Investment Management Legal + Regulatory Update: February 2012


In this issue: Senate Bill Would Raise Taxes on Derivatives Trades; Senate Hearings Question Fund Investments in Commodity-related Investments; SEC Grants No-action Relief for Potential Section 10(f) Violations; FINRA Proposes to Amend Advertising Rules; SEC Issues Guidance on Adviser Use of Social Media; SEC Adopts Net Worth Standard for Accredited Investors; SEC Charges Fund Adviser for Fund Pricing Violations; SEC Charges Fund PM for Withholding Pricing Information; SEC Charges Three Investment Advisers for Failing to Implement Compliance Procedures; NY Court of Appeals: Martin Act Does Not Preempt Common Law Causes of Action; SEC Enforcement Director Criticizes Court’s Refusal to Approve Consent Judgment in Citigroup Case; and SEC Charges Hedge Fund Managers with Fraud as Part of Initiative to Investigate Suspicious Returns.

Excerpt from 'Senate Bill Would Raise...':

Senator Carl Levin introduced a bill that would eliminate long-term capital gain treatment for trades of certain derivatives contracts. The current law provides that “Section 1256” contracts are taxed 60 percent as long-term capital gains or losses, and 40 percent as short-term capital gains or losses. Section 1256 contracts, under current law, include regulated futures contracts, foreign currency contracts, and nonequity options. The bill would amend the Internal Revenue Code of 1986 to provide for short-term treatment for these capital gains or losses. Senator Levin states that the purpose of the bill is to “end a tax loophole that subsidizes short-term speculation in derivatives.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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