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Communiques

The latest compliance news from SEC3 and CCO3.

How to Make $13 Million Before the New Year

December 17, 2015

The SEC announced on December 13 that they have brought charges against a New Jersey man and his company for allegedly committing fraud in a pump-and-dump scheme resulting in ill-gotten profits of $33 million, of which the New Jersey man pocketed $13 million. The SEC alleges that this individual and others obtained control of nearly all available stock in four microcap companies to create the appearance of liquidity and demand for the stocks.

Read more: How to Make $13 Million Before the New Year

 

SEC Raises Awareness Surrounding CCO Outsourcing

November 10, 2015

Yesterday, the SEC indirectly affirmed that registered investment advisers and investment companies can outsource their CCO to an unaffiliated third party and satisfy their 206(4)-7(c) and 38(a)-1(a)(4) obligations. However, advisers and funds that do so must ensure they comply with all aspects of the respective Compliance Rules, including ensuring the outsourced CCO is qualified to serve as the CCO.  The SEC's announcement came via a risk alert  that was based on an SEC examination initiative focused on advisers and funds that outsource their Chief Compliance Officers.   Consistent with other risk alerts, the SEC raised their concerns around the subject at hand, and outlined some best practices.  The examination included 20 firms composed of both investment advisers and investment companies as part of the Outsourced CCO Initiative.

Read more: SEC Raises Awareness Surrounding CCO Outsourcing

 

SEC Provides Clarity on When and How the Enforcement Division Goes After CCOs

November 05, 2015

Yesterday, Director of the Enforcement Division of the Securities and Exchange Commission, Andrew Ceresney was the keynote speaker at the National Society of Compliance Professionals National Conference in Maryland. His remarks highlighted several hot topics relating to Chief Compliance Officers ("CCOs") including CCO liability and recent enforcement actions. Director Ceresney laid out a three-fold plan in his speech. First, he discussed recent cases that support the compliance position receiving adequate resources. Second, he addressed the significance of Rule 206(4)-7 (the "Compliance Rule"). Last, he addressed recent cases brought against CCOs.

Read more: SEC Provides Clarity on When and How the Enforcement Division Goes After CCOs

 

The SEC Outdoes Itself Again Announcing A Record Year for Enforcement Action

October 22, 2015

The Securities and Exchange Commission announced on October 22, 2015 a comprehensive report describing the results of enforcement actions taken against advisers in fiscal year 2015, which ended in September. The results are noteworthy, as they highlight the fact that the SEC is continuing to bring first of their kind cases against advisers across the securities industry.

Read more: The SEC Outdoes Itself Again Announcing A Record Year for Enforcement Action

 

The Hunt Continues: SEC Goes After Large Private Equity Firm for Undisclosed Fees

October 08, 2015

On October 7, 2015, the SEC announced a large settlement with a private equity firm charged with failure to disclose. The SEC said that the firm failed to sufficiently disclose to its investors details about fees they collected from companies it sold or took public, as well as discounts the firm received on some legal fees that weren't passed on to the fund investors. Nearly $29 million of the settlement will be distributed to affected fund investors, the SEC said. The SEC alleged that the firm breached its fiduciary duty and failed to implement necessary compliance policies and procedures to mitigate the risk of conflicts of interest.

Read more: The Hunt Continues: SEC Goes After Large Private Equity Firm for Undisclosed Fees

 

Adviser Settles SEC Cyber Enforcement Action

September 24, 2015

The Securities and Exchange Commission announced on September 22, 2015 that an investment adviser has agreed to settle charges that it failed to establish the required cybersecurity policies and procedures in advance of a breach that compromised the personally identifiable information (PII) of approximately 100,000 individuals, including thousands of the firm’s clients. The SEC order outlined that the firm failed "entirely" to protect its clients from a July 2013 cyber-attack that was later traced to China, U.S. regulators said on Tuesday. The investment advisory firm will pay $75,000 to settle the civil charges.

Read more: Adviser Settles SEC Cyber Enforcement Action

 

First Case Brought Under Distribution-in-Guise Initiative

September 22, 2015

On September 21, 2015, the Securities and Exchange Commission charged  an asset manager with improperly using mutual fund shareholder's assets to pay two unnamed brokerage firms to market and distribute its funds. The SEC charged the manager with mischaracterizing distribution payments as sub-Transfer Agent services such as recordkeeping and other shareholder servicing.

Read more: First Case Brought Under Distribution-in-Guise Initiative

 

New Cybersecurity Risk Alert Announcing Second Round of Cybersecurity Sweep Exams

September 17, 2015

On September 15, 2015, the Office of Compliance Inspections and Examinations ("OCIE") issued a new Risk Alert relating to cybersecurity. This Risk Alert reemphasized the intention of the Commission to conduct a second phase of cybersecurity examinations of Investment Adviser firms showing the Commission is keeping the promises made in the 2015 Examination Priorities released in January 2015.

Read more: New Cybersecurity Risk Alert Announcing Second Round of Cybersecurity Sweep Exams

 

Anti-Money Laundering Regulation—Third Time’s the Charm?

