Robin M. Bergen

Subscribe to Robin M. Bergen's Posts
Contact: Read more about Robin M. Bergen

On December 29, 2022, in a closely-watched insider trading case, the Second Circuit decided United States v. Blaszczak (“Blaszczak II”).[1]  The Supreme Court in January 2021 had vacated and remanded the Second Circuit’s prior decision in light of Kelly v. United States (also known as the “Bridgegate” decision).  On remand, a divided panel of the Second Circuit found that trading on the basis of certain confidential government information related to pending regulation does not give rise to violations of the criminal wire fraud and securities fraud statutes.…

Continue Reading Second Circuit Decision Limits the Ability to Prosecute Instances of Trading on Confidential Government Information

The U.S. Securities and Exchange Commission recently announced the Division of Enforcement’s results for fiscal year 2022, the first full year for the Division under the leadership of both Chair Gary Gensler and Director of Enforcement Gurbir Grewal.

Results were up from the year before, with a record $4.2 billion in civil penalties reflecting the…

On October 26, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed a new rule under the Investment Advisers Act of 1940 (“Advisers Act”) imposing due diligence, recordkeeping and reporting obligations on registered investment advisers (“RIAs”) who outsource certain key “covered functions” of the adviser’s business to third parties, including affiliates.  The Proposal represents another step toward more substantive regulation of RIAs by the SEC under Chairman Gensler, and will impose real costs and operational risk on RIAs.
Continue Reading New Requirements for Outsourcing by Advisers: Proposed SEC Rule Brings More Obligations and Scrutiny

On September 30, 2022, the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury adopted a final rule (the “Final Rule”) to implement the beneficial ownership reporting requirements of the Corporate Transparency Act (“CTA”), as part of the Anti-Money Laundering Act of 2020.  The CTA and Final Rule require a range of U.S. entities, and non-U.S. entities registered to do business in the United States, to report information on their underlying beneficial owners who are individuals to FinCEN.  Notably, certain investments advisers exempt from registration and subsidiaries of private fund clients of investment advisers will be subject to these reporting requirements.
Continue Reading FINCEN’s Corporate Beneficial Ownership Reporting Rule: Significance for Investment Advisers

On September 9, 2022, the Securities and Exchange Commission (“SEC”) announced charges against several investment advisers for failure to comply with requirements of Section 206(4) of the Advisers Act and the rules promulgated thereunder (commonly known as the “Custody Rule”) and deficiencies related to Form ADV filings.  The advisers included BiscayneAmericas Advisers L.L.C., Garrison Investment Group, LP, Janus Henderson Investors US LLC, Lend Academy Investments, LLC, Polaris Equity Management, Inc., QVR, LLC, Ridgeview Asset Management Partners, LLC, Steward Capital Management, Inc., and Titan Fund Management, LLC.  The advisers all agreed to settle the charges and will pay combined penalties of over $1 million.
…
Continue Reading SEC Releases Slate of Enforcement Actions Against Advisers Related to Custody Rule Violations and Form ADV Deficiencies

On August 10, 2022, the U.S. Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) jointly adopted proposed amendments to Form PF that would significantly expand reporting by private equity advisers and hedge fund advisers of both their investments and structures (the “Proposal,” available here).  The Proposal is part of an ongoing effort to bolster the SEC’s regulatory oversight of private fund advisers and investor protection efforts, while also purportedly enhancing the Financial Stability Oversight Counsel’s (“FSOC”) ability to monitor systematic risk. …
Continue Reading Form PF, Take Two: The SEC and CFTC Propose Further Amendments To Reporting Obligations For Private Equity and Hedge Funds

On June 13, 2022, the Securities and Exchange Commission charged three Charles Schwab investment adviser subsidiaries—Charles Schwab & Co., Inc.; Charles Schwab Investment Advisory, Inc. (“CSIA”); and Schwab Wealth Investment Advisory, Inc. (“SWIA,” and together with Charles Schwab & Co., Inc. and CSIA, “Charles Schwab”)—with violations of the Investment Advisers Act of 1940 for alleged misconduct associated with its robo-advisor, Schwab Intelligent Portfolios (“SIP”).  Unlike most other robo-advisers, Charles Schwab did not charge an advisory fee for the SIP service.  However, Charles Schwab required its SIP clients to hold pre-set amounts of cash—rather than investing in equities under market conditions where equities were outperforming cash—that was then loaned out by Charles Schwab Bank at higher interest rates than it paid to the SIP clients, resulting in a profitable spread for Charles Schwab and the equivalent of a hidden fee for its clients, since holding cash lowered their returns.  Charles Schwab was ordered to pay almost $46 million in disgorgement, more than $5 million in prejudgment interest, and $135 million as a civil penalty.  The $187 million in total sanctions will be returned to investors.  Charles Schwab also agreed to an independent consultant to conduct a “comprehensive review” of its compliance policies, and agreed to provide ongoing cooperation to the SEC in an unusual provision—a sign that there may be additional charges yet to come.
…
Continue Reading SEC Brings Robo-Adviser Case Against Charles Schwab for Misleading Clients About Hidden Costs

On May 25, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed amendments to rules and related reporting forms under the Investment Advisers Act of 1940 (the “Advisers Act”) and the Investment Company Act of 1940 (the “Investment Company Act”) that are ostensibly intended to provide additional transparency regarding the use of environmental, social, and governance (“ESG”) factors by investment advisers and investment companies (the “Proposal,” available here), but which will also give SEC Examination and Enforcement staff additional tools to track and target advisers and funds pursuing an ESG strategy.
Continue Reading New ESG Rule Proposal Raises the Stakes under SEC’s New Marketing Rule

On May 23, 2022, the Securities and Exchange Commission (“SEC”) announced the inaugural enforcement action against an investment adviser by its much hyped ESG Task Force.[1]  As expected, this case does not find fault with the concept of ESG or conduct suggesting actual wrongdoing.  Instead, consistent with bread and butter policy for the SEC’s Enforcement Division, the SEC charged BNY Mellon Investment Advisers (“BNYMIA”) for failing to act consistently with its ESG disclosures to investors and having inadequate policies and procedures to prevent the misleading disclosures.  While the penalty of $1.5 million could be seen as small for this SEC, BNYMIA was charged with negligent fraud under Section 206(2), Section 206(4) and Rule 206(4)-8 under the Advisers Act, in addition to compliance violations.
Continue Reading SEC’s ESG Task Force Comes Out Swinging with Inaugural Enforcement Action Ahead of New ESG Disclosure Rules

On March 30, 2022, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2022 Examination Priorities (“2022 Priorities”).  The Division is undergoing extensive leadership changes, with the recent departures of several top officials.  Consistent with the aggressive agenda set by Chair Gensler for the SEC generally, the Division has returned to its pre-pandemic caseload, conducting over 3,000 exams in fiscal year 2021, issuing over 2,000 deficiency letters, and making 190 referrals to the Enforcement Division.  Despite the management changes, the 2022 Priorities generally retain perennial risk areas as the core focus, but include several new and emerging risk areas reflecting the policy goals espoused by Gensler in recent proposed rule releases and public statements.
Continue Reading SEC Division of Examinations Reinforces Gensler Initiatives in its 2022 Exam Priorities