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Communiques

The latest compliance news from SEC3 and CCO3.

Are you ready for your next SEC exam?

May 17, 2016

We know first-hand the stress involved when the SEC calls to inform you that they are coming onsite to conduct an exam.  Not only have many on our team been examiners, but we have also received the call as in house CCOs.  Obviously, the most important thing is to be certain that there is no fraudulent activity occurring at your firm.  Second to that, preparedness for an SEC exam makes all the difference in the direction an exam could take; especially with the risk based approach the SEC is taking to exams.

Read more: Are you ready for your next SEC exam?

 

New Year, Same Requirements

February 10, 2016

Individual liability is quickly rising to the forefront of the radar of the Securities and Exchange Commission. In fact, over the last five years, 80% of SEC enforcement cases have involved charges being brought against individuals. In a recent speech, Andrew Ceresney explained this increased focus stating "Holding individuals accountable for their wrongdoing is critical to effective deterrence and, therefore, the Division considers individual liability in every case". In a separate speech also highlighting individual liability, Mr. Ceresney noted that many of the recent enforcement cases brought against individuals make it clear that the SEC will "aggressively pursue business line personnel and firms who mislead or deceive".

Read more: New Year, Same Requirements

 

Happy New Year and Important Reminders Regarding CCO Liability

January 15, 2016

As we begin a new year, our thoughts turn to our clients and friends who have made our progress possible. We are grateful to our clients for the opportunity to work with them and our friends for their support, counsel and encouragement.

In this spirit, we want to wish everyone a happy, healthy and prosperous New Year and on behalf of clients and friends, make a charitable contribution. While there are many worthwhile charities we looked for one that not only provides financial assistance, but also "thought-leadership" and meaningful guidance to improve the lives of those less fortunate. We chose the Calvert Foundation, a unique organization that partners with entities around the world to promote important initiatives to improve the lives of all of us. This global map highlights many of the true successes the Calvert Foundation has had a hand in.

Back to Compliance: As 2016 begins in force, we would also like to share with you some important insights relating to CCO liability and outsourcing CCO responsibilities that we believe compliance professionals should have at the forefront of their minds in the first days of 2016. Please look for the second installment on this topic to be published in February.

Read more: Happy New Year and Important Reminders Regarding CCO Liability

 

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

 

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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.
tip: check both to keep informed!

Communiques

2018 - Are you ready for your next SEC exam?

The pool of registered investment advisers that will be subject to an SEC exam in 2018 is at the highest level seen in years. The SEC projects it will examine... read more »

Navigating the Changes to Form ADV

On August 25, 2016, the U.S. Securities and Exchange Commission adopted numerous substantive and technical amendments to Form ADV. While the adopting release required advisers to begin complying with the... read more »

Overlooked Benefits of E&O/D&O

While asset managers should always be aware of the protections provided by their E&O/ D&O coverage, there are more reasons than ever to think about it now. The SEC continues to... read more »

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 »

Events

Webinar: 2018 SEC Exam Priorities & Recent Exam Highlights

Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. Tobin S. Cochran, Managing Member/President of Focus 1 Associates, LLC and...

Chief Compliance Officer Roundtable: Breakfast Briefing - February 7, 2018

When: February 7, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

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...