Foley Hoag LLP

SUMMARY

As we previously noted in our Foley Adviser dated February 3, 2010, “New Massachusetts Data Security Law and Regulations-Comprehensive Information Security Plan required before March 1, 2010”, under the regulations, an investment adviser must require third-party service providers by contract to implement and maintain appropriate security measures for personal information. There currently is a grandfather provision that deems any contract with a service provider entered into before March 1, 2010 to be in compliance even if it makes no reference to data protection.  [more...]

SUMMARY

The Massachusetts Securities Division (the “Division”) has adopted new regulations relating to the regulation of investment advisers. The new regulations will become effective on February 3, 2012, but will not be enforced by the Division until August 3, 2012, six months after the effective date.  [more...]

SUMMARY

Asset managers are reminded that The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) implemented a significant change in the approach taken under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), regarding the registration with the Securities and Exchange Commission (the “SEC”) of advisers to unregistered funds. This change reflects two fundamental alterations of basic regulatory philosophy: a determination that advisers to such funds must register with the Securities and Exchange Commission (the “SEC”) unless covered by a specific exemption from registration; and a greater reliance on state regulators to oversee advisers generally. The deadline for managers required to register with the SEC is March 30, 2012. In order to make certain that a registration is effective by March 30, managers should file an application with the SEC by February 14, 2012.  [more...]

SUMMARY

The Massachusetts Securities Division has amended proposed rules relating to the regulation of investment advisers. We outlined the previous proposals in our April 21, 2011 Foley Adviser-“Massachusetts Secretary of State Proposes New Regulations for Investment Advisers in response to Dodd-Frank Act.” The amended proposal, after consideration of previously submitted public comments, makes substantive changes to (i) the definition of “institutional buyer,” (ii) the proposed private fund adviser exemption (including the introduction of a grandfathering provision), and (iii) requirements for advisers with discretion over, or custody of, client funds. [more...]

SUMMARY

Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) set forth, among other regulatory changes, a revised net worth test for a natural person to qualify as an “accredited investor” for purposes of Regulation D under the Securities Act of 1933, as amended (the primary private placement exemption relied on by investment advisers managing private investment funds). The revised standard, which came into effect on July 21, 2010, requires such individual’s net worth or joint net worth with the spouse of that person, at the time of investment to be $1,000,000, excluding the value of the primary residence of such natural person.  [more...]

SUMMARY

In this Issue: 

• DOJ’s Recent Trend of Prosecuting Individuals for FCPA Violations Continues with Longer Prison Sentences and Increased Fines

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

Registered Investment Advisers who were registered as of December 31, 2010, and who have fiscal years ending December 31, 2010 through April 30, 2011 must deliver brochure supplements (Part 2B Form ADV) to existing clients by September 30, 2011. Advisers should already be delivering brochure supplements to new and prospective clients.

SUMMARY

Investment Advisers registered with the US Securities and Exchange Commission (the “SEC”) as of December 31, 2010, and that have fiscal years ending December 31, 2010 through April 30, 2011 must start delivering brochure supplements (Part 2B Form ADV) to new and prospective clients by July 31, 2011 and to existing clients by September 30, 2011.

Advisers with fiscal years ending after April 30, 2011, must deliver such brochure supplements within 120 days after the end of their fiscal year. Investment Advisers who filed their applications for registration between January 1, 2011 and April 30, 2011, should already be delivering such brochures to new and prospective clients, as well as existing clients.

SUMMARY

On June 22, 2011, the Securities and Exchange Commission (“SEC”) released amendments to Rule 206(4)-5 (the “Rule”) under the Investment Advisers Act of 1940  (the "Advisers Act"), which places restrictions on political contributions by an investment advisor or its covered associates, and prohibits the engagement by an investment advisor of unregulated third party solicitors to solicit government entity clients on its behalf.

SUMMARY

At an open meeting of the Securities and Exchange Commission (the “SEC”) held earlier today, the SEC adopted final rules relating to the implementation of the changes to the registration requirements contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC also extended the deadline by which currently unregistered advisers will need to comply with the new registration requirements until March 30, 2012.

Additional information regarding the details of the new rules will follow.

SUMMARY

In a release dated May 10, 2011, the Securities and Exchange Commission (the “SEC”) announced that, as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), it intends to issue an order that would adjust the dollar amount thresholds for “qualified clients” as defined under rule 205-3 of the Investment Advisers Act of 1940, as amended (“Advisers Act”). [more...]

SUMMARY

On May 27, 2011, new Rule 5131 ( New Issue Allocations and Distributions) of the Financial Industry Regulatory Authority, Inc. (“FINRA”) will go into effect. This new rule is intended to address certain abuses in the allocation and distribution of new issues and specifically prohibits, among other things, “spinning.” The full text of the rule can be found on the FINRA website. Rule 5131 does not replace the existing new issues rule (Rule 5130), but instead creates an additional set of requirements.  [more...]

SUMMARY

The Massachusetts Securities Division, under the direction of Secretary Galvin, has proposed new regulations relating to the regulation of investment advisers, including hedge fund managers. The proposed regulations are being issued in main part in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) passed by Congress in July 2010 and are intended to “promote consistency” between Massachusetts state requirements for registration and regulation of investment advisers and the federal requirements following passage of the Dodd-Frank Act.

SUMMARY

In a letter dated April 8, 2011 to the President of the North American Securities Administrators Association, Inc., Robert E. Plaze, Associate Director of the Securities and Exchange Commission (“SEC”), indicated that the SEC will consider extending the deadlines by which certain advisers must register with the SEC, or switch from SEC to state registration, under the new provisions of the Dodd-Frank Wall Street Reform and Consumer Protect Act (the “Dodd-Frank Act”).  [more...]

SUMMARY

On February 4, 2011, the U.S. Court of Appeals for the District of Columbia Circuit rejected Full Value Advisors LLC’s challenge to Form 13F disclosure requirements. Full Value argued that the disclosure requirements amount to compelled speech in violation of the First Amendment and an uncompensated taking in violation of the Fifth Amendment. Full Value’s requests for exemption from and confidential treatment under Section 13(f) had previously been denied by the U.S. Securities and Exchange Commission. [more...]

SUMMARY

On January 26, 2011, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Commodity Futures Trading Commission (“CFTC”) and the U.S. Securities and Exchange Commission (“SEC”) jointly proposed new disclosure requirements for investment advisers to private funds. The proposed rules require certain information about private funds to be disclosed by electronically filing a new reporting form called “Form PF” with the SEC.  [more...]

SUMMARY

Exemptions Are Commonly Relied Upon By Investment Advisers to Hedge Funds and Other Private Funds

Elimination of Exemptions 

On January 26, 2011, the U.S. Commodity Futures Trading Commission (“CFTC”) proposed certain amendments to current CFTC rules, including the elimination of two widely used exemptions from commodity pool operator (“CPO”) registration. If adopted, the proposed amendments would have a significant impact on advisers to funds currently operated as “exempt commodity pools,” including many hedge funds. [more...]