The post SEC Adopts 13D/13G Amendments appeared first on Investment Fund Law Blog.
]]>Pages 10-11 of the adopting release contains a table summarizing the changes. The adopting release also provides guidance regarding the current legal standard governing when two or more persons may be considered a group for the purposes of determining whether the beneficial ownership threshold has been met, as well as how, under the current beneficial ownership reporting rules, an investor’s use of certain cash-settled derivative securities may result in the person being treated as a beneficial owner of the class of the reference equity securities.
The amendments will become effective 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on Sept. 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on Dec. 18, 2024. Compliance with the other rule amendments will be required upon their effectiveness.
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]]>The post SEC Proposes ESG Rule appeared first on Investment Fund Law Blog.
]]>The proposed rule is available HERE.
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]]>The post SEC Adopts Rules to Require Electronic Filing for Investment Advisers and Institutional Investment Managers appeared first on Investment Fund Law Blog.
]]>The press release is available HERE and text of the Final Rules is available HERE.
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]]>The post SEC Division of Examinations Announces 2022 Examination Priorities appeared first on Investment Fund Law Blog.
]]>The Securities and Exchange Commission’s Division of Examinations today announced its 2022 examination priorities. The Division will focus on private funds, environmental, social and governance (ESG) investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto-assets.
The Division will focus on registered investment advisers (RIAs) who manage private funds. Examinations will review issues under the Advisers Act, including an adviser’s fiduciary duty, and will assess risks, including a focus on compliance programs, fees and expenses, custody, fund audits, valuation, conflicts of interest, disclosures of investment risks, and controls around material nonpublic information. The Division will also review private fund advisers’ portfolio strategies, risk management, and investment recommendations and allocations, focusing on conflicts and disclosures around these areas. In addition, the Division will review the practices, controls, and investor reporting around risk management and trading for private funds with indicia or signs of systemic importance.
The SEC press release is here. The full priorities memorandum is here.
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]]>The post SEC Proposed Rules to update beneficial ownership reporting appeared first on Investment Fund Law Blog.
]]>The proposed amendments to Regulation 13D-G would:
The Fact Sheet summarizing the proposed amendments:
https://www.sec.gov/files/33-11030-fact-sheet.pdf
Text of proposed rule amendments:
https://www.sec.gov/rules/proposed/2022/33-11030.pdf
Please contact your Pillsbury investment management attorney with any questions.
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]]>The post SEC Proposes Amendments to Enhance Private Fund Reporting appeared first on Investment Fund Law Blog.
]]>The proposed amendments would require current reporting for large hedge fund advisers and advisers to private equity funds. These advisers would file reports within one business day of events that indicate significant stress at a fund that could harm investors or signal risk in the broader financial system. The proposed amendments would provide the Commission and FSOC with more timely information to analyze and assess risks to investors and the markets more broadly.
The proposal also would decrease the reporting threshold for large private equity advisers from 2ドル billion to 1ドル.5 billion in private equity fund assets under management. Lowering the threshold would result in reporting on Form PF that continues to provide robust data on a sizable portion of the private equity industry. Finally, the proposal would require more information regarding large private equity funds and large liquidity funds to enhance the information used for risk assessment and the Commission’s regulatory programs.
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]]>The post Gensler SEC Expands Scope of Insider Trading Enforcement appeared first on Investment Fund Law Blog.
]]>TAKEAWAYS
On August 17, 2021, the U.S. Securities and Exchange Commission (SEC) charged a former pharmaceutical company executive with insider trading for purchasing the securities of a rival company based on confidential information he learned about his own employer’s contemplated merger with another pharmaceutical company. The SEC’s enforcement action, which is being litigated in the United States District Court for the Northern District of California, appears to confirm early predictions that the SEC, with Chair Gary Gensler at the helm, would aggressively police the securities markets for insider trading.
READ MORE . . .
Read this article and additional Pillsbury publications at Pillsbury Insights.
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]]>The post Dollar Threshold Change for "Qualified Client" Definition under the Investment Advisers Act appeared first on Investment Fund Law Blog.
]]>Effective August 16, 2021, the dollar thresholds specified in the definition of "qualified client" under Rule 205-3 of the Investment Advisers Act of 1940, as amended ("Advisers Act") will increase (i) from 2ドル.1 million to 2ドル.2 million (net worth test) and (ii) from 1ドル million to 1ドル.1 million (assets under management (AUM) test). Clients that enter into investment advisory agreements (and existing fund investors that make additional fund investments) in reliance on the net worth test prior to the effective date will be "grandfathered" in under the prior net worth threshold. The increases are made pursuant to a five-year inflation adjustment required by section 205(e) of the Advisers Act (section 419 of the Dodd-Frank Act). (The most recent prior change was effective August 15, 2016.)
