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Article
Publication date: 2 May 2017

Rachael Leah Schwartz, Domenick Pugliese, Marguerite Bateman and Kimberly Vargo

To provide an overview of the US Securities and Exchange Commission’s (SEC) recently adopted rule 22e-4 (Rule 22e-4) under the Investment Company Act of 1940, as amended (1940…

391

Abstract

Purpose

To provide an overview of the US Securities and Exchange Commission’s (SEC) recently adopted rule 22e-4 (Rule 22e-4) under the Investment Company Act of 1940, as amended (1940 Act) regarding investment company liquidity risk management programs.

Design/methodology/approach

Reviews and summarizes the specific requirements of Rule 22e-4 to better enable investment companies and their boards to comply by the general compliance date of December 1, 2018 (smaller complexes have until June 1, 2019).

Findings

The SEC clarifies that each fund should tailor its particular Program to ensure that it is adequately assessing and managing its specific liquidity risk based on its investment strategies and risks; however, it is not expected that a fund would eliminate all adverse impacts of liquidity risk. In addition, under the final rule, while the board does have certain duties and responsibilities with respect to certain aspects of a fund’s Program, the SEC pared back much of what had been in the Proposing Release to ensure that the board’s role remains one of oversight and not management.

Practical implications

Although the compliance date does not occur for almost two years, funds and their boards should begin reviewing the Rule 22e-4 requirements now and developing their Program.

Originality/value

Practical guidance from experienced investment management attorneys that provides insight into expectations for compliance with Rule 22e-4.

Details

Journal of Investment Compliance, vol. 18 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 31 October 2018

Mark M. Attar, Marguerite Bateman, Jack P. Drogin, Domenick Pugliese, Rachael Leah Schwartz and Kimberly Karcewski Vargo

To provide an overview of the US Securities and Exchange Commission’s (SEC’s) recently proposed rulemaking package relating to standards of conduct for investment professionals…

53

Abstract

Purpose

To provide an overview of the US Securities and Exchange Commission’s (SEC’s) recently proposed rulemaking package relating to standards of conduct for investment professionals. The three proposals included: interpretation regarding the standard of conduct of investment advisers under the Investment Advisers Act of 1940; Form CRS which both registered investment advisers and registered broker-dealers would have to provide to retail investors; and proposed regulation best interest.

Design/methodology/approach

Reviews and summarizes the three individual proposals.

Findings

The SEC has proposed this rulemaking package in order to meet three goals: enhance retail investor protection and decision making, preserve investor choice and cost, and raise retail investor awareness of whether they are doing business with a registered financial professional. The SEC is looking for feedback, particularly from retail investors, on whether these proposals would achieve the SEC’s goals.

Originality/value

Summarizes the three proposals in a manner that provides insight into how investment advisers and broker-dealers would be required to conduct business with retail investors if the proposals are adopted in the current form.

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Article
Publication date: 1 July 2006

Michael R. Rosella and Domenick Pugliese

To discuss how product innovations in exchange‐traded funds (ETFs) have blurred the line between passive and active management, and to explore the legal ramifications of these…

835

Abstract

Purpose

To discuss how product innovations in exchange‐traded funds (ETFs) have blurred the line between passive and active management, and to explore the legal ramifications of these developments.

Design/methodology/approach

Describes how ETFs operate and how the ETF marketplace has grown; discusses the use of broad‐based indexes for most ETFs until recently; describes newer ETFs that provide targeted exposure to narrow market segments; and discusses underlying indexes that are based on performance‐based characteristics rather than market segments, along with possible difficulties in making performance‐based criteria widely available to investors.

Findings

Historically the SEC has expressed skepticism over actively managed ETFs because of uncertainty as to whether they can provide the same portfolio transparency and arbitrage opportunity that traditional ETFs can. As “Rule Sets,” or criteria for including companies in performance indexes, become more involved and less objective, the challenge will be to ensure that sufficient arbitrage opportunities exist to ensure pricing efficiency. If that challenge can be met, it may serve as a model for a truly actively managed ETF.

Originality/value

Explains how the new generation of ETFs is coming closer to the line of active management and the legal issues that must be surmounted before truly actively managed ETFs are offered.

Details

Journal of Investment Compliance, vol. 7 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 1 October 2006

Michael R. Rosella and Domenick Pugliese

This paper sets out to assess the role of the chief compliance officer (“CCO”), how the CCO performs his/her duties, and how the CCO interacts with the fund's board three years…

1264

Abstract

Purpose

This paper sets out to assess the role of the chief compliance officer (“CCO”), how the CCO performs his/her duties, and how the CCO interacts with the fund's board three years after the adoption of Rule 38a‐1 under the Investment Company Act of 1940.

