Investment Company Act of 1940

News & Analysis as of

FinCEN Proposes BSA/AML Rules for Investment Advisers (Again)

On Tuesday, August 25, 2015, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department, issued a notice of proposed rulemaking that would bring certain investment advisers under the umbrella...more

Seventh Circuit Affirms District Court on Remand in Jones v. Harris Associates

In Jones v. Harris Associates L.P., the Supreme Court adopted the Gartenberg standard for cases brought under Section 36(b) of the Investment Company Act of 1940: “[T]o face liability... an investment adviser must charge a...more

Seventh Circuit Issues Excessive Fee Decision In Harris Case

The Seventh Circuit Court of Appeals issued a decision on August 6, 2015, in the case of Jones v. Harris Associates L.P. on remand from the United States Supreme Court. The case was actually remanded to the Circuit Court in...more

The 15(c) Process Continues to be a Focus of the SEC Enforcement Staff

Two recent SEC Enforcement Division administrative settlements reinforce the importance for fund boards of directors and fund advisers to maintain a robust annual advisory contract renewal process....more

Dodd-Frank at 4: Where do we go from here?

Where do we go from here? As we mark another milestone in regulatory reform with the fourth anniversary of the enactment of the Dodd-Frank Act, it strikes us that although most studies required to be undertaken by the Act...more

A Compilation of Enforcement and Non-Enforcement Actions

Non-Enforcement - States are Accommodating Crowdfunding Offerings While the SEC Continues to Ponder Crowdfunding Rules - The SEC first proposed rules in October 2013 for the crowdfunding exemption which was included in...more

Volcker Agencies Provide Guidance Regarding Treatment of Registered Funds and Foreign Public Funds During Their Seeding Period

As the general July 21, 2015 deadline approached to conform with the implementing regulations (Final Rules) for the Volcker Rule, a key issue remained with respect to the sponsoring, organizing and seeding of investment...more

A User's Guide to Volcker Rule Complexities

Increasingly, we receive questions from prospective investors in covered bonds on whether an investment is prohibited or limited under the Volcker Rule, which was adopted by the various agencies under section 619 of the...more

NYSE Outage – Fund Valuation and Operations Based on the NYSE Close

The New York Stock Exchange (NYSE or Exchange) was forced to suspend trading for almost four hours on July 8, 2015 to resolve a technical problem that resulted from a software upgrade. The Exchange resumed normal trading...more

SEC’s Proposed Modernized Reporting Regime: Effects on ETF Sponsors

The U.S. Securities and Exchange Commission (SEC) on May 20, 2015 unanimously approved proposed rules, forms and amendments that are intended to modernize and enhance the reporting and disclosure of information by investment...more

BDC Master Feeder Funds on the Horizon – No-Action Relief Granted to One Issuer

The staff of the SEC’s Division of Investment Management said that it would not recommend enforcement action if a business development company (BDC) reorganizes into a master-feeder structure. The relief will also be...more

Volcker Agencies Provide Seeding Period Guidance for BDCs, RICs and FPFs in New FAQ

On July 16, 2015, the agencies responsible for implementing the Volcker rule (Agencies) issued FAQ 16, which provides guidance on the circumstances under which a seed investment would not cause (i) a registered investment...more

Court Dismisses in Part a Mutual Fund Excessive Fee Action Against SEI

Introduction - Over the past few years, we’ve seen a resurgence in the number of shareholder suits against mutual fund investment advisers for excessive fees under section 36(b) of the Investment Company Act. Currently,...more

SEC's Warning — Fund Trustees Are Fair Game

In a cease-and-desist order entered on June 17, 2015, the U.S. Securities and Exchange Commission found that a fund adviser, two independent trustees and an inside trustee willfully violated Section 15(c) of the Investment...more

Financial Services Weekly News Roundup - July 2015 #3

Regulatory Developments - CFPB Outlines Guiding Principles for Faster Payment Networks: On July 9, the CFPB released an outline of its guiding Consumer Protection Principles (Principles) for protecting consumers as...more

SEC Charges Mutual Fund Board Members and Investment Adviser with Violations of Section 15(c) For Deficient Advisory Contract...

On June 17, 2015, the SEC charged Commonwealth Capital Management (“CCM”), an investment adviser to various mutual funds within World Funds Trust (“WFT”) and World Funds, Inc. (“WFI”), for violating Section 15(c) of the...more

SEC Proposes New Reporting Requirements for Registered Funds

On May 20, 2015, the Securities and Exchange Commission (“SEC”) proposed rules, forms and amendments under the Investment Company Act of 1940 (the “1940 Act”) and related regulations (together, the “Proposed Amendments”) that...more

SEC Requests Public Comment on Issues Concerning Exchange-Traded Products

On June 12, 2015, the SEC published a Request for Comment (the “Request”) seeking public comment on topics related to the SEC’s oversight of the listing and trading of exchange-traded products (“ETPs”) on national securities...more

Coming to America – A Guide for FPIs

In this Issue: - The Latham FPI Guide: Accessing the US Capital Markets From Outside the United States - Chapter 1: Background - Chapter 2: Unregistered Global Offerings – Regulation S, Rule 144A and...more

SEC Sanctions Independent Trustees for Approving Mutual Fund Advisory Contract without Sufficient Information

Underscoring the need for independent trustees to act vigilantly, a recent SEC consent order issued in an enforcement action imposed discipline on a mutual fund's independent trustees, its investment advisor, and the...more

SEC Sanctions Independent Trustees for Deficient Advisory Contract Review

In a cease-and-desist order entered on June 17, 2015, the SEC found that a fund adviser, two independent trustees, and an inside trustee willfully violated Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”)...more

U.S. SEC Approves Proposal to Modernize Investment Company Reporting Regime

The U.S. Securities and Exchange Commission (SEC or Commission) unanimously approved a proposal (Proposal) to modernize the reporting of information provided by registered investment companies (funds). Guided by the recent...more

FINRA Relaxes Restrictions on Related Performance in Institutional Communications

On May 12, 2015, the Financial Industry Regulatory Authority (“FINRA”) issued an interpretive letter (the “Letter”) permitting the use of Related Performance Information (as defined below) in communications distributed solely...more

SEC Sanctions Insurance Company for Variable Contract Pricing Violations

The Securities and Exchange Commission (the “SEC”) recently charged a life insurance company with violating the pricing requirements under Rule 22c-1 of the Investment Company Act of 1940 in respect of purchase and redemption...more

The Volcker Rule’s Impact on CLO Issuances and other Securities Offerings

Section 619 of the Dodd-Frank Wall Street Reform Act of 20101 (the “Dodd-Frank Act”) – commonly known as the “Volcker Rule” – adds a new section 13 to the Bank Holding Company Act of 1956, as amended, and prohibits “banking...more

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