SEC Registration May Apply To Smaller Hedge Funds The Securities and Exchange Commission's proposal on hedge-fund registration could subject fund managers with less than the $150 million in assets to the regulation. read on
Hedge Fund Securities Firm Wins $1.46 Arbitration Award Against WFG Hedge fund services company Esposito Securities won a $1.46 million FINRA arbitration award against $6.5 billion Dallas-based financial services firm WFG Investments, Inc. The claims asserted included breach of contract, raiding and tortious interference. read on
The Fallout From Dodd-Frank Regulators in the US have developed numerous new rules and regulations that will take effect this year and into early 2012. This June, the Securities and Exchange Commission adopted rules that require advisers to hedge funds to register with the SEC, and establish new exemptions for SEC registration and reporting requirements for certain advisers, and reallocate regulatory responsibility for advisers between the SEC and states. Registration must be done by March of 2012. read on
Convicted Life-Settlement Hedge Fund Manager Gets 60 Years A life-settlement hedge fund fraudster was sentenced to 60 years in prison for ripping retirees and others off to the tune of $100 million. read on
Hedge Funds Find Themselves In A Marathon, Not A Sprint Some of the world's most successful funds - including Paulson & Co, Lansdowne Partners and Odey Asset Management - suffered big losses over the summer amid the market turmoil, and banking stocks plunged. Experts are concerned that the losses, combined with the continued turmoil in the markets and a general flight from risky assets, will lead to investors pulling their money from hedge funds. read on
San Francisco Hedge Fund Team Accused Of Providing SEC With Phoney Paperwork The SEC has charged San Francisco-area hedge fund adviser Kurt Hovan with fraud for lying to clients about brokerage commission rebates and producing phony documents to cover up the fraud during an SEC examination. read on
Ten Reasons Why Smaller Hedge Funds Outperform A new report published this week by software provider PerTrac shows that funds with fewer than $100m in assets under management returned 13.04% in 2010. This compares with 11.14% by mid-size funds -- those with between $100m and $500m under management -- and 10.99% by funds with over $500m in assets. read on
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Landmark Ruling Curtails FINRA's Right To Collect Fines Through Courts The United States Court Of Appeals for the Second Circuit issued a dramatic decision in and ruled that the Court ruled that FINRA lacked the authority to bring court actions to collect its disciplinary fines. read on
CFTC May Finish Curbs On Speculation for Oct. 18 The top U.S. commodities regulator may complete Dodd-Frank Act limits on speculation in oil, natural gas and other markets at an Oct. 18 Washington meeting, read on
SEC Bracing For Court Ruling On Equity Caps The SEC is preparing to implement a stricter interpretation of foreign equity caps should the Supreme Court affirm its recent ruling earlier this year, officials said. Monitoring efforts will be bolstered to check on erring firms but status quo will be maintained in the meantime. read on
Day Of Reckoning For Goldman Sachs And Morgan Stanley New regulations are set to roll out in the coming months that threaten to kill off a large chunk of their profits -- most notably, the controversial Volcker Rule. While the specifics of the Volcker Rule are still being debated, the long-term impact on the firms' bottom line could be quite damaging. read on
SEC May Monitor High-Frequency Trading With Consolidated Audit Trail The SEC proposed a rule last year that would create a computer system powerful enough to monitor high-frequency trading, and it plans to release a detailed blueprint in the next few months. read on
Calculating Margin For Leveraged ETFs Margin calculation for most long positions is straightforward: 25% maintenance margin requirement is a standard. On leveraged ETFs, however, the calculation is more complex. read on
SEC & DOL Disagree On Universal Fiduciary Standard A universal fiduciary standard applying to both registered investment advisors and broker-dealers looked all but inevitable last year. But a series of setbacks has culminated in the delay of not only the SEC’s rule, but also an unpopular Labor Department rule, which would have exposed almost every advisor associated with a retirement plan to liability as a fiduciary. read on
FINRA Panel Finds For Aurum Against SocGen A FINRA arbitration panel found Societe General SA liable for $153 million in damages and interest stemming from a dispute with a fund manager over how to value a derivative instrument that matured during the 2008 financial crisis. The ruling ranks as one of the largest ever awarded by a FINRA arbitration panel. read on
