Compliance and Regulatory Services (“CARS”) Hot Topics for April 2015

April 14, 2015

For this monthly distribution, we are highlighting an SEC enforcement action against an investment adviser for failure to adequately value private fund level 3 assets, resulting in the payment of excess management fees to the tune of $200 million.  Although this proceeding relates to valuation of fund assets, the manager knowingly failed to mark down certain assets that stopped making interest payments as disclosed in the funds’ governing documents.  The private fund and its founding principal are charged with fraud under the anti-fraud provisions of the Investment Advisers Act of 1940.   The SEC also charged that the fund failed to disclose the conflict of interest:  controlled payments made by borrowers on the debt held by the securitization vehicles.

Our Take:  We cannot overstate the importance of maintaining rigorous fair valuation policies and procedures that includes an independent review.  It is clear the SEC has gained the insight and knowledge necessary to evaluate the most complex structured products.    

Below, for your convenience, we've aggregated recent postings from the SEC and FINRA. 

SEC News

March 31, 2015 SEC Charges Former Polycom CEO With Hiding Perks From Investors
March 30, 2015 SEC Announces Fraud Charges Against Investment Adviser Accused of Concealing Poor Performance of Fund Assets From Investors
March 27, 2015 SEC Charges New York-Based Brokerage Firm With Faulty Underwriting of Public Offering by China-Based Company
March 26, 2015 SEC Charges Nearly Two Dozen Unregistered Broker-Dealers
March 25, 2015 SEC Adopts Rules to Facilitate Smaller Companies’ Access to Capital
March 25, 2015 SEC Proposes Rule to Require Broker-Dealers Active in Off-Exchange Market to Become Members of National Securities Association
March 13, 2015 Corporate Insiders Charged for Failing to Update Disclosures Involving “Going Private” Transactions
March 4, 2015 SEC Charges Texas-Based Brokerage Firm With Violating Supervisory and Customer Protection Rules
March 2, 2015 Former Company Officer Earns Half-Million Dollar Whistleblower Award for Reporting Fraud Case to SEC
March 2, 2015 SEC Suspends Trading in 128 Dormant Shell Companies to Put Them Out of Reach of Microcap Fraudsters


March 27, 2015 Grading the Commission’s Record on Capital Formation: A+, D, or Incomplete?
March 26, 2015 International Cooperation in a New Data-Driven World  
March 24, 2015 The Benefits of Structured Data for Investors
March 20, 2015 Preparing for the Regulatory Challenges of the 21st Century
March 19, 2015 A Few Observations on Shareholders in 2015
March 16, 2015 Remarks at the 2015 Mutual Funds and Investment Management Conference  
March 13, 2015 Remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation
March 12, 2015 Understanding Disqualifications, Exemptions and Waivers Under the Federal Securities Laws
March 10, 2015 A Watched Pot Never Boils: the Need for SEC Supervision of Fixed Income Liquidity, Market Structure, and Pension Accounting
March 6, 2015 Remarks to 2015 IAA Compliance Conference
March 5, 2015 Supporting Innovation Through the Commission’s Mission to Facilitate Capital Formation
March 5, 2015 Remarks to PLI Investment Management Institute 2015
March 3, 2015 Remarks at CBI's Pharmaceutical Compliance Congress


March 30, 2015 FINRA Sanctions Three Firms for Inadequate Supervision of Consolidated Reports
March 26, 2015 FINRA Sanctions Oppenheimer & Co. $3.75 Million for Supervisory Failures
March 25, 2015 FINRA Sanctions First New York Securities L.L.C. $916,000 for Illegal Short Selling in Advance of 14 Public Offerings
March 16, 2015 FINRA Launches Redesigned Website  
March 12, 2015 FINRA Sanctions Brookville Capital Partners $1.5 Million and Bars President Anthony Lodati for Fraud
March 9, 2015 FINRA Foundation Research Reveals Fraud Victims Vulnerable to Severe Stress, Anxiety and Depression
March 2, 2015 FINRA Foundation Military Spouse Fellowship Application Period Open From March 2 to April 17

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FINRA Rule Filings List
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