Global Investment Law Watch – Exploring the legal and regulatory issues affecting the worldwide investment community.

Why the CTA Should Be at the Top of Your End-of-Year Checklist

Oct 15 2024

By: C. Todd Gibson, Robert H. McCarthy Jr., and Jamie M. Robinson

The time has come to finalize those end-of-year checklists and for anyone with US entities, foreign entities doing business in the United States, or for those who are planning to form or register entities to do business in the United States, the United States Corporate Transparency Act (CTA) should be at the top of the list. This includes investment advisers and funds that they manage.

Effective on 1 January 2024, the CTA requires all newly formed and currently existing “Reporting Companies” (as defined in the CTA) to provide certain ownership and control information to the Financial Crimes Enforcement Network (FinCEN). While Reporting Companies formed on or after 1 January 2024 have had a 90 day window to report to FinCEN, Reporting Companies in existence prior to the beginning of 2024 were given the remainder of the year to comply with the CTA requirements.

However, as we quickly approach year end, that compliance window continues to shorten, Reporting Companies should ensure that they have positioned themselves to meet the 1 January 2025 filing deadline. We note that the analysis for reporting under the CTA can be complex and time consuming and one that must be done on an entity-by-entity basis. FinCEN has said that it cannot rule out potential technical issues or website outages due to the expected high volume of filings the last two weeks of the year. FinCEN’s stated position is that a potential failure or difficulties of their system to accept filings for technical reasons will not excuse late filings. As such, the CTA should remain a priority well before the last few weeks of the year to allocate sufficient time to determine which entities may be Reporting Companies and to prepare any required filings, and we are encouraging our clients to file sooner rather than at the last minute.

For a more in-depth overview of the CTA’s requirements, please visit the K&L Gates HUB for our insights on the CTA.

Extra Credit Projects: SEC Settles Charges Against Carbon Offset Project Developer for US$250 Million Offering Fraud

Oct 07 2024

By: Pablo Man and Benjamin Skillin

On 2 October 2024, the Securities and Exchange Commission (SEC) announced settled charges against one of the largest carbon credit project developers (the Developer), for fraudulently altering data concerning its business and making material misrepresentations in the offering of equity to institutional investors in the United States. The SEC’s order found that the Developer violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Europe: New Irish Fast-Track Filing Process for Fund Name Changes To Comply With ESG-Related Rules

Oct 01 2024

By: Áine Ní Riain and Gayle Bowen

The Central Bank of Ireland (CBI) has announced a streamlined filing process for Irish UCITS and AIFs seeking to change their name to comply with the European Securities and Markets Authority’s guidelines on funds’ names using ESG or sustainability-related terms (the Guidelines).

D, F, G, 3, 4, 5: Firms Charged for Failing to Make Section 13 and 16 Filings

Sep 26 2024

By: Pablo J. Man, C. Todd Gibson, and Lisa N. Ju

On 25 September 2024, the SEC announced settled charges against 23 entities and individuals for failing to make timely filings about their holdings and transactions on Schedules 13D and 13G and on Forms 3, 4 and 5, pursuant to Sections 13 and 16 of the 1934 Act, respectively. The individuals charged were officers, directors and/or beneficial owners of publicly traded companies that failed to make “insider” filings. Two firms were charged for contributing to their officers’ and directors’ failures to file insider reports and for failing to comply with their own disclosure obligations to report such delinquencies. The penalties ranged from US$10,000 to US$750,000, and in the aggregate exceeded US$3.8 million.

Volunteer Fire Fighters: CFTC Attempts to Boost Integrity of Voluntary Carbon Credit Derivative Contracts With New Guidance for DCMS

Sep 24 2024

By Cheryl L. Isaac, Matthew J. Rogers, and Benjamin C. Skillin

On 20 September 2024, the Commodity Futures Trading Commission (CFTC) released final guidance regarding the listing of voluntary carbon credit (VCC) derivative contracts on CFTC-registered exchanges known as designated contract markets (DCMs). VCCs are tradable, intangible instruments issued by a carbon crediting program and generally represent the equivalent of one metric ton of carbon dioxide avoided or removed from the atmosphere. As with other commodities, the CFTC does not have regulatory authority over VCCs, but can promulgate guidance and regulations related to derivatives on VCCs.

The Fed’s Recent Interest Rate Cut: A Step in the Right Direction for PE Sponsors

Sep 24 2024

By: Ed Dartley and Jamie M. Robinson

On 18 September 2024, the Federal Open Market Committee lowered the benchmark federal funds rate by 50 basis points to a target range of 4.75-5%. While this is welcome news on many levels, we expect that in the coming months it will have a real and positive impact on private equity sponsors, and particularly mid-sized and smaller sponsors.

Extension of Australia’s AML/CTF Regime to “Tranche-Two” Entities

Sep 24 2024

By: Jim Bulling and Anthony Shorten

On 11 September 2024, the Attorney-General introduced the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) to the Federal Parliament, following two periods of consultation undertaken by the Department of the Attorney-General, and AUSTRAC over 2023 and 2024.

DOL Fiduciary Rule: The Saga Continues With Eleventh Hour Appeal of Fiduciary Rule Stay

Sep 23 2024

By: Robert L. Sichel and Ruth E. Delaney

In July, two federal district courts in Texas stayed the effective date (slated for 23 September) of the Department of Labor’s (DOL’s) amended fiduciary rule that would define when a financial professional is acting as a “fiduciary” under ERISA by virtue of providing nondiscretionary investment advice to participants in 401(k) plans, IRAs, and similar clients. On Friday 20 September 2024, the DOL informed the courts that the DOL is appealing to the United States Court of Appeals for the Fifth Circuit to reverse the lower courts’ decisions.

Firms Fail to File 13Fs, Fines Follow

Sep 18 2024

By: C. Todd Gibson, Pablo J. Man, and Brian Doyle-Wenger

On 17 September 2024, the SEC announced settled charges against 11 institutional investment managers for failing to file Form 13F. In addition, two of the 11 firms also failed to file Forms 13H as large traders. The penalties ranged from US$175,000 to US$725,000, and in the aggregate exceeded US$3 million combined. However, two firms self-reported and paid no penalties and one firm self-reported Form 13H filing violations and paid no penalties on that portion of the settlement. Furthermore, all of the institutional investment managers made remedial filings covering several years (in one case over 50 such filings).

End of Summer Pool Party: CFTC Approves Final Rule Amending 4.7 Regulatory Relief for CPOs and CTAs

Sep 17 2024

By: Cheryl L. Isaac, Matthew J. Rogers, and Benjamin C. Skillin

On 12 September 2024, the Commodity Futures Trading Commission (CFTC) published a Final Rule impacting registered commodity pool operators (CPOs) and commodity trading advisors (CTAs) relying on the regulatory relief provided under CFTC Regulation 4.7. “Registration light,” as Regulation 4.7 is sometimes known, provides reduced disclosure, reporting and recordkeeping obligations for CPOs and CTAs that limit sales activities to “qualified eligible persons” (QEPs).