Design/methodology/approach

Reviews the CCO's responsibilities under Rule 38a‐1, discusses how the CCO role has evolved since the rule was promulgated, and focuses on key issues such as oversight versus supervision, the annual review process, risk assessement, testing methodologies, and the annual report to the fund board on the adequacy and operation of the fund's compliance program.

Findings

Properly conducted compliance requires the support of a wide range of the advisory/administrative team with the CCO playing the role of conductor of the orchestra. More and more CCOs seek to distance themselves from approving the day‐to‐day actions of other employees, so they cannot be considered to have assumed supervisory responsibility for those employees. Although a fund is required to perform an annual review of the adequacy of its compliance programs and its Primary Service Providers' compliance programs, most CCOs have found the review process is ongoing and occurs continuously throughout the year. Now that these compliance programs have been in place for two years, more CCOs are devoting time and resources to identify high‐risk areas and to implement transactional, periodic, and forensic testing programs. The CCO annual report has taken many different shapes and sizes, but generally summarizes material changes to the fund's compliance policies and procedures that have already been reported to the board.

Originality/value

A current, practical assessment of the CCO role by expert lawyers who advise funds on their compliance programs.

Details

Journal of Investment Compliance, vol. 7 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 28 October 2014

Domenick Pugliese, Michael Rosella and David Hearth

To explain a guidance update recently issued by the USA Securities and Exchange Commission (SEC) Division of Investment Management that furthers the SEC’s goal of clear and…

127

Abstract

Purpose

To explain a guidance update recently issued by the USA Securities and Exchange Commission (SEC) Division of Investment Management that furthers the SEC’s goal of clear and concise, user-friendly disclosure by focusing on certain specified requirements of Form N-1A and the rules under the Securities Act of 1933.

Design/methodology/approach

Discusses five areas where the SEC staff had been providing significant numbers of comments related to mutual fund disclosure after the adoption of the amendments to Form N-1A in 2009 by summarizing the applicable instructions of Form N1-A and/or rule and the SEC staff’s observations with respect to such instruction or rule.

Findings

Funds should ensure that during their next annual update they review their prospectus disclosure in light of this guidance update and make necessary changes so that the disclosure is clear and concise and not overly technical.

Originality/value

A concise summary of the SEC’s guidance update from experienced investment management lawyers.

Details

Journal of Investment Compliance, vol. 15 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 19 June 2007

Michael R. Rosella and Domenick Pugliese

The purpose of this paper is to assess the history, current use, and possible future of Rule 12b‐1 of the Investment Company Act of 1940.

481

Abstract

Purpose

The purpose of this paper is to assess the history, current use, and possible future of Rule 12b‐1 of the Investment Company Act of 1940.

Design/methodology/approach

This paper briefly reviews the history behind the original adoption of Rule 12b‐1, then discusses the ways in which 12b‐1 fees are used today, some of the issues surrounding the Rule, and finally, briefly explores where we might be heading in the future.

Findings

The paper finds that, first adopted in 1980 in an effort to prop up a then ailing industry, Rule 12b‐1 and Rule 12b‐1 fees have been a staple for many mutual funds for almost 30 years. Over this time, the ways in which 12b‐1 fees are used has evolved significantly such that some people now wonder whether the Rule continues to serve the purpose for which it was designed.

Originality/value

The paper provides a comprehensive evaluation of how mutual funds' use of Rule 12b‐1 has changed, what the underlying issues are, and the prospects for reexamination of the Rule.

Details

Journal of Investment Compliance, vol. 8 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Available. Content available
Article
Publication date: 19 June 2007

Henry A. Davis

286

Abstract

Details

Journal of Investment Compliance, vol. 8 no. 2
Type: Research Article
ISSN: 1528-5812

Available. Content available
Article
Publication date: 1 October 2006

Henry A. Davis

192

Abstract

Details

Journal of Investment Compliance, vol. 7 no. 4
Type: Research Article
ISSN: 1528-5812

Available. Content available
Article
Publication date: 1 July 2006

Henry A. Davis and James A. Tricarico Jr

182

Abstract

Details

Journal of Investment Compliance, vol. 7 no. 3
Type: Research Article
ISSN: 1528-5812

Available. Content available
Article
Publication date: 28 October 2014

Henry Davis

99

Abstract

Details

Journal of Investment Compliance, vol. 15 no. 4
Type: Research Article
ISSN: 1528-5812

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