Editor’s letter

Citation

Davis, H.A. (2013), "Editor’s letter", Journal of Investment Compliance, Vol. 14 No. 3. https://doi.org/10.1108/JOIC-10-2013-0031

Editor’s letter

Article Type: Editor’s letter From: Journal of Investment Compliance, Volume 14, Issue 3

This issue begins with an article by Jeffrey Lehtman and William White that shows how the US Securities and Exchange Commission’s (SEC’s) insider trading enforcement has assumed increasingly global dimensions with many cases involving significant overseas conduct and cross-border cooperation from foreign securities regulators. The authors advise internationally active market participants to ensure they understand the new and evolving ways their firms receive and share information, internally and with third parties, and be prepared for how they might have to respond to cross-border regulatory investigations.

Next Jeffrey Legault, Pablo Quiñones, Mark G. Pedretti, Alexandra Poe, and Lina Zhou bring our attention to regulators’ and prosecutors’ increasing focus on private equity firms and highlight several problem areas that have been the subject of regulatory investigations, including “industry stressors” such as lack of product transparency on fees and valuation, pressure to call expiring commitments that may result in inappropriate investments, and various conflicts of interest.

David Engvall, David Martin, Warren Caywood and James Wawrzyniak explain changes to the SEC rules governing private offerings of securities, permitting general solicitation and general advertising in certain private placements under Rule 506 of Regulation D under the US Securities Act of 1933 and amending Rule 506 to disqualify certain “bad actors” under the rule.

Jackson Galloway and David Catano explain an SEC censure and cease-and-desist order against a registered investment adviser who conducted block trades with delegated discretionary authority for active portfolio management clients, but whose trade management system was incompatible with the custodian’s trading platform, resulting in the purchase of shares for some clients that did not have sufficient cash balances in their accounts to pay for the shares. The resulting block trade surplus was allocated in an unauthorized way to clients other than those originally intended to receive the shares, causing those clients losses as a direct result of the allocations.

Therese Pritchard, Jeffrey Kalinowski and Jeffrey Ziesman cite an administrative proceeding in which the SEC found that an investment adviser had appointed chief compliance officers (CCOs) without requisite compliance experience or training, had not tailored its compliance policies and procedures to its risk profile, and had not responded properly to the Commission’s findings from a prior examination. In light of this case the authors remind investment advisers of the need for compliance personnel with appropriate training and experience, an adequate number of compliance personnel, periodic reviews to ensure policies and procedures remain appropriate to their firms’ current business models and compliance risks, and prompt and comprehensive attention to SEC findings made in any prior examination.

Philip Urofsky and Danforth Newcomb discuss the types of US Foreign Corrupt Practices Act (FCPA) risks financial services firms face in their overseas activities, citing recent examples, and suggest ways those risks can be mitigated. They point to the potential protection from showing regulators a careful and comprehensive FCPA risk identification and management program.

Finally, Daniel Nathan and Kelley Howes address FINRA’s concerns about communications involving unlisted, on non-traded, real estate investment trusts (REITs) and real estate direct participation programs (DPPs), pointing to the need to balance the discussion of potential risks and benefits and to make appropriate disclosures along with any mention of distribution rates.

Henry A. Davis