By: Jim Bulling and Simon Kiburg
On 21 October 2024 the new ASIC Derivative Transaction Rules (Reporting) 2024 (2024 Rules) will come into effect replacing the current ASIC Derivative Transaction Rules (Reporting) 2022 (2022 Rules). In this post we set out some of the major changes to the 2022 Rules and some of the issues market participants in this space should be aware of.
Read MoreBy: Pablo J. Man, TJ Bright, Kenneth Holston, Christopher W. Phillips-Hart, and Tristen C. Rodgers
Earlier today, 5 June 2024, the US Fifth Circuit Court fully vacated the Private Fund Adviser Rules (PFAR) in a unanimous and highly anticipated decision curbing the Securities and Exchange Commission’s authority to regulate private funds. Absent a successful appeal of the decision, the PFAR will not come into effect.
Read MoreBy: Richard F. Kerr, Jennifer L. Klass, C. Todd Gibson, and Kenneth Holston
On 13 May 2024, the Securities and Exchange Commission (SEC) and the Department of the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) jointly proposed rulemaking to implement section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (CIP Rulemaking), which would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish written customer identification programs (CIP).
Read MoreBy: Áine Ní Riain, Dr Philipp Riedl, and Ruth Hennessy.
The European Securities and Markets Authority (ESMA) has published its much anticipated Final Report: Guidelines on funds’ names using ESG or sustainability-related terms (Guidelines).
This follows a consultation on the subject between November 2022 and February 2023 and an update provided by ESMA last December.
Acknowledging the significant impact of fund names on investor decision-making, ESMA has determined that a fund with ESG- or sustainability-related terms in its name must apply at least 80% of its investments to meet environmental or social characteristics or sustainable investment objectives.
The Guidelines also apply exclusion criteria for certain terms in fund names:
Use of “sustainability”-related terms in fund names will require a commitment to “invest meaningfully” in sustainable investments. Similar use of “transition” or “impact” – related terms will require that the relevant fund’s investments used to meet the 80% threshold are on a clear and measurable path to transition or are made with the objective to generate a positive, measurable impact alongside a financial return.
The Guidelines will apply to all EU UCITS and EU AIFs, and it currently seems likely that they will also apply to non-EU funds marketed into the EU (this is a point on which we will be watching developments closely).
The Guidelines are expected to come into force in Q3 or Q4 2024, subject to completion of administrative formalities including a decision by national competent authorities on whether to apply them locally (which is generally expected). Existing funds will have an additional 3-month transition period before compliance becomes mandatory.
By: Tsuguhito Omagari, Yuki Sako, Jason Nelms and Charmaine Mok
Financial Services Agency of Japan (FSA) proposed amendments to its supervisory guidelines applicable to managers of investment trust (toshin) funds and real estate funds, and is currently accepting comments until May 13. Of those, amendments relating to real estate funds would require managers to take additional measures to manage transactional conflicts of interest, specifically:
Read MoreBy: Grant F. Butler and Yuki Sako
Two proposals regarding oversight of the control of banks by asset managers were withdrawn at the 25 April board meeting of the Federal Deposit Insurance Corporation (FDIC). These proposals were a result of increasing concern by bank regulators regarding concentration in control of banks by institutional investors, particularly index funds.
Read MoreBy: Ed Dartley and Robert H. McCarthy, Jr.
On 23 April 2024, the Federal Trade Commission (FTC) voted 3-2 to approve a rule that will prohibit for-profit employers from either entering into non-compete clauses with workers or enforcing existing non-compete clauses against most workers (the Non-Compete Rule). Initially proposed in January 2023 (and discussed here), the Non-Compete Rule’s impact on asset managers will be significant if and when it becomes effective, which is currently scheduled to be in August 2024.
Read MoreBy: Andrew Massey, Philip Morgan, and Omega Modi
The UK’s FCA has published consultation paper 24/7: Payment optionality for investment research. It proposes a new, more flexible, way to charge third-party investment research to clients.
The new payment option would sit alongside the two existing options under which research costs are either paid by firms from their own resources or charged to clients through a research payment account. The latter approach has not been popular because of its operational complexities, so research has been an out-of-pocket expense for many UK asset managers.
Read MoreBy: Matthew J. Rogers and Benjamin C. Skillin
On 10 April 2024, the National Futures Association’s (NFA) Business Conduct Committee (BCC) issued an order against 50.ai Investments LLC, a former NFA Member commodity pool operator and forex firm. The order stipulates that 50.ai Investments may not reapply for NFA membership or act as a principal of an NFA Member at any time in the future due to violating a suite of NFA compliance rules.
Read MoreBy: Michael S. Caccese and Lance C. Dial
On 17 April 2024, the Securities and Exchange Commission (SEC) Division of Examinations issued a risk alert entitled “Initial Observations Regarding Marketing Rule Compliance” (the Alert). The Alert reflected the SEC examination staff’s preliminary observations coming from its examination program and noted that compliance with Rule 206(4)-1 (the Marketing Rule) continues to be a priority for the SEC staff.
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