Wendy E. Cohen, Richard D. Marshall, Allison C. Yacker and Lance A. Zinman
To explain actions the US Securities and Exchange Commission (SEC) brought on August 27, 2018, against a group of affiliated investment advisers and broker-dealers for what the…
Abstract
Purpose
To explain actions the US Securities and Exchange Commission (SEC) brought on August 27, 2018, against a group of affiliated investment advisers and broker-dealers for what the SEC considered misleading and insufficient representations and disclosures, insufficient compliance policies and procedures, and insufficient research and oversight concerning the use of faulty quantitative models to manage certain client accounts.
Design/methodology/approach
Explains the SEC’s findings concerning the advisers’ and broker-dealers’ failure to confirm that certain models worked as intended, to disclose the risks associated with the use of those models, to disclose the role of a research analyst in developing the models, to disclose the use of volatility overlays along with the associated risks, to determine whether a fund’s holdings were sufficient to support a consistent dividend payout without a return of capital, and to take sufficient steps to confirm the advertised performance of another investment manager whose products they were marketing. Provides insight into the SEC’s position and offers key takeaways.
Findings
These cases are significant for advisers who use quantitative models to implement their investment strategies in the management of client accounts and signal the SEC’s continued focus on investment advisers’ compliance with disclosure obligations to discretionary account investors.
Practical implications
Each manager should consider its own facts and circumstances, and should consult with counsel, in assessing how and to what extent to incorporate the SEC’s conclusions in crafting disclosure and other communications with investors on matters such as adequate representations, testing and validation of models, disclosure of errors, and verifying performance claims.
Originality/value
Practical guidance from experienced securities lawyers.
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Wendy E. Cohen, David Y. Dickstein, Christian B. Hennion, Richard D. Marshall, Allison C. Yacker and Lance A. Zinman
To explain the US Securities and Exchange Commission (the “SEC”) staff’s (the “Staff”) participating affiliate exemption from investment adviser registration for foreign advisers…
Abstract
Purpose
To explain the US Securities and Exchange Commission (the “SEC”) staff’s (the “Staff”) participating affiliate exemption from investment adviser registration for foreign advisers set forth in a line of Staff no-action letters issued between 1992 and 2005 (the “Participating Affiliate Letters”) and to discuss recent guidance issued by the Staff in an information update published in March 2017 (the “Information Update”) with respect to complying with requirements of the Participating Affiliate Letters.
Design/methodology/approach
Reviews the development of the Staff’s approach regarding the non-registration of foreign advisers that rely on the Participating Affiliate Letters from prior to the issuance of those letters through the Information Update and sets forth recommendations for registered investment advisers and their participating affiliates.
Findings
While there are arguments that the Information Update goes beyond restating established standards and does not clearly explain whether submission of all listed documentation is required, the Information Update will likely standardize the information submitted to the SEC.
Originality/value
Practical guidance for advisers relying on the Participating Affiliate Letters from experienced securities and financial services lawyers.
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Kenneth M. Rosenzweig, Wendy E. Cohen, Marilyn S. Okoshi and Fred M. Santo
The purpose of this paper is to explain the final rules adopted by the Commodity Futures Trading Commission (CFTC) on February 9 amending its Part 4 regulations governing…
Abstract
Purpose
The purpose of this paper is to explain the final rules adopted by the Commodity Futures Trading Commission (CFTC) on February 9 amending its Part 4 regulations governing commodity pool operators (CPOs) and commodity trading advisors (CTAs).
Design/methodology/approach
The paper explains, among other things, changes to CPO registration exemptions, additional reporting obligations for registered CPOs and CTAs, the imposition of new requirements for registered CPOs relying on certain exemptions, to provide annual financial statements, required risk disclosures regarding swap transactions, required annual affirmation and eligibility for exemptions and exclusions from CPO and CTA registration, and an initiative to harmonize CPO reporting, disclosure, and recordkeeping requirements of the CFTC and the SEC for registered investment companies.
Findings
Since the adoption of Rule 4.13(a)(4) in 2003, fund sponsors have frequently relied on the exemption made available by that rule to avoid both registration with the CFTC as CPOs and compliance with the CFTC's disclosure, reporting and recordkeeping requirements. The CFTC has now rescinded that exemption.
Practical implications
All advisers to registered investment companies need to evaluate their exposure to CFTC regulation after this rule amendment.
Originality/value
The paper provides practical guidance from experienced financial services lawyers.
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Marybeth Sorady, Daren Domina, Wendy Cohen, Fred Santo, Henry Bregstein, Meryl Wiener, Marilyn Okoshi and Jack P. Governale
This paper aims to explain the rules recently adopted by the Securities and Exchange Commission under the provisions of the Dodd‐Frank Wall Street Reform and Consumer Protection…
Abstract
Purpose
This paper aims to explain the rules recently adopted by the Securities and Exchange Commission under the provisions of the Dodd‐Frank Wall Street Reform and Consumer Protection Act relating to the increased asset threshold for federal registration as an investment adviser, the new exemptions from investment adviser registration (including the exclusion of “family offices” from the definition of an investment adviser), the enhanced reporting obligations imposed on registered and certain exempt advisers, and the definition of a “qualified client” for purposes of applying the performance fee rule under the Investment Advisers Act.
Design/methodology/approach
This paper summarizes the principal content of the Rules and explains their application to investment advisers, focusing in particular on analyzing the impact of the Rules on US and non‐US advisers to private funds.
Findings
The Rules clarify important aspects of the Dodd‐Frank amendments to the Investment Advisers Act and expand the scope of certain registration exemptions as they relate to foreign advisers. The Rules also expand significantly the family office exclusion from investment adviser status.
