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Your professionally curated research and reference resource fully integrating treatise and how-to guidance with underlying laws, rules, interpretations, and hundreds of sample documents.

DoL Fiduciary Rule Developments

The DoL Rule is effectively dead. The SEC has proposed Reg. Best Interest. See the News column to see recent updates.

Adviser Regulatory & Compliance News

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Lucia v. SEC:  Supreme Court Holds SEC’s Past Hiring of Administrative Judges Unconstitutional

June 21, 2018

On June 21, 2018, the U.S. Supreme Court ruled in the appeal of the Lucia v. SEC case which has worked its way through the courts the past several years. In essence, the Supreme Court determined that the SEC’s old administrative law judges (“ALJs”) hiring practice was unconstitutional. This decision throws into question the validity of the decisions of the ALJs that decide most of contested SEC enforcement actions. This decision resolved an outstanding split between federal circuit courts as to whether the SEC's ALJs are “officers” of the United States subject to the requirement of the Appointments Clause. The Court concluded that ALJs are “officers” who must be appointed pursuant to the Appointments Clause by the President, “courts of law,” or “heads of department.” However, the Court's decision does not resolve a variety of open questions that follow from this significant decision. Such questions will likely take years to resolve in lower courts, and perhaps a revisit to the Supreme Court. The heading to this blurb links to an excellent summary by our friends at Ropes & Gray.

Updated Custody Q&A

June 21, 2018

The SEC's Div. of Investment Mgmt. has updated its custody Q&A page on its website. The updates primarily address advisers continuing questions and challenges regarding what is termed "inadvertent custody.," The press release which is linked to in the heading above, details specifically the additions to the Q&A for your ease of access.

Adviser Fails to Disclose to Clients a Conflict of Interest

June 8, 2018

The SEC found that an investment adviser recommended a security without disclosure to its client that it had a financial interest in the issuer of the security. The SEC stated that Larry Werbel from at least 2011 through 2014 introduced his clients to VGTel, Inc. and informed them that VGTel was as an investment opportunity. The SEC found that Werbel willfully failed to tell these clients that he was being compensated to recommend the purchase of VGTel securities. The SEC noted that this compensation agreement was an agreement with Ed Durante, a convicted felon. The SEC further noted that he failed to inform these clients that New Market Enterprises, the entity he directed his clients to send their money for the purchase of VGTel securities, was run and controlled by Ed Durante. The SEC stated that he met with Ed Durante in connection with his compensation agreement to discuss his clients' investment opportunities in VGTel.

SEC to Allow Electronic Posting of Mutual Fund and ETF Reports

June 5, 2018

The SEC adopted Rule 30e‑3 under the 1940 Act, which provides an optional “notice and access” method to allow funds to satisfy their obligations to transmit shareholder reports. Subject to conditions in the rule, a fund may make its reports and other required materials publicly accessible at a specified website address, free of charge, and send investors a paper notice of each report’s availability by mail. Funds will be permitted to satisfy their delivery obligations for shareholder reports by mailing reports in paper, delivering reports electronically to investors who have chosen this method under the SEC’s electronic delivery guidance, providing notice and website accessibility under rule 30e-3, or a combination of the above.