On June 8th, the SEC Division of Examinations (the “Division”) published a risk alert expanding the areas of focus for its ongoing examination sweep of compliance with Rule 206(4)-1 (the “Marketing Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”). The Division announced its initial focus areas in a September 2022 risk alert, covering (1) policies and procedures, (2) substantiation, (3) performance advertising and (4) books and records. It has not yet released any observations from the sweep, nor has there been guidance on the Marketing Rule’s requirements from the Division of Investment Management. This risk alert’s addition of the “general prohibitions” to the sweep’s focus areas could signal the staff’s intent to issue deficiencies for violations of the broad and undefined “fair and balanced” and “materially misleading” standards. The risk alert also adds, as expected, endorsements and testimonials to the areas of focus, which is likely an unwelcome addition for advisers having difficult negotiations with placement agents over those requirements.
Continue Reading SEC Expands the Scope of Its Marketing Rule Examination Sweep – But Still No GuidanceThe First Shoe Drops—SEC Adopts the Initial Amendments to Form PF
On May 3, 2023, the U.S. Securities and Exchange Commission (“SEC”) adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers (“RIAs”) to private funds. The amendments are part of the SEC’s effort to bolster the Financial Stability Oversight Counsel’s (“FSOC’s”) ability to monitor systemic risk, but will also allow the SEC’s Divisions of Examinations and Enforcement to more quickly and specifically identify RIAs and issues for examination and investigation. Coupled with the SEC’s increasing use of artificial intelligence and other data-mining techniques, the amendments will provide a trove of information in areas of focus for SEC staff.
Continue Reading The First Shoe Drops—SEC Adopts the Initial Amendments to Form PFFrance Revises Internal Investigation and Corporate Enforcement Guidelines
By Cleary Gottlieb on
On March 14, 2023, the French Anticorruption Agency and the National Financial Prosecutor’s office jointly issued updated guidance about anticorruption internal investigations (Les enquêtes internes anticorruption – Guide pratique, the “Guide”).
This follows the announcement earlier this year of important revisions to the PNF’s corporate enforcement guidelines (Lignes directrices sur la mise en œuvre de la convention judiciaire d’intérêt public, the “Guidelines”).
Please click here to read the full alert memorandum.
SEC Continues to Shine Light on Cyber and Data Security: Proposes Amendments to Regulation S-P
By Robin M. Bergen, James R. Burns, Ben Rosenblum & Joe Wakeford on
On March 15, 2023, the U.S. Securities and Exchange Commission (“SEC”) issued proposed amendments (the “Proposal”) to Regulation S-P, which governs the treatment of nonpublic personal information about consumers by broker-dealers, registered investment advisers, registered investment companies, and transfer agents. The Proposal would broaden the existing “safeguards” and “disposal” rules under Regulation S-P, and would require the entities to adopt “incident response programs.”
Continue Reading SEC Continues to Shine Light on Cyber and Data Security: Proposes Amendments to Regulation S-PSEC Risk Alert Identifies Key Compliance Issues for New (and Not New) Registered Advisers
By Robin M. Bergen, Amber V. Phillips & Lyric Gupta on
Posted in Compliance, SEC Guidance
On March 27th, the SEC Division of Examinations (the “Division”) published a risk alert affirming its long-standing interest in conducting reasonably prompt examinations of newly registered advisers. The risk alert provides an examination ‘how to’ guide for new advisers, describing the materials those advisers should expect to provide to staff in an examination. Advisers should expect exam staff to focus on (i) proper identification and mitigation of conflicts of interest; (2) adequacy of client disclosures; and (3) effectiveness of compliance programs.
Continue Reading SEC Risk Alert Identifies Key Compliance Issues for New (and Not New) Registered AdvisersItaly Implements European Directive on Whistleblowing
By Cleary Gottlieb on
On March 9, 2023, the Council of Ministers approved Legislative Decree No. 24 of March 10, 2023 (the “Decree”) implementing Directive (EU) 2019/1937 on whistleblowing(the “Directive”), which partially amends the draft decree that was preliminarily approved on December 9, 2022 (the “Draft Decree”).
Continue Reading Italy Implements European Directive on WhistleblowingDepartment of Justice Announces Revisions to Criminal Division Policies
On March 3, 2023, Assistant Attorney General (“AAG”) Kenneth A. Polite announced revisions to two Department of Justice (the “DOJ”) Criminal Division policies and the launch of a new pilot program, as well as a forthcoming re-issuance of the FCPA Resource Guide in Spanish later this month.[1] His announcement follows a speech by Deputy Attorney General (“DAG”) Lisa O. Monaco the day before previewing the policy changes.[2] In parallel, the DOJ published (1) a new Compensation Incentives and Clawback Pilot Program (the “Pilot Program”),[3] (2) revised Evaluation of Corporate Compliance Programs (“ECCP”) guidance,[4] and (3) a revised Memorandum on the Selection of Monitors in Criminal Division Matters (the “Corporate Monitor Memorandum”).[5]
Continue Reading Department of Justice Announces Revisions to Criminal Division PoliciesDOJ and SEC Charge Healthcare Executive With Insider Trading Through a Rule 10b5-1 Trading Plan, Marking DOJ’s First Such Indictment
By Matthew C. Solomon, Adam Fleisher, Tom Bednar & Sarah Choi on
On March 1, 2023, the U.S. Department of Justice and the Securities and Exchange Commission announced insider trading charges against Terren Peizer, the CEO and Chairman of a California-based healthcare services company called Ontrak, Inc. (the “Company”) for allegedly selling Company securities while in possession of material, non-public information (“MNPI”) that one of the Company’s major customers was likely to cancel its contract.
Continue Reading DOJ and SEC Charge Healthcare Executive With Insider Trading Through a Rule 10b5-1 Trading Plan, Marking DOJ’s First Such IndictmentU.S. Attorney’s Offices Issue Nationwide Corporate Voluntary Self-Disclosure Policy
On February 22, 2023, the Department of Justice announced a new corporate Voluntary Self-Disclosure Policy for U.S. Attorney’s Offices nationwide (the “USAO Policy”).
Continue Reading U.S. Attorney’s Offices Issue Nationwide Corporate Voluntary Self-Disclosure PolicyFinCEN Proposes Rule Regarding Access to Beneficial Ownership Information under the Corporate Transparency Act
By Derek M. Bush, Patrick Fuller, Michael G. Sanders & Rishi Kumar on
Posted in Corporate Enforcement, Financial Institutions
On December 15, 2022, the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury announced a Notice of Proposed Rulemaking (the “Access Rule NPRM”)[1] to implement the requirements of the Corporate Transparency Act (“CTA”) with respect to access to beneficial ownership information (“BOI”) reported to FinCEN under the CTA.[2] The Access Rule NPRM would implement the CTA’s provisions on who may access BOI held by FinCEN, the circumstances under which access may be granted, and the conditions regarding use, security, and oversight of BOI. Separately, it proposes an approach to the use of “FinCEN identifiers” for corporate entities that FinCEN’s final BOI Reporting Rule left unaddressed.
Continue Reading FinCEN Proposes Rule Regarding Access to Beneficial Ownership Information under the Corporate Transparency Act