Investment Management

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 ...

DOL Issues Temporary Enforcement Policy with Respect to Investment Advice Fiduciaries

Today, the Department of Labor ("DOL") issued Field Assistance Bulletin 2018-02 (the "FAB"), which indicates that both the DOL and the IRS will continue to rely upon its previously announced temporary enforcement policy, pending the issuance of additional guidance by the DOL. The FAB states that during the period from June 9, 2017 until after regulations or prohibited transaction exemptions or ...

Another Win for the Plan Fiduciary - Fifth Circuit Follows Dudenhoeffer Standards in RadioShack Case

On February 6, 2018, the Court of Appeals for the Fifth Circuit in Singh v. RadioShack Corp. aligned with the Second Circuit and affirmed the dismissal of Plaintiffs' proposed class action.  The suit alleged that plan fiduciaries breached their fiduciary duties of prudence and loyalty by continuing to invest retirement assets of the employee stock ownership plan ("ESOP") in company stock, despite ...

SEC Proposes Three Related Releases on Retail Investor Matters

I. Introduction After a delay of almost eight years from the date that the SEC is authorized under the Dodd-Frank Act to provide for fiduciary standards for broker-dealers and investment advisers, the SEC, by a 4-1 vote, issued a detailed set of proposed rules in Release No. 34-83062 regulating the standard of conduct for broker-dealers, referred to as "Best Interest Regulation."While three ...