40 Act Blog

DOL Proposes Amendments to Delay Applicability Date for Fiduciary Rule

On August 9, 2017, the Department of Labor submitted proposed amendments to the Best Interest Contract Exemption (BICE), Class Exemption for Principal Transactions and Prohibited Transaction Exemption 84-24, to delay applicability under the Fiduciary Rule from January 1, 2018 to July 1, 2019.

In the meantime, we will continue to monitor the Department of Labor's (and the SEC’s) actions in this area, and will keep you informed of any changes to the Fiduciary Rule and Applicability Date.

Please also refer to these prior posts regarding the Fiduciary Rule:

• The Department of Labor Delays the New Fiduciary Rule – 04/14/2017
• DOL Issues Temporary Enforcement Policy on Fiduciary Rule – 03/14/17
• DOL Adopts Proposal to Delay the Fiduciary Rule – 03/01/2017
• Division of Investment Management Provides FAQs on Mutual Fund Fee Structures – 02/22/2017
• Division of Investment Management Provides Interpretive Guidance on Section 22(d) Restrictions – 01/13/2017
• Division of Investment Management Provides Guidance on “Mutual Fund Fee Structures” – 12/15/2016
• The New Fiduciary Rule's Effect on Investment Managers – 05/27/2016"

SEC shares “Observations from Cybersecurity Examinations”

As cybersecurity remains one of the top compliance risks for financial firms, the SEC has released a Risk Alert on observations from OCIE’s Cybersecurity 2 Initiative. Following the initial initiative in 2014 that undertook to assess associated industry practices and legal and compliance issues, the more recent focus was on more validation and testing of procedures and controls surrounding cybersecurity preparedness.

Revisiting the SEC’s 2015 “Summary of Cybersecurity Examination Sweep”

The SEC has recently completed its Cybersecurity Examination Initiative, aimed at better understanding how broker-dealers and advisers address the legal, regulatory, and compliance issues associated with cybersecurity. The examined firms were selected to provide perspectives from a cross-section of the financial services industry and to assess various firms’ vulnerability to cyber-attacks. The review was designed to discern basic distinctions among the level of preparedness of the examined firms.

As a result of this review, OCIE highlights several factors that firms may consider to: (1) assess their supervisory, compliance and/or other risk management systems related to cybersecurity risks, and (2) make any changes, as may be appropriate, to address or strengthen such systems.

Director of the Division of Investment Management to leave the SEC

The SEC announced today that David W. Grim, Director of the Division of Investment Management, will leave the agency next month after more than 20 years of public service. The SEC announced today that David W. Grim, Director of the Division of Investment Management, will leave the agency next month after more than 20 years of public service.

Division of Investment Management Responds to Questions Regarding New Fund Reporting Rules

The Division of Investment Management (the "Division") recently issued a set of interpretive answers ("Guidance") to questions relating to the investment company reporting reforms adopted by the Securities and Exchange Commission in October 2016.

Seward & Kissel participates in Washington, DC Compliance Roundtable

Click here for notes from June 15, 2017 members meeting with Mark J. Dowdell, Assistant Regional Director of Securities and Exchange Commission (Philadelphia Regional Office).

Q&As -- Now That the DOL's Fiduciary Rule Is Applicable

Q 1: What representations should a private investment fund get from new "benefit plan investors"?

A: Assuming that an investment manager or "you" are not intending to rely on the "best interest contract" ("BIC") prohibited transaction exemption and except as discussed in Q 2 below, a private investment fund can only be offered to an ERISA plan or IRA which employs an "independent fiduciary with financial expertise" ("IFFE") in connection with the investment into the fund. Under the Department of Labor fiduciary rule (the "Rule"), you can rely on representations from investors as to their qualifications as an IFFE.

New Rules to Modernize Reporting Obligations of Registered Investment Companies

In October 2016, the Securities and Exchange Commission ("SEC") adopted new rules and forms, as well as amendments to existing rules and forms, to enhance transparency and modernize reporting requirements for registered investment companies.  The SEC adopted new Form N-PORT (and rescinded Form N-Q), which requires registered investment companies and exchange-traded funds organized as unit investment trusts, but not money market funds and small business investment companies, to report information about their monthly portfolio holdings to the SEC in a structured data format. The SEC also adopted new Form N-CEN (and rescinded Form N-SAR), which requires registered investment companies, other than face-amount certificate companies, to annually report certain census-type information to the SEC in a structured data format.  In addition, the SEC adopted amendments to Regulation S-X, which require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments.

The DOL Fiduciary Rule - Action Steps for Investment Managers

The new Department of Labor fiduciary rule (the "Fiduciary Rule") will be applicable on June 9, 2017. If you have not already done so, you need to address these rule changes as they relate to ERISA plans and individual retirement accounts (IRAs) regarding:

• Post June 9th subscriptions for private fund investments;
• Separately Managed Accounts that use brokers/dealers affiliated with the investment manager, or invest in mutual funds affiliated with the investment manager; and
• Holistic advice that advises on ERISA plan rollovers to an IRA.

The Department of Labor Delays the New Fiduciary Rule

On Friday April 7th, the Department of Labor published in the Federal Register amendments to its fiduciary regulation (the "New Fiduciary Rule") and related prohibited transaction exemptions (the "Exemptions"). The amendments delay until June 9, 2017 the "Applicability Date" of the New Fiduciary Rule and the Exemptions.