August 28, 2015

The Financial Crimes Enforcement Network (FinCEN) proposed on August 25, 2015, a rule that would require certain registered investment advisers to have in place anti-money laundering (AML) policies and procedures and to also report suspicious activity to FinCEN as required by the Bank Secrecy Act (BSA). This is the third try in 12 years by FinCEN to require advisers to comply with AML rules. Previous proposals in 2003 and 2007 were withdrawn. Along with the current proposed rule requiring the adoption of AML programs, FinCEN announced the intention to include investment advisers in the definition of “financial institution” which would subsequently require them to file Currency Transaction Reports (CTRs) for transactions exceeding $10,000 and keep records relating to the transmittal of funds. Currently, the BSA does not expressly include “investment adviser” among its list of entities defined as a financial institution.

Read more: Anti-Money Laundering Regulation—Third Time’s the Charm?

 

Cybercrime Meets Insider Trading

August 14, 2015

The SEC announced on Tuesday charges against 32 defendants involved in an unprecedented illicit scheme deployed in the US and overseas. The scheme involved hacking websites of newswire services and stealing unpublished information about numerous public companies in order to enter into illicit trades that resulted in record profits.

Read more: Cybercrime Meets Insider Trading

 

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Newsletter

Get the latest compliance news and insights - delivered weekly. The SEC3 Communique covers all compliance topics. CCO3 focuses on CCO topics.
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Communiques

SEC3 Newsletter

Commentary: How Compliance Officers & Firms Can Help Limit CCO Personal Liability This article originally appeared on the Thomson Reuters Regulatory Intelligence subscription service for compliance and risk professionals and is... read more »

Wishing One-and-All a Happy, Healthy and Prosperous New Year

We hope each of you found some peace and tranquility in the company of loved ones this holiday season and want to wish one-and-all a happy, healthy and prosperous New... read more »

Understanding How to Mitigate Liability and Navigate Insurance Options (Part II)

In June, we shared our thoughts around common insurance gaps and insurance riders that CCOs as well as managers should understand. One of the gaps we shared related to pre-claim... read more »

Cybersecurity - What have we learned and what have we done?

Regulatory Landscape In April 2015, the Securities and Exchange Commission ("SEC's") Division of Investment Management issued a guidance update, identifying cybersecurity as a critical issue. Several regulators are in fact focusing... read more »

Gatekeepers in SEC Crosshairs

Ever since the enforcement cases were announced as part of the SEC’s “Operation Broken Gate,” the SEC enforcement division has continued to ramp up scrutiny of gatekeepers including third-party service... read more »

Anna M. Bencrowsky, CRCP, CMFS Joins SEC3

We are pleased to announce that Anna M. Bencrowsky, CRCP, CMFS has joined SEC3 as a Senior Consultant. Prior to joining SEC3, Anna held several executive compliance positions. Anna recently retired... read more »

Events

Upcoming Events - September & October 2017

Upcoming Events Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. SEC3 is teaming up with industry experts in NYC to discuss...

May 23, 2017 - Webcast: WannaCry Ransomware: Were You Really Protected or Just L…

When: Tuesday, May 23rd, 2017 | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. We...

June 14, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Willkie Farr & Gallagher LLP | 600 Travis Street | Suite 2310 | Houston, TX Barry Barbash from Willkie Farr & Gallagher LLP,...

June 13, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Haynes and Boone, LLP | 2323 Victory Avenue | Suite 700 | Dallas, TX 75219 Validated parking is available in the garage attached...

May 31, 2017 - Chicago

9:00-9:30 a.m - Networking and Continental Breakfast 9:30-11:00 a.m - Program Location: Baker & McKenzie LLP | 300 East Randolph Drive | Suite 5000 | Chicago, IL 60601 Kristin Gonzalez and Jerome Tomas...

May 17, 2017 (NYC WIMF)

This event is by invitation only. Please email info@seccc.com to learn more.

May 15, 2017 (NYC Chief Compliance Officer Roundtable)

9:00-9:30am - Networking and Continental Breakfast 9:30-11:00am - Program Location: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone:...

Webcast: The Most Insidious Cybersecurity Threat Is Also The Least Understood

When: Tuesday, April 25th | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. Ransomware, the...

CCO Liability (Part III): Managing Liability Webinar

In this webinar, panelists discuss indemnifications and insurance as potential remedies to address the direct financial risks to a CCO. Attendees will learn: What terms and conditions should Chief Compliance Officers be...

Webinar: CCO Liability (Part III): Managing Liability: Navigating Indemnities an…

When: Tuesday, February 21, 2017 Schedule: 11:00am ET / 10:00am CT / 9:00am MT / 8:00am PT / 7:00am AT Description of Webinar: The National Society of Compliance Professionals is pleased to host...

Webcast: SEC 2017 Examination Focus Area – Cybersecurity Testing

Penetration Testing & Vulnerability Assessments - Examining the SEC & FINRA Requirements When: Wednesday, January 25th | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder,...

Chief Compliance Officer Roundtable: Breakfast Briefing

When: October 20, 2016 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Thomas Westle and Janaya...

Practicing Law Institute - Hedge Fund Management 2016

When: September 15, 2016 Where: New York & concurrent webcast | 1177 Avenue of the Americas | New York, NY 10036 Schedule: 9:00 am – 5:00 pm Janaya Moscony, President of SEC3 will...

CHIEF COMPLIANCE OFFICER ROUNDTABLE: BREAKFAST BRIEFING

When: April 13, 2016 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 22nd Floor Boardroom Thomas Westle and Janaya Moscony, along with industry experts,...

COMPLIANCE SCIENCE SUMMIT 2015

When: November 17, 2015 Where: Convene Midtown East | 730 Third Avenue | New York, NY 10017 Janaya Moscony, President, SEC Compliance Consultants, Inc. will be moderating a...