Volcker Rule To Cost Banks $1B The Dodd-Frank Act’s ban on proprietary trading and limits on hedge-fund investments, known as the Volcker rule, will cost U.S. national banks about $1 billion for compliance and capital, according to a government estimate. read on
US SEC Accuses FINRA Of Altering Internal Documents The U.S. Securities and Exchange Commission scolded the self-policing brokerage industry group FINRA on Thursday for allegedly doctoring internal documents before handing them over to examiners. The SEC said a regional office of the Financial Industry Regulatory Authority in 2008 altered staff meeting documents just hours before handing them over to SEC inspection staff. read on
Investors Opt For Arbitration Panels Without Ties To Wall Street With skepticism of Wall Street running high, investors who have a beef with their brokerage firm are opting overwhelming to have their cases heard by arbitration panels that have no ties to the big banks. read on
SEC May Have To Get Admissions A federal judge called out the Securities and Exchange Commission on a long-standing practice used when the watchdog agency reaches a civil settlement with someone or some entity the SEC alleges violated securities laws. read on
SEC's Khuzami Faults Defense Lawyers For Conflicts Of Interest Some defense lawyers need to pay closer attention to possible conflicts of interest when they represent both companies and their employees in front of the SEC, the agency’s top enforcement official said. read on
House Panel Backs Bills To Ease Rules For Closely Held Firms A House panel approved measures aimed improving the ability of closely held firms to raise money by loosening SEC rules. With bipartisan support, the House Financial Services Committee approved four bills, including a measure that would allow firms to have up to 1,000 shareholders without triggering an initial public offering, increasing the threshold from 500. The legislation will next be voted on by the full House. read on
FINRA Indications Of Interest Proposal Draws Mixed Reviews A rule proposed by FINRA that could limit broker-dealers' usage of indications of interest drew mixed reviews from those who submitted comment letters to the regulator this month. Brokers and their advocates shot down the proposal, while one major buyside shop praised FINRA. While respondees differed on the rule's impact on buyside-sellside relations, both sides managed to find some common ground. read on
CFTC and SEC Harmonize Rules On Hedge Fund Disclosure The CFTC and the SEC will require essentially the same operational reports from hedge funds and private-equity funds. The CFTC approved a final rule requiring certain advisers to private funds dually registered with the SEC to report information for use by the Financial Stability Oversight Council in monitoring risks to the U.S. financial system. read on
Australian Hedge Fund Takes Goldman Back To Court Basis Capital Funds Management Ltd., an Australian hedge fund, filed a new lawsuit against Goldman Sachs Group Inc. over the sale of securities known as Timberwolf and Point Pleasant after a similar complaint was dismissed. read on
Fraudulent Hedge Fund Halted The SEC has obtained an asset freeze against a Boston-area money manager and his investment advisory firm charged with misleading investors in a supposed quantitative hedge fund and diverting portions of investor money into his personal bank account. read on
SEC OKs Confidential Private Fund Risk Reporting The Securities and Exchange Commission will adopt a new rule that would require certain advisers to hedge funds and other private funds to report information for use by the Financial Stability Oversight Council (FSOC) in monitoring risks to the U.S. financial system. read on
Hedge Funds Face Double Exposure Of Secret Data To Agencies When hedge funds and private-equity funds begin to reveal their inner workings to U.S. regulators, they may have to do it under different systems for two agencies. read on
SAC Capital Netted $14 Million In Trading Flagged By FINRA The brokerage industry's self-regulatory body referred trades in 19 companies to the SEC for further investigation, according to FINRA documents reviewed by Bloomberg News and to two people briefed on the matter. The hedge fund's bets -- on stocks including Genentech Inc., ViroPharma Inc. and United Therapeutics Corp. - - drew FINRA's attention because they were made before market- moving events such as acquisitions and the release of clinical- trial results for new drugs. read on
Hedge Fund's Case Against Rothstein, Kass Proceeds San Francisco Superior Court Judge Harold Kahn overruled Wednesday a request by Rothstein, Kass to dismiss a lawsuit brought by Nevada-based hedge fund Paron Capital Management against the firm read on
