Investment advisers have a duty to disclose material conflicts of interest to clients. The more difficult question is: "how much disclosure is enough?" In a recent settled enforcement action, the SEC suggests that disclosure of material facts alone may not be sufficient, and that more explicit disclosure is needed when investment advice may result in additional compensation to the adviser. The case is Matter of Valentine Capital Asset Management.
Investment Act/Investment Advisors Act
The Annual Risk Assessment Requirement for Investment Advisers: Keeping Your Review Current
Rule 206(4)-7 under the Investment Advisers Act of 1940 (the "Advisers Act") requires registered investment advisers to adopt and implement written policies and procedures that are reasonably designed to prevent violations of the Advisers Act by the adviser and any of its supervised persons within the meaning of Advisers Act section 202(a)(25). The adviser’s policies and procedures must also be reasonably designed to detect and promptly address any violations that occurred. Advisers Act Rule 206(4)-7(b) further requires investment advisers to undertake an annual review to determine the adequacy and effectiveness of their procedures in light of internal and external developments affecting the firm.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) from the Broker-Dealer’s Perspective
Although still subject to Senate approval, the House of Representatives’ June 30, 2010 vote to approve the Bill* moves broker-dealers that much closer to sweeping changes to their business and operations. Only a limited number of provisions will be effective immediately upon the President’s signing of the Bill into law. Accordingly, the overall impact of financial regulatory reform cannot be fully determined until regulators undertake required rulemaking and also determine whether — and to what extent — to exercise delegated rulemaking authority.
European Parliament and Council Back New Alternative Investment Fund Rules
The continuing saga of the Alternative Investment Fund Managers Directive (the Directive) of the European Union is causing heartburn throughout the world’s financial capitals.
Despite strong rhetoric from the Conservative Party whilst in opposition, the UK’s newly elected Conservative-Liberal coalition government quietly agreed to the next phase of the implementation of the Directive, perhaps aware that it could not assemble enough votes to block adoption of positions on the Directive using the Qualified Majority Vote system.
The Four ‘Ds’: Deterrence, Discipline, Disgorgement … and Dawn Raids — Latest on the UK Financial Services Authority’s Enforcement Regime
On 1 March, the UK Financial Services Authority ("FSA") published its new framework for financial penalty-setting. Explaining the tri-partite objectives of the new policy of deterrence, discipline and disgorgement, Margaret Cole (Director of Enforcement and Financial Crime) said:
Supreme Court Clarifies Standards for Judicial Review of Mutual Fund Fees
On March 30, 2010, the Supreme Court issued its decision in Jones v. Harris Associates L.P., No. 08-586. The Court construed Section 36(b) of the Investment Company Act of 1940, which states that investment advisers to mutual funds are deemed to have a fiduciary duty with respect to the receipt of compensation for services and provides a private cause of action for breach of that duty.
Private Fund Investment Advisers Registration Act Approved by House Committee
The Gibson, Dunn & Crutcher Financial Markets Crisis Group is closely tracking government responses to the turmoil that has catalyzed a dramatic and rapid reshaping of our capital and credit markets. We are providing updates on key regulatory and legislative issues, as well as information on legal and oversight issues, that we believe could prove useful as firms and other entities navigate these challenging times.