Investment Management

SEC Proposed Amendments to Advertising and Solicitation Rules

In early November 2019, the Securities and Exchange Commission ("SEC") released proposed amendments to the advertising rule and solicitation rule under the Investment Advisers Act of 1940 ("Advisers Act"), Rules 206(4)-1 and 206(4)-3, respectively. The proposed amendments attempt to modernize the rules to reflect technological changes, today's investor expectations, and current industry ...

Massachusetts Advances Regulations Imposing Fiduciary Duty on Broker-Dealers

In November 2019, the Commonwealth of Massachusetts issued revised regulations imposing a fiduciary standard upon broker-dealers, although the regulations would not apply to a broker-dealer who is a fiduciary under ERISA, a status currently in limbo since the invalidation by the Court of Appeals for the Fifth Circuit of the Department of Labor’s conflict of interest/fiduciary rule.  In issuing ...

Follow-up on SEC Guidance Regarding Broker-Dealers and Investment Advisors

On June 5th, the SEC issued a four-part package of guidance with respect to the activities of broker-dealers and investment advisors. We prepared an Investment Management Law Alert focusing on one of those components, Regulation Best Interest ("Reg BI"). On July 12th, the SEC guidance was published in the Federal Register. Printing the June 5th release in the Federal Register does not change ...

SEC Issues Final Regulation BI

The SEC, by a 3-1 party line vote, issued in a timely fashion its final regulations with respect to broker-dealer conduct, referred to as Regulation Best Interest ("Regulation BI"). The SEC's related press release can be found by clicking here. Regulation BI is separate and distinct from the fiduciary duty that has been developed under the Advisers Act. It is not intended to establish a private ...

IRS Releases Round Two of Proposed Regulations for Qualified Opportunity Funds

On April 17, 2019, the Internal Revenue Service ("IRS") issued the second round of proposed regulations with respect to qualified opportunity funds ("QOFs"). While the first round of proposed regulations, issued in October of 2018, established a solid basis on which to build, this second round addresses many of the questions that had remained open and unclear since last October.

U.S. Supreme Court Finds Non-"Makers" Can Violate Rule 10b-5

On March 27, 2019, the U.S. Supreme Court ruled in Lorenzo v. SEC, No. 17-1077 (U.S. Mar. 27, 2019) that a party who is not a “maker” under Securities and Exchange Commission Rule 10b-5(b) can nevertheless be found to have violated Rule 10b-5(a) and (c) and other securities laws including §17(a)(1) of the Securities Act of 1933. Rule 10b-5 makes it unlawful:

Nevada Issues Proposed Regulations Regarding Fiduciary Standards

While the SEC works on finalizing its proposed Regulation Best Interest, there continues to be significant activity at the state level that will cover, in varying degrees, the same subject matter. The comment period in New Jersey has closed on its preproposal to issue fiduciary standards for broker-dealers and proposed regulations could be issued in the near future. The Investment Transparency ...

OCIE Identifies Common Deficiencies Relating to Best Execution

On July 11, 2018, the Office of Compliance Inspections and Examinations ("OCIE") of the Securities and Exchange Commission published a Risk Alert relating to best execution deficiencies on the part of investment advisers. Under section 28(e) of the Securities and Exchange Act of 1934 (the "Act"), as a fiduciary, an adviser with responsibility to direct client trades is obligated to seek "best ...

Recent DOL Settlement Agreements with ESOP Trustees

The spate of recent settlements between the U.S. Department of Labor ("DOL") and trustees of employee stock ownership plans ("ESOP") is a signal that trustees and other fiduciaries should reassess their fiduciary obligations. While these settlement agreements do not have the force of law, they signal the DOL's current position with respect to the duties of ESOP trustees and fiduciaries in certain ...

Recent FINRA Notices Seek Comment on Proposed Amendment to Quantitative Suitability and Efficacy of Supervision Rule

On the heels of the Security and Exchange Commission's (the "Commission") April 18, 2018 release of the proposed Regulation Best Interest rule package ("Regulation BI") (which was covered in our April 20, 2018 Law Alert), the Financial Industry Regulatory Authority ("FINRA") on April 20, 2018 issued Regulatory Notice 18-13 ("Notice 18-13") seeking comment on its proposed amendments to the ...