FINRA Sanctions 8 Firms, 10 Individuals Over Private Placement Sales FINRA has sanctioned eight firms and 10 individuals for selling interests in private placement offerings “without having a reasonable basis for recommending the securities,” the regulatory agency said in a statement. The sanctions included ordering more than $3.2 million in total restitution. The firms and individuals sold interests in high-risk private placements such as those issued by Provident Royalties, Medical Capital Holdings, and DBSI. read on
Facebook IPO: A Rookie Investor Trap Facebook is reportedly looking to raise $10 billion in an IPO that could arrive as soon as April 2012, but retail investors should be wary of wading in the first chance they get. read on
Lawmaker Presses CFTC On MF Global Collapse A House Republican lawmaker is pressing Gary Gensler, the head of the Commodity Futures Trading Commission, on whether early signs of MF Global's collapse fell through the cracks. read on
How Much Should RIAs Shake In Their Boots Compliance experts are split as to whether the Securities and Exchange Commission’s imposition of cumulative penalties and reimbursements of $262,000 on three advisory firms this week — and vividly detailing those firms’ missteps in a press release — constitutes a not-so-veiled warning by the SEC that closer scrutiny of the compliance practices of RIAs is at hand. read on
SEC And CFTC Adopt Private Fund Adviser Reporting Form The SEC and CFTC jointly adopted Form PF and accompanying rules under the Investment Advisers Act of 1940 and the Commodity Exchange Act of 1936 to implement certain provisions of Title IV of the Dodd-Frank Act. The information to be collected on Form PF is intended to assist the Financial Stability Oversight Council ("FSOC") in monitoring the potential systemic risks posed by private funds by providing empirical data to FSOC with which it may make determinations about such risks. read on
One Simple Solution: Outside Auditors An idea worthy of serious consideration has emerged from the contentious battle over how investment advisers should be regulated. A report released this month by James J. Angel, a professor at Georgetown University, suggested allowing advisory firms to pick an outside accountant to perform routine compliance exams, rather than relying on government auditors or a self-regulatory organization. read on
Former SEC Chair Frustrated With US Approach To Hedge Funds Richard Breeden, a hedge fund manager who served under former President George HW Bush, expressed his frustrations with the way the government has handled the financial crisis, saying lessons learned during the savings and loan crisis of the '80s should come to bear on more recent government programs, a former SEC chairman said that he's disappointed with current approaches to debt problems. read on
US Hedge Funds Face Fraud Action The SEC’s new “analytics” division tasked with mining hedge fund data announced actions against six individuals and three hedge fund firms for alleged fraud. read on
Banks Want More Time Before Volcker Rule Is Implemented Banks say they will need more time to liquidate investments in some private equity funds, as will be required by the Volcker rule. The banks are concerned that they would be forced to hold "fire sales" if they don't get more leeway. read on
SEC And CFTC Adopt Private Fund Adviser Reporting Form The SEC and CFTC jointly adopted Form PF and accompanying rules under the Investment Advisers Act of 1940 and the Commodity Exchange Act of 1936 to implement certain provisions of Title IV of the Dodd-Frank Act. The information to be collected on Form PF is intended to assist the Financial Stability Oversight Council ("FSOC") in monitoring the potential systemic risks posed by private funds by providing empirical data to FSOC with which it may make determinations about such risks. read on
Probe Of Hedge Fund Chief Derailed By SEC Official's Alleged Action A federal probe of possible market manipulation and insider trading by a hedge fund manager was derailed when SEC officials found that an agency supervisor had improper contact with the fund manager, according to a report released by the SEC’s inspector general. The report did not identify the employee, who worked at the agency’s headquarters, or the hedge fund manager. read on
SEC Slams Two Hedge Funds Over Conflicts, Lying to Investors The SEC has taken action against a pair of hedge funds, accusing them of, among other improprieties, hiding copious conflicts of interest from clients both potential and actual. read on
SEC And FINRA Issue Guidance On Broker Dealer Branch Inspections The SEC’s Office of Compliance Inspections and Examinations and FINRA issued a Risk Alert and a Regulatory Notice on broker-dealer branch inspections, and offered suggestions to help securities industry firms better perform this key supervisory function. Read On.
