The Securities and Exchange Commission brought actions five investment advisory firms for violations of the Marketing Rule. The firms posted advertisements that included hypothetical performance on their websites. The SEC points out that websites are available to the general public and not “presenting hypothetical performance relevant to the likely financial situation and investment objectives of the intended audience.” Of course, a firm’s website and the materials posted to it are going to be considered advertisements for advisory services. As a reminder, Advisers Act Rule 206(4)-1(e)(1) defi ..read more

It survived motions to dismiss, summary judgment and now has survived a jury. The Securities and Exchange enlargement of insider trading, shadow trading, stuck through the case against Matthew Panuwat. The SEC alleged that Mr. Panuwat traded in the stock of Incyte Corporation based on highly confidential information. Incyte was in a similar business to his employer, Medication, Inc. Mr. Panaway had learned about an impending announcement of Pfizer Inc.’s acquisition Medivation, Inc. He assumed that the stock price of Incyte would rise based on the valuation Pfizer placed on Medivation for the ..read more

Over the past 2.5 years the Securities and Exchange Commission has charged 60 investment advisory firms and broker-dealers with violations of the record-keeping requirements and collected penalties approaching $2 billion. Those were all broker-dealers, dual-registered investment advisers, or affiliated investment advisers. Broker-dealers have strict communications retention mandates. Investment adviser requirements are not as strict. Private fund managers are thought to be a bit more uncertain. Everyone agrees that substantive business communications need to be captured and retained. The first ..read more

Pump and Dump schemes brought the fiduciary standard to light. In SEC v Capital Gains Research Bureau the US Supreme Court said a pump and dump scheme by an investment adviser violated its fiduciary duty. More recently, the SEC published an investor alert about Social Media and Investment Fraud. There is a lot of different frauds in there, but one is Fraudsters may use social media to conduct schemes including:  Pump and dump schemes – pumping up the share price of a company’s stock by making false and misleading statements to create a buying frenzy, and then selling share ..read more

As part of the Wells Report in 1972, the Securities and Exchange Commission adopted its no-admit/no-deny policy. The SEC, in agreeing to settle a case, relinquishes the opportunity to present the case in court. The defendant relinquishes the right to defend the case in court, in the press, and in the eyes of the public. The New Civil Liberties Alliance as part of its many attacks against administrative law has challenged the policy. It started in 2018 with a petition to amend the rule. Six years later, the SEC denied the petition on January 30, 2024. The NCLA also took its legal attack to cour ..read more

Back in December, Chair Gensler gave a speech to an AI Summit and warned about companies overstating their use artificial intelligence tools. From there, you can see the SEC approaching the concerns as part of fundraising fraud and marketing fraud. Chair Gensler probably knew that the Securities and Exchange Commission was actively working on two enforcement cases that got announced this week. “the first investment adviser to convert personal data into a renewable source of investable capital” “uses machine learning to analyze the collective data shared by its members to make intelligent inve ..read more

The annual Securities and Exchange Commission request for funding from Congress is not generally very interesting. For fiscal year 2025 its seeking $2.6 billion to support over 5,000 full-time equivalents. Some of the stats are interesting. This one caught my eye: Looking at the private funds area, in the last five years, the number of funds has increased 54 percent to approximately 56,000. The assets managed by private fund managers, now at $26 trillion in gross assets, surpasses the size of the entire U.S. commercial banking sector of approximately $23 trillion. Page 4 Those 5,000 FTE cover ..read more

On March 1, the US District Court in Northern Alabama ruled that the “Corporate Transparency Act is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.” It’s not clear what effect this ruling is going to have on other parties and other jurisdictions. Congress passed the 2021 National Defense Authorization Act which included a bill called the Corporate Transparency Act (“CTA”). The CTA requires most entities incorporated under State law to disclose personal stakeholder information to the Treasury Department’s criminal enforcement arm. There are two dozen exemption ..read more

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