Editor column

Citation

Davis, H.A. (2007), "Editor column", Journal of Investment Compliance, Vol. 8 No. 1. https://doi.org/10.1108/joic.2007.31308aaa.001

Editor column

We start the year 2007 and Volume 8 of the Journal of Investment Compliance with nine articles on a diversity of topics of current interest to compliance officers of investment companies. Michael Lukaj and Girard Healy start us off with a comprehensive view of current and outstanding hedge fund regulation issues, including Representative Barney Frank’s recent proposed legislation and the renewed interest of individual states in filling a perceived regulatory void, and the outlook for more regulation in the future including the possible raising of the minimum dollar thresholds under Regulation D for who qualifies to invest in hedge funds. Following up on our recent coverage of hedge fund side letters from the US point of view (see “The Downside of Side Letters”, by Ian Levin and Kevin Scanlan, Volume 7, Issue 2, 2006) we have some advice from Peter Astleford, Richard Frase, Andrew Hougie, and Stuart Martin reflecting the UK point of view based on the Alternative Investment Management Association’s recent Guidance Note. Next we return to one of those investment compliance issues that never goes away, insider trading – this time fueled by regulators’ perception (whether justified or not) that a recent increase in merger activity has caused an uptick in insider trading. Authors Timothy Burke and Hope Jarkowski recommend policies and procedures that investment companies should have in place to prevent and detect the misuse of material non-public information. Another issue we have seen in the news recently is the Department of Justice’s concern about the nature of “clubs” formed by competing private equity firms to place bids for target companies. Geraldine Alexis and Troy Sauro discuss the reasoning and innovation behind the Department of Justice’s current investigation. Then Soo Yim and Christie Öberg summarize the NASD’s recent expansion of the best execution rule so that it applies not only to transactions for or with a customer, but also to those for or with another broker-dealer’s customer. The NASD also reiterates that the rule applies to debt as well as equity securities. Bhaskar Dhandapani provides detailed practical guidelines for mutual funds on systematic, readily documented ways to determine appropriate share classes – which differ in the sales charges that are applied at the point of buy and sell, fund expenses, dividends, and capital gain distributions – for different investors based on factors such as the investor’s planned investment horizon, existing holdings, and source of investment (new money versus proceeds of sales) as well as applicable fund rules. Another issue this journal has covered in recent years is fair value measurement (see “The fair valuation mess”, by David F. Freeman Jr, Volume 4, Number 1, Spring 2003). Anthony Zacharski, Alan Roseblat, Erin Wagner and Adam Teufel discuss the FASB’s recently issued Statement 157, which defines fair value, establishes a framework within generally accepted accounting principles for measuring it, and expands disclosure requirements for fair value measurements. Next Louis Anon, Harry Filowitz, and Jeffrey Kovatch recommend ways that Sarbanes Oxley controls can be integrated into an investment firm’s overall governance framework, echoing a theme found often in this journal that all aspects of compliance, governance, and risk management should be woven together as part of a firm’s day-to-day operating procedures and basic cultural fabric. Finally, Jeffrey Puretz, Robert Robertson, Alan Rosenblat, Jutta Frankfurter, and Cortney Scott visit one of the prominent mutual fund abuse rules we have been covering in recent issues, market timing. (See two consecutive articles by Thomas R. Smith, Jr “Mutual funds under fire”, Volume 7, Issue 1, 2006, and “Mutual funds under fire: reform initiatives”, Volume 7, Issue 2, 2006). The authors discuss the SEC’s recent amendments to the redemption fee rule, which simplify mutual funds’ obligations to enter into shareholder information agreements with intermediaries that are designed to prevent market timing and other similar abusive transactions. That wraps it up for this quarter. We always welcome readers’ comments and proposed contributions to the journal.

Henry A.DavisEditor

James A. Tricarico JrConsulting Editor