FIA Response To CFTC Proposed Definition Of High Frequency Trading The FIA Principal Traders Group has issued the following letter to the CFTC in response to its request for public comment on a proposed definition of High Frequency Trading. Read On
SEC Won't Sue SAC, Kynikos In Fairfax Case The SEC has ended a three-year-long probe into alleged market manipulation by hedge funds SAC Capital Advisors and Kynikos Associates. The regulator about a month ago informed the two firms that it was ending the investigation and would not bring enforcement actions against them, Reuters reports. The letters from the SEC have not been made public. Read On
Deadline For Broker-Dealers To Register Operations Professionals In Regulatory Notice 11-33, FINRA set Oct. 17, 2011, as the effective date for new FINRA Rule 1230(b)(6). The new rule requires member firms to register certain individuals as Operations Professionals. FINRA has now submitted a proposed rule change to amend FINRA Rule 1230(b)(6) to provide persons who are required to register until April 14, 2012 to pass the Operations Professional qualification examination, during which time such persons may function as an Operations Professional. Read On.
Regulators Charge 13 Over Securities Kickback Schemes The SEC, U.S. Attorney for the District of Massachusetts, and FBI have filed parallel cases in federal court against several corporate officers, lawyers and a stock promoter for allegedly using kickbacks and other schemes to trigger investments in various thinly-traded stocks. Read On.
SEC Charges Wachovia With Fraudulent Bid Rigging In Municipal Bond Proceeds The SEC charged Wachovia Bank N.A. with fraudulently engaging in secret arrangements with bidding agents to improperly win business from municipalities and guarantee itself profits in the reinvestment of municipal bond proceeds. Read On.
SEC Turns To Data Analysis To Draw Out Offending Advisers The SEC expects to bring an increasing number of enforcement actions against advisers to mutual funds, hedge funds, private-equity funds and other investment advisers in the coming year, thanks, in part, to computer systems programmed to root out lies. Read On.
Court Finds Private Actions Allowed Under Martin Act A decade after Attorney General Eliot Spitzer dusted off the long dormant Martin Act and deployed it to become the "Sheriff of Wall Street," the Court of Appeals has essentially deputized private citizens in holding for the first time that common-law tort claims are not preempted by the law. The Court said law and public policy support its conclusion that "an injured investor may bring a common-law claim (for fraud or otherwise) that is not entirely dependent on the Martin Act for its viability. Read On.
Ex-Prudential Broker Beats Market Timing Fraud Claims After a five-week trial, a jury in Manhattan federal court largely exonerated O'Meally, finding that the SEC hadn't proven that he violated the linchpin of securities fraud charges. Read On.
MF Global Debacle Triggers Calls For CME Changes The anger that market participants are expressing towards the exchange's regulation of the MF Global customer accounts is triggering the desire for a regulatory overhaul, according to Reuters. Eight weeks after the troubled broker dealer disintegrated into bankruptcy, customer funds totaling as much as $1.2 billion are unaccounted for. Read On.
SEC Adopts Final Rule Modifying Net Worth Definition For "Accredited Investors" The SEC's new rule, which was required by last year's Dodd-Frank Wall Street overhaul law, would exclude the value of a person's home from net worth calculations that are used to determine who is an "accredited investor." Only accredited investors who have a net worth of $1 million or more can participate in certain private placements and offerings that are not registered and do not require certain disclosures. Read On.
A Separate Regulator For Investment Advisers? It has become increasingly apparent that the system of oversight for investment advisers is lacking. In 2011, a mere 9% of the country’s 11,539 investment advisers were examined by the SEC, bringing the average number of years in between examinations to eleven. Examinations are a crucial element of any regulatory system both in terms of detecting unscrupulous practices and in deterring advisers from engaging in such behavior in the first place. Read On.
FINRA Fines Barclays Capital $3m For Subprime Mortgage Failures The regulator found that Barclays misrepresented the historical delinquency rates for three subprime RMBS it underwrote and sold between March 2007 and December 2010. Read On.
