Assess your policies and procedures and improve your RIA and fund compliance programs based on recent SEC observations from exams in the RIC initiatives.
In May, we discussed eight things that you needed to know about the liquidity rule in this article. At that time, we noted that part of the rule was due to take effect in December 2018 for large fund families or June 2019 for smaller fund families. The parts that were delayed until 2019 included the liquidity classifications (i.e., the buckets) and the highly liquid minimum requirement. More importantly, our third point was that the SEC would have more changes to the liquidity rule in 2018.
At the beginning of June, the SEC announced settlements against 13 private fund advisers for failing to provide the required information in Form PF. Generally, Form PF requires information on private funds managed by investment advisers if the total assets of the private funds are over $150 million. The form, which became effective in 2012, asks for information on a private fund’s assets under management, strategy, performance, investments, and other areas. The form must be updated annually or when there is a material change to the information in the most recent filing. As stated in its orders, the SEC and other regulatory, such as the Financial Stability Oversight Council, use the information in Form PF to watch systemic risk in the private fund industry. Additionally, the SEC uses the form in regulatory exams and investigations. (Emphasis added.) The same is true for Form ADV.
IM Director's Recent Remarks on Standards of Conduct & Liquidity Risk Management
by Peter Michael Allen
On April 5, 2018, the New York Office of the Attorney General (NYAG) announced that it had completed an investigation into 14 large fund families, including some of the largest asset management firms in the world. The NYAG’s list included BlackRock, Goldman Sachs Asset Management, JP Morgan & Chase, Oppenheimer, The Vanguard Group, and others. According to the NYAG’s report, it was investigating the relationship between mutual fund fees and disclosure, specifically, the disclosure of the Active Share metric to retail investors. The NYAG concluded that: