SEC PROPOSES TO EXEMPT THRIFTS FROM THE ADVISERS ACT
4.30.2004 The SEC proposed a new rule under the
Investment Advisers Act of 1940 Act that will except thrifts from having to register as investment advisers under the Advisers Act
when they provide investment advice as part of certain trust department
fiduciary services. Under the proposed rule, a thrift institution will
be deemed not to be an investment adviser if its investment advisory
services are provided solely in its capacity as trustee, executor,
administrator, or guardian for customer accounts created and maintained
for a fiduciary purpose, or to its collective trust funds excepted from
the Investment Company Act of 1940. Thrifts that provide advisory services beyond the new exceptions
would be required to continue to be registered with the Commission,
but could apply the Advisers Act only to accounts that fall outside
the new exceptions.
The SEC also
proposed an amendment to Form ADV, the registration form for investment advisers, and a new rule
under the Securities Exchange Act of 1934 that will exempt thrift-sponsored collective trust funds from registration and
reporting requirements under the Exchange Act.
Please click http://www.sec.gov/rules/proposed/34-49639.htm for a copy of the proposing release.
Back To The Top
ADVISER SANCTIONED FOR INAPPROPRIATE USE OF SOFT DOLLARS
4.29.2004 The SEC announced that Gordon J. Rollert, the
former principal of registered investment advisers Sage Advisory
Services LLC and Standard Asset Group, L.P., was enjoined, by consent,
from violations of the antifraud and false filing provisions of the
federal securities laws and ordered to pay $50,000 disgorgement.
In February 2001, the SEC charged Rollert, of Wellesley,
Massachusetts, with defrauding one of his clients, the Pakachoag Church
of Auburn, Massachusetts, of approximately $900,000 between 1993 and
1997. In its complaint, the SEC alleged that Rollert used his
investment advisory firm, Sage Advisory Services, LLC, and its
predecessor to
misappropriate hundreds of thousands of dollars in soft dollar credits
generated by securities transactions made on the Church's behalf in an
account that Rollert set up at a Boston-area broker-dealer. It also
alleged that Rollert fraudulently induced the Church to invest $250,000
in Rollert's advisory firm.
The SEC also alleged Rollert submitted invoices to the broker-dealer for
payments with soft dollars that had been generated by trading in the
Church's account. Many of the invoices that Rollert submitted were in
the name of FA Partners, a shell entity that Rollert controlled, and
falsely indicated that FA Partners had provided services to Sage that
were payable with soft dollars. The broker-dealer paid FA Partners
based on these false invoices. Rollert personally picked up these
payments from the broker-dealer and deposited them into bank accounts
that he controlled. He then withdrew the majority of the funds for his
personal use. The SEC alleged that the Church was not informed
that its soft dollars were being used for Rollert's personal benefit.
Soft dollar credits are created when an investment adviser and a broker-
dealer enter into an arrangement in which a percentage of commissions
are used to pay for products and services, such as research, that help
the adviser in making investment decisions. Because soft dollar credits
are generated by commissions paid by the advisory client, they are
assets of the client.
Please click http://www.sec.gov/litigation/litreleases/lr18687.htm for a copy of the administrative action.
Back To The Top
SEC UPDATES EDGAR FILER MANUAL
4.23.2004 The SEC has adopted revisions to the Electronic Data Gathering,
Analysis, and Retrieval System (EDGAR) Filer Manual to reflect updates
to the EDGAR system. The revisions are being made primarily to support
the mandatory electronic filing of Form ID, the application for access
codes to file on EDGAR, via a new EDGAR Filer Management Web site and to
support the initial period of our proposal to expand the information
that we require certain open-end management investment companies and
insurance company separate accounts to submit to us electronically
through EDGAR regarding their series and classes (or contracts, in the
case of separate accounts), that will allow these investment companies,
to enter series and class information using the new Series and classes information
page on the EDGAR Filer Web site to obtain series and class identifiers. In addition, the new release will include EDGAR company
naming convention updates. It will increase the company name length
from 60 characters to 150 characters and support the use of additional
ASCII characters in the company name and the ability to store and
disseminate mixed-case company names instead of in all upper case (as
was done in the past).
Please click http://www.sec.gov/rules/final/33-8409.htm for a copy of the release.
Back To The Top
SEC ADOPTS MARKET TIMING AND OTHER DISCLOSURE RULES
4.13.2004 The SEC adopted amendments to
Forms N-1A, N-3, N-4, and N-6 under the Securities Act of 1933 and the
Investment Company Act of 1940. The amendments:
- require open-end
management investment companies and variable insurance products to
disclose in their prospectuses information about the risks of, and
policies and procedures with respect to, the frequent purchase and
redemption of investment company shares;
- clarify that open-end
management investment companies and insurance company managed separate
accounts that offer variable annuities are required to explain both the
circumstances under which they will use fair value pricing and the
effects of using fair value pricing; and
- require open-end management
investment companies and insurance company managed separate accounts
that offer variable annuities to disclose their policies with respect to
disclosure of portfolio holdings information.
Please click http://www.sec.gov/rules/final/33-8408.htm to access a copy of the adopting release.
Back To The Top
COURT ISSUES AN ORDER THAT SHUTS DOWN HEDGE FUND
4.13.2004 San Diego-based
Global Money Management, L.P., (GMM) a hedge fund, was ordered to cease operations. The fund is operated by GMM. Marvin
I. Friedman, of La Jolla, California, controls GMM.
The SEC's complaint alleges that the defendants grossly
overstated the assets of GMM to investors.
While the amount of money actually raised is
not known, Friedman allegedly told investors at various times over the last
several months that the hedge fund held assets ranging from $60 million
to over $100 million. GMM's brokerage records, however, show that,
since at least December 2002, the securities it holds have been worth no
more than $11 million. In addition, Friedman touted his investment
experience but failed to inform investors about his disciplinary
history, including that he has been barred from association with any
member of the NASD.
Please click http://www.sec.gov/litigation/litreleases/lr18666.htm to access a copy of the administrative action.
Back To The Top
OCIE DIRECTOR SPEAKS ON COMPLIANCE
4.13.2004 The Director of the Office of Compliance Inspections and Examinations (OCIE), Lori Richards, spoke about various compliance issues at the NRS Spring conference in Naples, Florida. She listed the following ten areas as being areas that OCIE examiners will focus on:
- Fund Shareholder Trading
- Fair Value and NAV Calculation
- Use of Brokerage
- Fees
- Advisers' Custody
- Side-By-Side Management of Hedge Funds
- Affiliated Transactions
- Advisers' Disclosure of Conflicts
- Allocations
- Advisers' Performance Calculations
Please click
http://www.sec.gov/rules/proposed/33-8396.htm to access a copy of the speech.
Back To The Top
SEC DIRECTOR GIVES SPEECH TO NEW MUTUAL FUND DIRECTORS
4.2.2004 Paul Roye, Director of SEC's Division of Investment Management, spoke at the 2004 New Directors Workshop in Washington, D.C. Mr. Roye spoke about the mutual fund scandal and the lessons to be learned from the scandals. He also listed the following general tenets that should guide fund directors as they perform their responsibilities:
- there is no justification for complacency on the part of fund directors;
- fund directors must bring a healthy dose of skepticism to their oversight functions;
- fund directors must insist on a culture of compliance at the firms that manage their funds;
- fund directors must demand accountability from fund management; and
- fund directors must remember that the fund's management company works for you-not the other way around.
Please click http://www.sec.gov/news/speech/spch040204pfr.htm to access a copy of the speech.
Back To The Top
