Foley Hoag LLP

SUMMARY

Effective September 30, 2011, the new Treasury International Capital (TIC) Form SLT is required to be filed by certain custodians, investment managers and investors. The first filing deadline will be October 24, 2011 for any reporting entity, including an investment adviser that has $1 billion or more of reportable securities as of the last business day of the reporting month. You should note that only aggregate data derived from Form SLT will be published and only in a manner that will not reveal individual responses.

SUMMARY

On September 8, 2011, Representative Bachus (R-Ala.), Chairman of the House Financial Services Committee, introduced a discussion draft of the Investment Adviser Oversight Act of 2011 which proposes allowing a self-regulatory organization (“SRO”) to oversee investment advisers. If adopted, the legislation would amend the existing Investment Advisers Act of 1940 to provide for a national investment adviser association. If established, all Securities and Exchange Commission (the “SEC”) and state registered investment advisers would be required to register with the association. The draft legislation hasn’t yet been presented to the House Financial Services Committee.

SUMMARY

A decision by the Massachusetts Supreme Judicial Court (“SJC”) on September 22, 2011, lays to rest the Secretary of the Commonwealth’s finding that a hedge fund manager, Bulldog Investors General Partnership (“Bulldog”), and its principals, violated the Massachusetts Securities Act through its operation of an interactive website that provided investment information to all visitors. In this decision, the SJC rejected the hedge fund’s argument that the Secretary’s order violated the hedge fund’s First Amendment right to communicate information to consumers.

SUMMARY

On July 26, 2011 the U.S. Securities and Exchange Commission (the “SEC”) adopted Rule 13h-1, which implements registration and reporting requirements for large traders.

SUMMARY

On September 19, 2011, the Securities and Exchange Commission’s (the “SEC”) increased dollar amount thresholds for “qualified clients” as defined under rule 205-3 of the Investment Advisers Act of 1940, as amended, will go into effect.

SUMMARY

On August 8, 2011, the Massachusetts Securities Division (the “Division”) adopted regulations regarding the use of expert network services by investment advisers in Massachusetts (regardless of whether the adviser is registered with the Division or exempt from registration). Under new 950 CMR 12.205(9)(c)(16), investment advisers in Massachusetts will be required to obtain a written certification (see below) before engaging an expert network service (the “Expert Network Rule”). The Expert Network Rule will become effective December 1, 2011.

SUMMARY

On August 8, 2011, the Massachusetts Securities Division (the “Division”) adopted regulations regarding the charging of performance based fees by investment advisers (the “Performance Fee Rule”.) Under new regulation 950 CMR 12.205(9)(c)(17), investment advisers in Massachusetts (regardless of whether they are registered with the Division or exempt from registration) will be prohibited from charging performance based fees unless those fees comply with Rule 205-3 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

SUMMARY

As previously discussed in a Foley Adviser dated June 22, 2011, the Securities and Exchange Commission (the “SEC”) issued final rule releases relating to the implementation and interpretation of amendments to the Investment Advisers Act of 1940, as amended (the “Advisers Act”), contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). On July 11, 2012, the Connecticut Banking Commissioner issued two orders relating to investment adviser state registration requirements in response to the Dodd-Frank Act and the related SEC rule releases.

SUMMARY

The SEC’s final rules on the implementation of SEC registration requirements for investment advisers under the Investment Advisers Act of 1940, as recently modified by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), were published in the Federal Register and will become effective July 21, 2011 (the “Rules”). The Rules define who will be exempt from SEC registration in terms of the venture capital exemption and the exemption for private funds with less than $150 million in assets under management.

SUMMARY

The I.R.S. has recently issued its annual cost-of-living adjustments applicable in 2011 to qualified retirement (pension, profit-sharing, § 401(k), money purchase and stock bonus) plans. Generally, there has been such a low rate of inflation in the nation’s economy that many of these cost-of-living adjustments will remain unchanged.

SUMMARY

As the end of 2010 approaches and we receive numerous inquiries concerning developing hiring plans, I thought you might be especially interested to note some particulars about the Hiring Incentives to Restore Employment Act (the “HIRE Act”) which was enacted earlier this year to stimulate prompt hiring of workers by businesses.

SUMMARY

The Federal Trade Commission (FTC) just published its preliminary Staff report setting out its proposed framework for protecting privacy in the digital economy. View the FTC’s press release here. The FTC is seeking comments on its proposed framework by January 31, 2011 and expects to issue a final report in 2011.

SUMMARY

In this Issue: 

• The Sarbanes-Oxley Act provides whistleblower protection to certain employees who report wrongdoing by a publicly-traded company.

• A federal district court in Massachusetts has held that Sarbanes-Oxley whistleblower protection covers not only employees of the publicly-traded company, but also employees of that companys contractors, subcontractors, and agents.

• The district court is the only one in the United States that has interpreted Sarbanes-Oxley whistleblower protection to be so broad.

• The First Circuit has accepted the case for interlocutory appeal, and will likely be the first appellate court to determine the proper coverage of Sarbanes-Oxley whistleblower protection.
  

SUMMARY

In this Issue:

SEC v. TAMBONE: The First Circuit Reverses Course on What It Means to “Make” a Statement Under the Securities Laws

• Sitting en banc, the First Circuit vacated a key portion of its prior panel decision and affirmed the district court’s dismissal of the SEC’s Section 10(b)/Rule 10b- 5 claim against two mutual fund underwriters.
• The court rejected the SEC’s argument that a person who uses a false statement drafted by others to sell securities is liable for “making” that statement under Rule 10b-5.
• While this ruling closes one door to primary violator liability, others doors may yet remain open depending on the specific allegations of each case, and the First Circuit declined to choose sides in the current circuit split regarding the scope of primary liability.
  

SUMMARY

Earlier this week, Attorney General Eric Holder announced that the President’s FY 2011 budget request includes a staggering $29.2B for the Justice Department, an increase over the actual FY 2010 budget appropriation of $1.5B and 2,880 positions. 

SUMMARY

On December 21, 2009, President Barack Obama signed into law an extension of the federal COBRA subsidy created by the American Recovery and Reinvestment Act of 2009 (“ARRA”).

SUMMARY

Insider trading cases often have focused on “the CEO’s brother-in-law” or similarly situated individuals who used a tidbit passed along at Thanksgiving dinner to make a quick and easy personal profit.  Today, hedge funds have joined “the CEO’s brother-in-law” as the target of insider trading cases.  In the hedge fund context, charges are being based on a hedge fund employee’s collection of information as part of the employee’s job in trading the hedge fund’s assets, unlike the classic cases based upon receipt of an isolated “tip” outside of the work setting that will be used to generate profit for an individual.

SUMMARY

On October 27, 2009, the U.S. House of Representatives Financial Services Committee (the “Committee”) voted 67-1 to approve the Private Fund Investment Advisers Registration Act (the “Bill”), sponsored by Representative Paul E. Kanjorski (D-PA). The Bill would require advisers to private funds (which would include advisers to hedge funds and private equity funds as defined by the SEC, but not advisers to venture capital funds) to register as investment advisers with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

SUMMARY

On October 1, 2009, Representative Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, released discussion draft bills of the Investor Protection Act and the Private Fund Investment Advisers Registration Act.  These bills are part of the financial regulatory reform movement in Congress in response to the recent economic crisis.  In conjunction with the release of the draft bills, on October 6, 2009, the House Financial Services Committee has scheduled a hearing to discuss the creation of a national insurance office, improving investor protections and the regulation of private pools of capital.

SUMMARY

On July 2, 2009 the United States Bankruptcy Court for the Southern District of New York issued an order establishing September 22, 2009 as the deadline for filing proofs of claims against Lehman Brothers Holdings Inc. or any of its debtor affiliates (the “Order”). The Order provides that any holder of a claim against the Debtors who fails to file a proof of claim before the September 22, 2009 deadline will be forever barred from asserting such claim thereafter. The Order also establishes certain procedures that must be followed when filing proofs of claims, and sets forth additional requirements for claims based on either a derivative contract or an obligation that was guaranteed by one of the Debtors.