US Extends Volcker Rule Comment Period U.S. regulators will extend the comment period for the so-called Volcker rule, giving lawmakers and banks more time to seek changes in the proposed proprietary trading ban required by the Dodd-Frank Act. Read On.
SEC Rule 10b-5 Now Has A Sister And She's Mean While Rule 10b-5 may not be a concern for secondary participants, there is a new and bigger threat from two little noticed provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act. These two provisions should dramatically change the liability exposure of intermediaries, such as broker-dealers, investment advisers and fund managers in the sale of securities. read on
FINRA Fines Raymond James, Orders Firm To Repay Customers $1.69M Raymond James Financial Inc. will pay more than $2 million to resolve Financial Industry Regulatory Authority claims that more than 15,500 brokerage clients were charged excessive commissions on securities trades. read on
Ex-Edward Jones Brokers Under FBI Scrutiny Over Alleged Ponzi Scheme The FBI is investigating two former Edward Jones brokers based in South Dakota for their role in a “selling-away” case that involved raising money from clients who invested in an alleged Ponzi scheme. read on
CFTC Again Postpones Vote on Position Limits Federal rules set to rein in speculative commodities trading face further delays, as regulators struggle to finalize the controversial proposal amid threats of legal challenges. read on
SEC Wants To Increase Frequency, Lower Duration Of Trading Stoppages Federal regulators are considering changing the rules for when a dramatic shift in the stock market's value triggers exchanges to cut off trading. read on
SEC Muni Report Advances The SEC staff are pressing forward with a final municipal advisor registration scheme and a report that will recommend improvements in disclosure and other areas of the muni market. read on
SEC Sued Over 1998 Policy of Purging Files Linked to Probes The SEC was accused in a lawsuit by a government watchdog of illegally destroying documents from probes of Bernard Madoff, Bank of America Corp. and Lehman Brothers Holdings Inc. read on
SEC Approves Consolidated FINRA Rule Governing Reporting Requirements The SEC approved FINRA’s proposal to adopt a rule governing reporting requirements for the consolidated FINRA rulebook. The new rule, FINRA Rule 4530, is based in large part on NASD Rule 3070, taking into account certain requirements under NYSE Rule. read on
FINRA Oversight Of Advisers Gaining Momentum Mr. Bachus' Investment Adviser Oversight Act of 2011 is meant to boost regulation of advisers after a SEC report found that only 9% of registered advisers are examined each year, as it lacks the resources to do more. read on
Court Ruling Delays SEC Financial Reforms Six key looming federal regulations that will impact executive compensation - including proxy access and mandatory disclosure of the ratio between CEO pay and the median pay of a company’s workforce - have been effectively postponed at least until 2013. All were originally scheduled to go into effect before next year’s proxy voting season. read on
Former SAC Capital Portfolio Manager Settles With SEC Longueuil was sentenced to 30 months in prison in July after pleading guilty to criminal charges of conspiracy and securities fraud in a case that also included former SAC portfolio manager Noah Freeman, Samir Barai, founder of Barai Capital Management, and Jason Pflaum, an analyst who worked for Barai. read on
Stronger Broker-Dealer Audits Considered By SEC The SEC is contemplating new regulations that would create tougher audits for broker-dealers that do not use outside firms to handle client funds. Essentially, public accounting firms would have greater authority to conduct audits to ensure that brokerage firms are in compliance with existing rules. Borne out of the 2009 rules intended to prevent future financial scandals, money managers would have to comply with several rules involving the protection of client funds. read on
CFTC Finalizes Whistleblower Rule The CFTC rule, which takes effect Oct. 24, adds a new section to the Commodity Exchange Act. It provides for payment of an award to whistleblowers who offer original information about a violation that leads to successful enforcement. read on
FINRA Election Deadlines Set For Next Month Individuals who want to run for a seat on FINRA's small firm advisory board or on one of its district committees have until Oct. 7 to submit a form and get their names on the ballot. read on
SEC Bans Document Destruction After Whistleblower Cries Foul The SEC has forbidden its employees from destroying investigative documents, as fallout spreads from a whistleblower’s recent claim that the agency has illegally destroyed thousands of preliminary investigation documents. read on
