription documents for your investment funds, as well as any investment management agreements for separately managed accounts that you are contemplating in the future.
July 11, 2011
Private Fund Advisers: Although a Self-Regulatory Organization Could Supplement SEC Oversight, It Would Present Challenges and Trade-offs
Full Report, Highlights and Summary: U.S. Government Accountability Office
Over the past decade, hedge funds, private equity funds, and other private funds proliferated but were largely unregulated, causing members of Congress and Securities and Exchange Commission (SEC) staff to raise questions about investor protection and systemic risk. To address this potential regulatory gap, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) brought certain advisers to private funds under the federal securities laws, requiring them to register with SEC. The Dodd-Frank Act also requires GAO to examine the feasibility of forming a self-regulatory organization (SRO) to provide primary oversight of private fund advisers. This report discusses (1) the feasibility of forming such an SRO, and (2) the potential advantages and disadvantages of a private fund adviser SRO. To address the mandate, GAO reviewed federal securities laws, SEC staff's recently completed study on its investment adviser examination program that was mandated by the Dodd-Frank Act, past regulatory and legislative proposals to create an SRO for investment advisers, and associated comment letters. GAO also interviewed SEC and SRO staffs, other regulators, and various market participants and observers. We provided a draft of this report to SEC for review and comment. SEC staff provided technical comments, which we incorporated, as appropriate. Read More...
June 17, 2011
FBAR Reporting Update
Relief on FBAR reporting signature authority for accounts owned by publicly-traded or widely-held groups and affiliates of certain financial institutions
On June 17, FinCEN issued Notice 2011-2 that extends the FBAR filing date for officers and employees of investment advisors that are registered with the SEC with signatory or other authority (but no financial interest) in accounts of persons that are not registered investment companies. The individual must be an employee or officer of the SEC registered entity, not another entity within the fund complex.
Persons covered by the new extension will have until June 30, 2012 to file. The extension is applicable to FBARs for calendar year 2010 and FBARs for calendar year 2009 or earlier calendar years for which the filing deadline was properly deferred under Notice 2009-62, 2009-35 I.R.B. 260, or Notice 2010-23, 2010-11 I.R.B. 441.
This new extension does not impact FBAR fillings related to financial interests in foreign bank account. They were still due on June 30, 2011.
The IRS granted a further extension until November 1, 2011 under IRS Notice 2011-54 to persons having signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years for which the reporting deadline was previously extended.
Links to PDFs:
FBAR Filing Requirements
FBAR Deadline Extention Release
May 13, 2011
California to Issue Emergency Regulations Regarding Private Adviser Exemption
By: Michael Wu
Posted on: Pillsbury Investment Fund Law Blog
California's Department of Corporations (the "Department") intends to issue emergency regulations to address the elimination of the "private adviser exemption" under Section 203(b)(3) of the Investment Advisers Act of 1940, as amended (the "Advisers Act"). Currently, an investment adviser in California may rely on the private adviser exemption by virtue of California Department of Corporations Rule 260.204.9, which specifically refers to the private adviser exemption under Section 203(b)(3) of the Advisers Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act will eliminate the private adviser exemption under Section 203(b)(3) effective as of July 21, 2011, which in turn would affect a California investment adviser's ability to rely on Rule 260.204.9. The Department will issue emergency regulations amending Rule 260.204.9 to preserve the status quo. Therefore, California investment advisers that currently rely on the exemption from registration for private advisers will be able to continue to rely on that exemption until the Department adopts a final rule regarding private fund advisers. For more information about this new development please click here.
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