Section 205(a)(1) of the Advisers Act generally restricts an investment adviser from entering into, extending, renewing, or performing any investment advisory contract that provides for compensation to the adviser based on a share of capital gains on, or capital appreciation of, the funds of a client ("performance compensation prohibition"). Rule 205-3 of the Advisers Act provides a limited exemption from the performance compensation prohibition and permits investment advisers to receive performance-based compensation (incentive allocations, carry, carried interest, performance fee etc.) from "qualified clients."
After August 16, a "qualified client" is a person that:
(i) has at least 1ドル.1 million in assets under management with the investment adviser immediately after entering into the advisory contract (AUM test); or
(ii) has a net worth (in the case of a natural person client, together with assets held jointly with a spouse) that the investment adviser reasonably believes is in excess of 2ドル.2 million immediately prior to entering into the advisory contract (net worth test).
As a reminder, the value of a natural person’s primary residence must not be included in net worth; indebtedness secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time the investment advisory contract is entered into, need not be counted as a liability toward net worth (except that debt acquired or a loan amount increased within 60 days before investment or contract execution date must be counted); and indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the residence also must be counted as a liability.
A qualified client also includes both a "qualified purchaser" as defined in section 2(a)(51)(A) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and an investment adviser’s "knowledgeable employees." The newly revised definition will, therefore, affect certain private investment funds that rely on Section 3(c)(1) of the Investment Company Act (but not those funds relying on Section 3(c)(7)) and separately managed accounts that charge performance fees.
Advisory clients that established an advisory relationship (signed a contract) before the effective date of the new thresholds will be "grandfathered" in under the prior net worth threshold. Investors in a private fund are considered, for these purposes, a client of the adviser (fund manager). Therefore, future investments in a fund by the same investor who first invested in that fund before August 16 also will be grandfathered at the prior dollar thresholds. However, managers of section 3(c)(1) funds should update their subscription agreements and other offering documents to reflect the new qualified client threshold for new investors who first invest after August 16, 2021. In addition, notably, existing investors in a 3(c)(1) fund of funds (investor fund) that first invests in a 3(c)(1) fund (investee fund) after the effectiveness of a new threshold would nevertheless each have to be qualified client under the new thresholds because the investor fund’s investment in the investee fund would count as a new advisory relationship.
Private fund advisers (hedge fund, private equity and venture capital fund managers) that rely on the federal ‘private fund adviser" exemption from investment adviser registration will not be impacted, including with respect to their 3(c)(1) funds. The Adviser’s Act performance compensation prohibition applies only to registered investment advisers but does not apply to investment advisers relying on the federal private fund adviser exemption (so called "exempt reporting advisers"). Certain states (e.g., California, Texas), however, mandate under their state equivalent private fund adviser exemptions that even exempt reporting advisers, other than exempt venture capital fund advisers, only charge a performance fee to qualified clients with respect to their 3(c)(1) funds. Therefore, while private fund advisers that qualify as "venture capital fund advisers" will not be impacted by the new qualified client thresholds, exempt reporting advisers that are private equity or hedge fund managers will have to comply with the qualified client standard in their 3(c)(1) funds under certain state laws.
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Please contact your attorney at Pillsbury’s Investment Funds Group for additional information.
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]]>The post SEC Adopts Modernized Marketing Rule for Investment Advisers appeared first on Investment Fund Law Blog.
]]>In the decades since the adoption of the current rules, advertising and referral practices have evolved. The technology used for communications has advanced, the expectations of investors seeking advisory services have changed, and the profiles of the investment advisory industry have diversified. The new marketing rule recognizes these changes and the Commission’s experience administering the current rules. The reforms will allow advisers to provide investors with useful information as they choose among investment advisers and advisory services, subject to conditions that are reasonably designed to prevent fraud.
"The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology," said Chairman Jay Clayton. "This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors. The new rule provides for an extended compliance period intended to provide advisers with a sufficient transition period, including to enable consultation with the Commission’s expert staff."
The rule replaces the current advertising rule’s broadly drawn limitations with principles-based provisions designed to accommodate the continual evolution and interplay of technology and advice, and includes tailored requirements for certain types of advertisements. For example, the rule will require advisers to standardize certain parts of a performance presentation in order to help investors evaluate and compare investment opportunities, and will include tailored requirements for certain types of performance presentations. Advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being misleading. The rule also will permit the use of testimonials and endorsements, which include traditional referral and solicitation activity, subject to certain conditions.
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]]>The post Commodity Pool Operators: Final Rule Amending Form CPO-PQR appeared first on Investment Fund Law Blog.
]]>The amendments to Form CPO-PQR (1) eliminate existing Schedules B and C of the form, except for the Pool Schedule of Investments; (2) amend the information requirements and instructions to request Legal Entity Identifiers (LEIs) for commodity pool operators and their operated pools that have them, and to delete questions regarding pool auditors and marketers; and (3) make certain other changes due to the rescission of Schedules B and C, including the elimination of all existing reporting thresholds. Click here for the full press release.
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