Misleading Presentation of Model Results Leads to SEC Fraud Charges

May 9, 2012 Comments Off on Misleading Presentation of Model Results Leads to SEC Fraud Charges

The Securities and Exchange Commission has charged a father-and-son duo of hedge fund managers with securities fraud stemming from claims about their investment strategy and past performance. According to the SEC’s order, Gabriel and Marco Bitran raised millions of dollars for their hedge funds through, among other things, very successful performance track records based on actual trades from 1998 to the inception of their hedge funds. In fact, those track records were based on hypothetical historical investments. In settling the SEC action, the Bitrans and their fund management entities agreed to pay disgorgement of $4.3 million, other monetary penalties and be barred from the securities industry. « Read the rest of this entry »

Financial Services Committee Proposes Investment Adviser SROs

April 26, 2012 Comments Off on Financial Services Committee Proposes Investment Adviser SROs

Rep. Spencer Bachus (R-AL), Chair of the House Financial Services Committee, and Rep. Carolyn McCarthy (D-NY) introduced legislation–the Investment Adviser Oversight Act of 2012–that would create new self-regulatory organizations intended to provide more efficient and effective oversight of the retail investment advisory industry. « Read the rest of this entry »

Investment Advisers and Social Media

April 19, 2012 Comments Off on Investment Advisers and Social Media

Growing numbers of investment advisers and fund managers are using social media–Facebook, LinkedIn, Twitter, blogs, etc. After passage of the JOBS Act–and removal of the ban on general solicitation–we expect even more widespread use of these outlets to reach new markets and clients.

Advisers and private fund managers should recognize that these new forms of communication remain under the same antifraud, compliance, and recordkeeping requirements as traditional forms of advertising and communications. The SEC has already charged one adviser with fraud arising from offering fictitious securities through social media sites.

In recognition of the growing role of social media use by advisers, SEC staff has provided guidance for advisers when reviewing their compliance programs to address social media use. « Read the rest of this entry »

Next Steps for the JOBS Act

April 11, 2012 § 3 Comments

Now that President Obama has signed (on April 5) the JOBS Act, the clock is running for the SEC. The agency has 90 days—or until July 4, 2012—to allow general solicitation and advertising for securities offerings to accredited investors under Rule 506 of Regulation D.

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Will JOBS Act Repeal Ban on General Solicitation?

March 20, 2012 § 2 Comments

On March 8, the House overwhelmingly passed the Jumpstart Our Business Startups (JOBS) Act. The Act would allow crowdfunded equity offerings and, more importantly for private fund managers, would remove the ban on general solicitation and advertising from Regulation D.

Repealing the prohibition would vastly increase the ways in which private funds could reach out to prospective investors. The SEC and state regulators meanwhile are concerned that a repeal would open the doors to widespread abuse and investor fraud.

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