The Securities and Exchange Commission (SEC) recently released the 2022 Examination Priorities from the Division of Examinations, formerly known as the Office of Compliance Inspections and Examinations. This annual release provides insight into the areas that the SEC plans to highlight when examining investment advisers during the coming year. While the SEC notes the continued impact of COVID-19 on investment advisers and the investment industry, the SEC reported an increase in examinations conducted during FY21, with the total number of completed examinations close to the pre-pandemic levels ..read more

Last month, the SEC commenced an administrative enforcement action that highlights the significance of its change in guidance over the use of “hedge clauses” in investment advisory agreements. Recall that in IA-5248, the SEC’s 2019 interpretive release that addressed the standard of conduct for investment advisers, the Commission withdrew the 2007 No-Action Letter previously issued in Heitman Capital Management, LLC (Feb. 12, 2007) (“Heitman Letter”). Prior to IA-5248, the Heitman Letter had frequently been relied upon by investment advisers to permit the use of hedge clauses, or clauses purpo ..read more

Earlier this week, the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a risk alert in which it discussed ongoing deficiencies identified during compliance examinations of investment advisers that advise private funds. This risk alert follows on the heels of other SEC activity relating to private fund advisers, including enforcement referrals, deficiency letters, and informal guidance. The deficiencies discussed in the risk alert fall into three broad categories: disclosures relating to fees; disclosures relating to conflicts of interests; and sufficiency of a firm’s poli ..read more

On August 2, 2017, a federal court in Connecticut ordered Steven Hicks (“Hicks”), a hedge fund manager, and his hedge fund advisory firms to pay almost $13 million.  This payment includes disgorgement and a penalty.  In 2010, the Securities and Exchange Commission (“SEC”) filed a complaint against Hicks and his two hedge fund advisers, Southridge Capital Management LLC (“Southridge Capital”) and Southridge Advisors, LLC (“Southridge Advisors”).  The complaint alleged that Hicks, Southridge Capital, and Southridge Advisors committed fraud by placing investor money in illiquid sec ..read more

On May 24, 2017, the Securities and Exchange Commission (“SEC”) filed a complaint against an options trading instructor and unregistered investment adviser, Gustavo A. Guzman (“Guzman”).  The complaint alleges that Guzman obtained more than $2.1 million from investors, assuring them that their funds would be invested in equity options and real estate.  However, evidence showed that Guzman misappropriated a third of the funds “and lost the remainder through his options trading while misleading existing or prospective investors.” Guzman was not registered as an investment adviser with ..read more

Last month the Securities and Exchange Commission (“SEC”) commenced an administrative proceeding against an Augusta Georgia investment adviser to a hedge fund called Geier International Strategies Fund, LLC (“GISF”).  According to the SEC’s Order Instituting Administrative Proceedings, Christopher M. Gibson, the fund’s adviser, caused the fund to invest the  majority of the fund’s assets in a single security, then personally profited and helped both his friends and a preferred investor in the fund to personally profit at the expense of the fund and its other members by engaging in fr ..read more

Last month, the Securities and Exchange Commission (“SEC”) brought and simultaneously settled administrative charges against an investment adviser and its owner for misleading clients regarding the historical performance of a private fund managed by the adviser and for making misleading statements regarding the fund’s investment strategy.  Specifically, the SEC announced it had settled an administrative proceeding on January 28, 2016, against QED Benchmark Management LLC and its owner, Peter Kuperman, in which administrative proceeding the SEC alleged that QED and Kuperman represented tha ..read more

Amendments have been proposed to form ADV and certain rules under the Investment Advisers Act of 1940 that would have significant effects on reporting requirements for investment advisers. In addition to codification of “umbrella registration” which was initially proposed in an SEC no action letter to the American Bar Association in 2012, new information would be required regarding separately managed accounts and general advisory business. Umbrella Registration Larger investment managers to private funds or other pooled vehicles are often comprised of many legal entities conducting a single ad ..read more

In the past six months two states, Iowa and Texas, have adopted private fund adviser exemptions to their investment adviser registration requirements under their respective state securities acts. Another state, Washington, has proposed a private fund adviser exemption. These state actions reflect a continuing trend to exempt private fund advisers from registration under certain carefully circumscribed conditions. The Iowa exemption, which became effective at the end of 2013, exempted advisers providing advice to one or more qualifying private funds so long as neither the advisers nor their aff ..read more

On January 30, 2014, the Securities and Exchange Commission hosted a compliance outreach program for investment companies and investment advisors. The national seminar, which was jointly sponsored by the Office of Compliance Inspections and Examinations and the Asset Management Unit of the Division of Enforcement, was held at the SEC headquarters in Washington, D.C. The seminar outlined the priorities of SEC Divisions or Programs as well as general regulatory priorities of the SEC in the coming years. These priorities included the Wrap-Fee Programs, General Solicitation under the JOBS Act, Cyb ..read more