Compliance and Regulatory Services (“CARS”) Hot Topics for April 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.
(Complete Listing: http://www.finra.org/Industry/Regulation/Notices/2014/index.htm)
FINRA Rule Filings List
(Complete Listing: http://www.finra.org/Industry/Regulation/RuleFilings/2014/index.htm)