40 Act Blog

Chairman Clayton Clarifies Role of SEC Staff Views

On September 13, 2018, Chairman Jay Clayton issued a statement indicating that all staff statements are nonbinding and do not create enforceable legal rights or obligations. The statement highlighted the distinction between the SEC’s rules and regulations, on the one hand, and staff views on the other. The statement noted that staff views may be reflected in written statements, compliance guides, letters, speeches, and responses to frequently asked questions and responses, among other things.

SEC Staff Withdraws Two No-Action Letters Related to Proxy Advisory Firms

On September 13, 2018, the SEC’s Division of Investment Management issued a notice indicating the withdrawal of two 2004 no-action letters that provided guidance on adviser responsibilities in voting client proxies and the use of proxy advisory firms.

The Division of Investment Management said it reexamined the no-action letters in light of the upcoming SEC roundtable discussion on “the proxy process” expected to be held in November 2018. The staff stated that the withdrawal of the letters would facilitate the discussion at the roundtable.

Elad Roisman Sworn in as SEC Commissioner

On September 11, 2018, Elad L. Roisman was sworn into office as an SEC Commissioner by SEC Chairman Jay Clayton. Mr. Roisman was nominated to the SEC by President Donald J. Trump, and his nomination was confirmed by the U.S. Senate on September 5. Commissioner Roisman comes to the SEC from the Senate Banking Committee, where he served as Chief Counsel.

Massachusetts Financial Services to Pay a $1.9 Million Civil Penalty for the Use of Misleading Marketing Materials

On August 31, 2018, the SEC announced that it settled charges against Massachusetts Financial Services related to allegations that it failed to disclose that some of its product marketing materials for its blended research equity strategy presented hypothetical back-tested portfolio results.

Click here to access the SEC Order.

Transamerica Entities to Pay $97 Million to Investors Relating to Errors in Quantitative Investment Models

On August 27, 2018, the SEC announced that it settled charges against four Transamerica-related entities for misconduct involving reliance on faulty investment models and ordered the entities to refund $97 million to misled retail investors. According to the SEC’s order, investors put billions of dollars into mutual funds and strategies using the faulty models developed by investment adviser AEGON USA Investment Management LLC (AUIM).

The SEC found that the models, which were developed solely by an inexperienced, junior AUIM analyst, contained numerous errors, and did not work as promised. The SEC also found that when AUIM and a Transamerica affiliate learned about the errors, they stopped using the models without telling investors or disclosing the errors.

Click here to access the SEC Order.