SEC Cautions Advisers to Address Risks of Unauthorized Trading

February 29, 2012 § Leave a comment

The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a risk alert this week to help brokerage and investment advisory firms prevent and detect unauthorized trading in their client accounts. Advisers can anticipate that the SEC and other regulators will expect to see adoption of and adherence to appropriate compliance measures to address these risks.

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California Rules Propose Significant Changes to Private Fund Adviser Exemption

February 24, 2012 § 4 Comments

Recently, the California Department of Corporations proposed new rules that would make widespread changes to the state’s investment advisor regulatory scheme. The proposed rules would create a significant new exemption from full registration for investment advisers that advise hedge funds in California. After Dodd-Frank, advisers with less than $100 million will come under the authority of the DoC (and these proposed rules) rather than the SEC. « Read the rest of this entry »

SEC Tightens Rules on Advisory Performance Fee Charges

February 16, 2012 § 2 Comments

As part of its continuing Dodd-Frank mandated rulemaking, the Securities and Exchange Commission recently issued final rules to raise the net worth requirement for investors who pay performance fees. The tightened standard excludes the value of the investor’s home from the net worth calculation.

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SEC Finalizes Changes to Accredited Investor Standard

February 12, 2012 § 5 Comments

The Securities and Exchange Commission recently adopted final rules to implement changes to the accredited investor standard required by the Dodd-Frank Act.

Most hedge funds rely on Rule 506 of Regulation D when offering their interests to investors. Rule 506 generally exempts funds from having to register their private securities offerings with the SEC when they sell their interests only to accredited investors. Under the pre-Dodd-Frank standard, individuals were considered accredited investors if they had either a $1,000,000 net worth or satisfied an alternative annual income test.

Upon passage, Dodd-Frank immediately required that the value of an individual’s primary residence be excluded when calculating net worth. The Act instructed the SEC to amend its rules to reflect this exclusion. The SEC’s recent action did that and clarified other elements of the standard.  « Read the rest of this entry »

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