Category Archives: Securities and Exchange Commission

SEC Staff Updates Form ADV FAQs

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In August 2016, the SEC adopted amendments to Form ADV Part 1A, pursuant to Final Rule Release No. IA-4509 (Form ADV and Investment Advisers Act Rules). These changes are designed to provide additional information related to an advisers’ separately managed account business, private fund adviser entities and other important identifying data.  The new Form is to be implemented on October 1, 2017.

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SEC Proposing to Amend the Investment Advisers Act

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In December 2015, the Fixing America’s Surface Transportation Act (the “FAST Act”) was signed into law by President Obama.  Among other things, sections 74001 and 74002 of the FAST Act amended two provisions of the Investment Advisers Act of 1940 (the “Advisers Act”):

  • An adviser whose only clients were rule 203(l)-1 venture capital funds and deemed to be “small business investment companies” (“SBICs”) can rely on the venture capital fund adviser exemption; and
  • An adviser solely to “private funds” with assets under management in the United States of less than $150 million attributable to its non-SBIC private fund clients could now rely on the private fund adviser exemption regardless of the assets under management in the United States attributable to its SBIC client(s).

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SEC Charges One of its Own with Securities Fraud Violations

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Whether you are an investment adviser in the private sector or one of the SEC’s own employees, the Commission will not hesitate to charge you with securities fraud if they determine you have committed misconduct, regardless of your association. Such was the case with David Humphrey, one of the SEC’s former employees.

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SEC & NASAA Sign Info-Sharing Agreement to Aid Small Businesses

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Last year, in an effort to give companies more flexibility to engage in intrastate offerings through websites and social media without having to register their securities offerings with the federal government, the Securities Exchange Commission (“SEC”) created a new exemption and also amended Regulation D. Combined, these two actions will help facilitate intrastate offerings as well as the development of regional offering exemptions at the state level.

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SEC Risk Alert: OCIE Examines Registrants’ Compliance with Whistleblower Rule

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On October 24, 2016, citing a recent increase in SEC enforcement actions pertaining to Rule 21F-17 of the Securities Exchange Act of 1934 (“Exchange Act”), the SEC issued a National Exam Program Risk Alert regarding examinations of investment advisers’ and broker-dealers’ compliance with the Whistleblower Rule.

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Caution: SEC Looks at More Than Just Policies and Procedures for Whistleblower Violations

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Earlier this month, Health Net Inc. agreed to pay a $340,000 penalty for illegally using severance agreements that required employees leaving the company to waive their right to obtain monetary awards from the SEC’s whistleblower program.  According to the SEC order, by doing this, the California-based health insurance provider directly targeted the Congress-authorized program.

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SEC Investigates California Insider Trading Ring

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Four individuals have been charged with insider trading by the Securities and Exchange Commission (“SEC”) in an alleged scheme involving two Silicon Valley-based companies.  Christian B. Keller (“Keller”), a financial analyst employed by Applied Materials, Inc. and later Rovi Corporation, is accused of using his access to confidential information about the companies to organize an insider trading ring. Keller, along with John Gray (“Gray”), allegedly enlisted Kyle Martin (“Martin”) and Aaron Shepard (“Shepard”) to participate by trading in their respective brokerage accounts. At the time Gray was an analyst at Barclays, Martin was employed at a Beverly Hills car dealership and Shepard worked as a car stereo installer.

The SEC alleges that while at Applied Materials, Inc. Keller used confidential information regarding a merger to trade ahead of Applied Materials acquisition of another company. Later, while at Rovie, it is alleged that Keller used confidential information regarding Rovi’s quarterly financial results to trade ahead of Rovi’s negative news announcements. The trades in question were executed in the accounts of Martin and Shepard and are thought to have generated $750,000 in illegal profits.

Gray and Keller tried to evade detection by trading in another person’s name, using prepaid disposable phones, and making structured cash withdrawals to share profits,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.  “Despite their careful planning, we were able to detect the suspicious trading and effectively use our cooperation program to expose their nefarious scheme.”

The four have agreed to settle charges without admitting to wrongdoing and pay penalties of approximately $1.7 million. Gray has also been barred from the securities industry and from participating in penny stock offerings. Keller has been barred from serving as an officer or director of a public company for 10 years.

Please reference our Jacko Law Group, PC Legal Risk Management Tip Practical Considerations For Preventing Insider Trading to learn more about insider trading and practical steps to protect your organization.

For more information on this and other related subjects, please contact us at info@jackolg.com  or (619) 298-2880.

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