Originality/value
The paper provides expert guidance from experienced financial services lawyers.
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Linh Duong, Helen S. Sanderson, Wendy Phillips, Jens K. Roehrich and Victor Uwalaka
Geopolitical disruptions significantly impact the management of temporary healthcare supply chains (HSCs). Common across geopolitical disruptions is the interruption to the flow…
Abstract
Purpose
Geopolitical disruptions significantly impact the management of temporary healthcare supply chains (HSCs). Common across geopolitical disruptions is the interruption to the flow of supplies, calling for organizations to reconfigure their existing supply chains or set up temporary ones. We theoretically and empirically investigate how temporary HSCs are designed to ensure a resilient flow of vital healthcare products during a geopolitical disruption.
Design/methodology/approach
We investigated two different temporary HSCs – potable water and blood products – that experienced geopolitical disruptions. We purposefully sampled HSCs in deployed medical care where healthcare providers operate in resource-austere, politically volatile environments and timing and access to specialist expertise, medical equipment and medicines are critical. We built on rich datasets, including archival data, 12 expert workshops and 41 interviews.
Findings
The nature of temporary HSCs (e.g. urgency of demand and time-limited need) and product characteristics (e.g. perishability and strict storage conditions) lead to complexity in designing resilience for temporary HSCs. In contrast to permanent supply chains, temporary HSCs have limited flexibility and redundancy. Collaboration and agility are predominant strategies for enhancing resilience for temporary HSCs.
Practical implications
The study uncovers an urgent need for radical changes in how managers and policymakers responsible for HSC address resilience. During geopolitical disruptions, managers and policymakers need to review healthcare regulations across nations and prioritize by activating high levels of information- and knowledge-sharing between nations.
Originality/value
This study addresses an underresearched area of investigation by theoretically combining and empirically investigating the supply chain strategies employed by organizations to build up resilience in temporary HSCs.
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This study uses Hall's (1976) theory of low/high context culture with theories of interpersonal adaptation (Gudykunst, 1985; Patterson, 1983) to test communication preferences…
Abstract
This study uses Hall's (1976) theory of low/high context culture with theories of interpersonal adaptation (Gudykunst, 1985; Patterson, 1983) to test communication preferences, flexibility, and effectiveness in same‐ and mixed‐culture negotiation. Ninety‐three same‐culture low context (Israel, Germany, Sweden, and U.S.), 101 same‐culture high context (Hong Kong, Japan, Russia, Thailand), and 48 mixed‐culture mixed context (U.S.‐Japan, U.S.‐Hong Kong) dyads negotiated a 1 ½ hour simulation. Transcripts were content coded for direct and indirect integrative sequences and analyzed with hierarchical linear regression. Supporting the theory, results revealed more indirect integrative sequences in high context dyads and more direct integrative sequences in low context and mixed context dyads. Direct integrative sequences predicted joint gains for mixed context dyads.
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Janet M. Angstadt, David Dickstein, Mark Goldstein and Richard Marshall
To analyze SEC Staff’s announced 2018 OCIE Examination priorities to provide insight to investment advisers and other regulated entities regarding areas of focus during SEC…
Abstract
Purpose
To analyze SEC Staff’s announced 2018 OCIE Examination priorities to provide insight to investment advisers and other regulated entities regarding areas of focus during SEC examinations.
Design/methodology/approach
This article discusses the US Securities and Exchange Commission’s (SEC) Office of Compliance Inspections and Examinations (OCIE) published its examination priorities for 2018 (the “2018 Priorities Report”).
Findings
Given that OCIE’s examination priorities for 2017 were published before the beginning of the Trump administration, differences between the 2017 and the 2018 priorities provide important insights into the focus of examinations under SEC Chair Clayton. Investment advisers and other regulated entities should allocate resources towards their preparedness for the areas of focus identified in the 2018 Priorities Report.
Originality/value
This article contains valuable insight regarding the SEC’s 2018 OCIE examination priorities and practical guidance from industry experts.
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Zandra Balbinot, Wendy Farrell, William H.A. Johnson, Seema Pissaris, Eric David Cohen, Jiang Chun and Vas Taras
This study investigates how the maximum cultural intelligence (Max CQ) within a team – defined as the highest cultural intelligence level of an individual member – affects…
Abstract
Purpose
This study investigates how the maximum cultural intelligence (Max CQ) within a team – defined as the highest cultural intelligence level of an individual member – affects intra-team communication, conflict dynamics and, ultimately, team satisfaction and performance in global virtual teams (GVTs).
Design/methodology/approach
Utilizing quantitative research methods, this investigation draws on a dataset comprising 3,385 participants, which forms a total of 686 GVTs.
Findings
The study reveals that MaxCQ significantly enhances team communication, which in turn mitigates conflict, increases satisfaction and improves performance. It is noteworthy that the influence of MaxCQ on GVT success is more significant than the average cultural intelligence (CQ) of team members, providing critical insights for effective GVT management strategies.
Practical implications
The findings suggest that managers may optimize team dynamics not by uniformly increasing each member’s CQ but by concentrating on maximizing the CQ of one individual who can act as an influencer within the team. Strategically placing individuals with high CQ in GVTs can enhance overall team function.
Originality/value
While existing literature primarily examines the individual effects of CQ on communication and conflict management, this study sheds light on the collective interplay between MaxCQ, communication and conflict. It highlights the importance of MaxCQ, along with the frequency of team communication and conflict, in influencing team satisfaction and performance in GVTs.