Private Fund Manager Blows Private Offering Exemption and Gets Banned from Industry. The SEC found that private fund manager and real estate development firm, Ettro Capital Management Corp. (“ECM”) made material misstatements and omissions to prospective investors about (1) the past performance of their Fund; (2) capital raised and assets under management; and (3) ECM’s investment management and real estate development experience. ECM also blew its private offering exemption by advertising a private real estate fund offering its unrestricted website. Peter Ettro, ECM’s founder, received an industry bar and a $60,000 fine. The lesson learned is that unregistered advisers are still subject to the SEC’s jurisdiction. Moreover, the SEC does not look kindly on firms that tell investors fairy tales about their track record, capital raised and fund investments. Contributed by Rochelle A. Truzzi, Managing Director.
Worth Reading, Watching and Hearing
- Broker-Dealers - 2020 Regulatory Year in Review. Check out this excellent summary by Hardin senior compliance consultant, Doug MacKinnon. It’s a nice companion piece to this summary by Ulmer & Berne FINRA’s 2021 Exam Priorities.
- SEC Continues Focus on Digital Asset Securities. Akin Gump offers its views on the SEC’s latest risk alert. Schneider Downs Wealth Management also weighs in with Bitcoin Bitcoin Read All About it.
- NASAA IAR Continuing Education Model Rule FAQ. NASAA launched this FAQ resource to assist firms and states with its Investment Adviser Representative (IAR) Continuing Education Model Rule.
- U.S. Department of Labor Releases Statement on Enforcement of its Final Rules on ESG Investments, Proxy Voting by Employee Benefit Plans. On March 10, the Department of Labor’s Employee Benefits Security Administration (EBSA) announced that, pending additional updates, “it will not enforce recently published final rules on “Financial Factors in Selecting Plan Investments” (also referred to as the “ESG Rule”) and “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights.” EBSA plans to conduct more outreach with stakeholders about these rules and share additional information with the public on its new webpage as it becomes available.
- Virginia Consumer Data Protection Act Becomes Law. Ropes & Gray offers this summary of the latest state to adopt its own Consumer Data Protection Act. Thompson Hine offers its assessment of the topic.
- SEC Announces Division of Enforcement Task Force Focused on Climate and ESG Issues. Acting Deputy Director of Enforcement, Kelly L. Gibson, will lead the task force and stated: “This task force brings together a broad array of experience and expertise, which will allow us to better police the market, pursue misconduct, and protect investors.”
- FINRA Gateway Updates. On March 17, 2021, FINRA published an announcement highlighting several significant registration filing milestones taking place in the coming weeks. U4 and U5 filers should find this update helpful. FINRA is also looking for comments on those starting to access Disclosure Letters via the Gateway.
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