Investment Manager Regulation – Page 15 – Global Investment Law Watch

United States: SEC Proposes New Requirements for Adviser Oversight of Service Providers

Oct 31 2022

On October 26, 2022, the Securities and Exchange Commission (the “SEC”) proposed new rule 206(4)-11 and related amendments under the Advisers Act, which would require registered investment advisers to meet certain requirements when outsourcing “covered functions” to service providers. Citing increasing use of third-party service providers, SEC Chair Gary Gensler noted that the proposals are designed to ensure that outsourcing is consistent with the obligations advisers have to their clients. A related fact sheet and the SEC’s press release can be found here and here.

Australia: ASIC releases its first insights from the reportable situations regime

Oct 28 2022

By Jim Bulling and Hugo Chow

In ASIC’s first annual report regarding the reportable situations regime, it noted that there were over 8000 reports made to ASIC by financial services and credit licensees under the regime from 1 October 2021 to 30 June 2022.

Australia: Australian Government abandons introduction of limited partnership structure

Oct 26 2022

By Kane Barnett

The Australian Government has delivered the 2022-23 Federal Budget. One of the announcements relevant to the investment funds industry was that the Government “has reviewed and will not proceed with … the 2016–17 Budget measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles”.

Australia: Regulatory update – 24 October 2022

Oct 24 2022

By Jim Bulling and Hugo Chow

ASIC’s crackdown on product disclosures continues

To date, ASIC has issued 11 design and distribution obligations stop orders, with the first stop orders being issued in July this year.

The latest interim stop order prevent a fund management firm (the Firm) from offering or distributing three funds (the Funds) to retail investors due to the Firm not having compliant target market determinations (TMDs).

United States: SEC Reopens Comment Period for Eleven Significant Rulemaking Releases

Oct 14 2022

By: Trayne S. Wheeler and Brian Doyle-Wenger

On October 7, 2022, the Securities and Exchange Commission (the “SEC”) announced that, due to a technological error, it was reopening the public comment periods for 11 pending rulemaking releases (“Rulemaking Releases”) and one request for comment. The comment periods will be reopened as of October 7^th and will end 14 days after the publication of the release in Federal Register (if, for example, this release were to be published on October 15, then the comment periods would close on October 29, 2022). The SEC encouraged commenters that submitted a public comment through the internet comment process to check the SEC’s website, SEC.gov, to determine whether their comment was received and posted.

The SEC’s release did not elaborate on nature of the technological error but stated that a number of public comments submitted through the SEC’s internet comment form were not received. The SEC noted the majority of the affected comments were submitted in August 2022, but that the technological error is known to have occurred as early as June 2021.

The impact of the reopening of the public comment periods is not yet known, but will likely result in delaying the release of a number of highly anticipated SEC rules[1]. The Rulemaking Releases include the following proposals and request for comment:

• Reporting of Securities Loans

• Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions

• Money Market Fund Reforms

• Share Repurchase Disclosure Modernization

• Short Position and Short Activity Reporting by Institutional Investment Managers; see also Notice of the Text of the Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data Collection,

• Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure

• Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews

• The Enhancement and Standardization of Climate-Related Disclosures for Investors

• Special Purpose Acquisition Companies, Shell Companies, and Projections

• Investment Company Names

• Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices

• Request for Comment on Certain Information Providers Acting as Investment Advisers

(Certain SRO rules, not covered here, also have comment periods that have been reopened.)

[1] SEC Release, Resubmission of Comments and Reopening of Comment Periods for Several Rulemaking Releases Due to a Technological Error in Receiving Certain Comments, October 7, 2022 (https://www.sec.gov/rules/proposed/2022/33-11117.pdf)

Australia: Regulatory update – 10 October 2022

Oct 10 2022

By Jim Bulling and Hugo Chow

ASIC sues Latitude Finance Australia and Harvey Norman Holdings for allegedly misleading interest free advertising

ASIC is suing Latitude Finance Australia (Latitude) and Harvey Norman Holdings Ltd (Harvey Norman) over the promotion of interest-free payment methods.

ASIC alleges that advertisements which included “no deposit”, “interest free” payment options over specified terms for purchases at Harvey Norman were misleading as they did not disclose that consumers could only use these payment options if they applied for and used a Latitude GO Mastercard, and that Harvey Norman misrepresented the actual costs of these payment options as they did not adequately disclose the establishment fees and monthly account fees.

Asia: Proposed Code of Conduct for ESG Evaluation and Data Providers Presents Significant Implications for Asset Management and Investor Communities

Aug 05 2022

By Yuki Sako

On 12 July 2022, as widely anticipated, the Financial Services Agency of Japan (“FSA”) proposed “the Code of Conduct for ESG Evaluation and Data Providers” (“Proposed Code”), and is soliciting comments from the public until 5 September 2022.

The stated focus of the Proposed Code is to provide a set of principles and guidelines for ESG evaluation and data providers (“Provider(s)”) that would require Providers who decide to endorse such code to “comply or explain” such code, i.e., a Provider would be required to comply with, or provide an explanation as to why the Provider is departing from, such code.

Australia: DDO Implementation and Enforcement

Aug 01 2022

By Daniel Knight and Simon Kiburg

ASIC have announced the first enforcement action it has taken in relation to the Design and Distribution Obligations (DDO), which were introduced late last year. The enforcement action shows that, as described by ASIC deputy chair Karen Chester, “ASIC’s focus has now shifted to compliance. Industry has had sufficient time to bed down its implementation of the DDO regime.“

Australia: Crypto Downturn and Its Regulation

Jul 11 2022

By Daniel Knight and Kithmin Ranamukhaarachchi

In the wake of the drawn out cryptocurrency market downturn, increased regulation of the sector seems inevitable. With nearly one million Australians transacting in cryptocurrencies last year, there have been widespread calls to enact additional protections for retail investors.

Europe: Systemically important outsourced service providers, eg cloud services, to be identified and regulated in the UK

Jul 08 2022

By: Kai Zhang

In an 8 June 2022 policy statement, the UK Government proposes a specific regime for supervising “critical” service providers to the financial services industry. This is to address concentration risk as many regulated firms rely on a few large service providers whose failure could potentially threaten the stability of, or confidence in, the UK’s financial system. The Government observes that in 2020 over 65% of UK regulated firms used the same four cloud providers for cloud infrastructure services.

Category:Investment Manager Regulation