To mark the new year, registered investment advisers and funds should take a look back at the activity undertaken by the Securities and Exchange Commission (SEC) and its staff during 2019 and carefully consider steps to be taken to implement new and amended regulations adopted by the SEC throughout the year. The start of a new year is also a good time to evaluate what remains on the SEC's regulatory agenda.
The Securities and Exchange Commission recently issued an interpretive release designed to reaffirm, and in some cases clarify, the standard of conduct that investment advisers owe to their clients. While the interpretive release includes no new regulation, it clarifies the type of disclosure, policies and procedures that advisers should adopt to ensure that they continue to operate in a manner that is consistent with their fiduciary obligations.
The end of 2018 was notable for two Securities and Exchange Commission (SEC) enforcement actions against private equity fund managers for violations of the Investment Advisers Act. The actions demonstrate the SEC's continued focus on private equity fund managers' use of operating partners or consultants and the particular issue of how the expenses of such operating partners or consultants are allocated.
The Financial Industry Regulatory Authority (FINRA) recently published its 2019 Risk Monitoring and Examination Priorities Letter. Unlike previous letters, the 2019 letter focuses primarily on priorities that FINRA considers to be materially new. The first highlighted priority, online distribution platforms, will be of particular interest to the growing number of companies providing financial services through online platforms.
President Trump recently signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act. While much of the act was designed to provide smaller financial institutions and community banks with relief from regulations implemented under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, Title V includes provisions designed to encourage capital formation. Among other things, the act expands the scope of the blue sky registration exemption.
According to the Securities and Exchange Commission, its recent release proposing an interpretation of the standard of conduct for investment advisers is intended to "reaffirm – and in some cases clarify – certain aspects of the fiduciary duty that an investment adviser owes to its clients under section 206" of the Investment Advisers Act 1940. However, the proposed interpretation, if adopted, appears to expand the parameters of the fiduciary duty standard and could require advisers to take on additional regulatory obligations.
The Securities and Exchange Commission (SEC) recently issued a public statement regarding exchanges and other secondary trading platforms that list or facilitate the trading of coins and tokens online. The statement emphasises that platforms offering the trading of digital assets that are securities must register with the SEC as a national securities exchange or operate under an exemption from such registration.