Exam Alert: SEC alters investment adviser registration and reporting requirements

The SEC has adopted changes to the registration and reporting requirements that private fund advisers face. Unless the private fund adviser meets Continue reading

The SEC has adopted changes to the registration and reporting requirements that private fund advisers face.  Unless the private fund adviser meets an exemption, they must register with the SEC.  Exemptions from registration are provided for venture capital fund advisers and private fund advisers with less than $150 million in assets under management in the U.S., though these advisers must still report certain business information.  Foreign private advisers are exempt from the registration and reporting requirements.

Source: SEC Release 2011-133

Exam Alert: Mid-sized advisers must register with the states

The SEC has modified the standards for federal investment adviser registration. They have raised the bar for federal registration from Continue reading

The SEC has modified the standards for federal investment adviser registration.  They have raised the bar for federal registration from $25 million in assets under management to $100 million.  Advisers with between $25 million and $100 million in assets under management fall into the new category of “mid-sized advisers,” which must register with the states unless they qualify for federal registration based on other criteria.  Mid-sized advisers have until June 28, 2012 to register at the state level.

Source: SEC Release 2011-133

Exam Alert: SEC approves exemption from investment adviser registration for “family offices”

On June 22, 2011, the SEC approved an exclusion for “family offices” from the regulations of the Investment Adviser Act of 1940. The new exemption applies Continue reading

On June 22, 2011, the SEC approved an exclusion for “family offices” from the regulations of the Investment Adviser Act of 1940.  The new exemption applies to a company that only provides advice to “family clients,” is wholly owned by “family clients,” and does not hold itself out to the public as an investment adviser.  “Family clients” include family members, key employees, and certain other clients.

Family offices were typically covered under the exemption for advisers with fewer than 15 clients, but that exemption will be removed under Dodd-Frank changes.

Relevant to the Series 7, 6, 65, 66, 63, 24 and Series 26 exams.

Source: SEC Release 2011-134

Exam Alert: FINRA pushes back implementation date for higher customer care standards

FINRA has changed the date on which its new know-your-customer and suitability rules will take effect. The new effective date is Continue reading

FINRA has changed the date on which its new know-your-customer and suitability rules (previously mentioned in this exam alert) will take effect.  The new effective date is July 9, 2012.  FINRA has also answered questions from firms about the new rules; the questions and answers may be found here.

http://www.finra.org/Industry/Regulation/Notices/2011/P123702

Exam Alert: SEC approves consolidated FINRA rules on books and records

The SEC has approved a new set of FINRA Rules governing books and records. These rules will be effective December 5, 2011. The rules state that records Continue reading

The SEC has approved a new set of FINRA Rules governing books and records.  These rules will be effective December 5, 2011.  The rules state that records for which no retention period is given under FINRA or Securities Exchange Act rules must be kept for six years.  Firms must now record the name of the agent(s), if any, responsible for an account.  Relevant to the Series 6, 7, 62, 24 and 26. Additional changes can be found here: http://www.finra.org/Industry/Regulation/Notices/2011/P123549.

Exam Alert: IRS requires broker-dealers and mutual funds to report cost basis of stocks

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to Continue reading

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to the IRS and to investors.  In 2011, this reporting requirement only applies to most stocks, while in 2012 and beyond, the requirement will apply to all stocks.  In 2011, the rule will not apply to mutual fund shares and shares purchased via dividend reinvestment plans. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66 exams.

IRS news release: http://www.irs.gov/newsroom/article/0,,id=228907,00.html

Analysis by the Securities Technology Monitor: http://www.securitiestechnologymonitor.com/photo_gallery/1_36/27400-1.html

Exam Alert: FINRA further revises its Sanction Guidelines

Effective March 22, 2011, FINRA has revised its Sanction Guidelines to reflect recent developments in FINRA disciplinary cases. The specific revisions: Continue reading

Effective March 22, 2011, FINRA has revised its Sanction Guidelines to reflect recent developments in FINRA disciplinary cases.  The specific revisions:

-clarify the standards required for an order of restitution (repayment)

-recognize that adjudicators may order that ill-gotten gains be paid to the injured party (as opposed to being taken by FINRA as a fine)

-acknowledge that whether a factor is aggravating or mitigating depends on the circumstances of the case

-direct adjudicators to consider sanctions already imposed by other regulators for the same misconduct to see if those sanctions were “sufficiently remedial”

http://www.finra.org/Industry/Regulation/Notices/2011/P123374

http://www.finra.org/Industry/Regulation/Notices/2011/P123374

Exam Alert: FINRA revises its Sanction Guidelines

Effective February 9, 2011, FINRA has modified its Sanction Guidelines. These changes incorporate legal precedent from federal courts and the SEC. Continue reading

Effective February 9, 2011, FINRA has modified its Sanction Guidelines.  These changes incorporate legal precedent from federal courts and the SEC.  The degree of penalties for certain offenses have changed, such as recommending higher fines and firm suspension for “egregious” sales of unregistered securities, particularly in connection with market manipulation.  The guidelines for FINRA Rule 8210 now have three categories of violations.  Additional details may be found here: http://www.finra.org/Industry/Regulation/Notices/2011/P122910.

Exam Alert: SEC to nationalize exam program

According to the Wall Street Journal, the SEC is putting the finishing touches on a new uniform manual for its examiners. The WSJ states that the SEC expects Continue reading

According to the Wall Street Journal, the SEC is putting the finishing touches on a new uniform manual for its examiners.  The WSJ states that the SEC expects that the new manual will nationalize the agency’s examination program, allowing for uniform processes and procedures across all regional offices.  The SEC intends to distribute the manual to examiners in 30 to 60 days and to the public in 30 to 90 days (as of 2/8/11), according to the WSJ.

http://online.wsj.com/article/SB10001424052748704364004576132231587877342.html

Exam Alert: New SEC rules on shareholder approval of executive compensation

Effective January 25, 2011, the SEC has adopted new rules concerning shareholder approval of executive compensation. The new rules require Continue reading

Effective January 25, 2011, the SEC has adopted new rules concerning shareholder approval of executive compensation. The new rules require “say-on-pay” votes to take place at least once every three years.  The frequency with which these say-on-pay votes occur must be voted on at least once every six years, and the results of the frequency vote are reported on Form 8-K. Relevant to Series 6, Series 7, Series 62, Series 66, Series 24 and Series 79 exams.

http://www.sec.gov/news/press/2011/2011-25.htm