Legal Alert

Investment Management Update - June 2019

June 17, 2019

The Investment Management Update keeps you apprised of recent developments that affect registered investment companies, private equity funds, hedge funds, investment advisers, and others in the investment management industry. 

SEC Adopts Regulation Best Interest, Form CRS, and Related Interpretations

Last year, we discussed the Securities and Exchange Commission's proposed Regulation Best Interest (BI). On June 5, 2019, the SEC voted to adopt a package of rulemakings and interpretations designed to enhance the quality and transparency of retail investors' relationships with investment advisers and broker-dealers, including the new Regulation BI, the new Form CRS Relationship Summary (Form CRS), and two separate interpretations under the Investment Advisers Act of 1940 (Advisers Act).


SEC's Office of Compliance Inspections and Examinations Issues Risk Alert Related to Regulation S-P

The SEC's Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert on April 16, 2019, which provided a list of compliance issues related to Regulation S-P, the primary SEC rule regarding privacy notices and safeguard policies of investment advisers and broker-dealers.


Here Come the Active Managers: SEC Allows Non-Transparent ETF Structure

As of last August, actively managed mutual funds held assets of $11.8 trillion—more than triple the $3.6 trillion held by passively managed index funds. Conversely, though, the $61.9 billion in assets held by actively managed exchange-traded funds (ETFs) represents around 2 percent of the total amount of assets held by passive ETFs. However, with the SEC's recent approval of the first non-transparent ETF structure, the active versus passive disparity for ETFs with respect to assets under management may be in for a big shift.


SEC Proposes Reforms to Securities Offerings and Disclosures For Listed Closed-End Funds, Business Development Companies, and Interval Funds

The SEC recently proposed significant reforms to the application of the Securities Act of 1933 (the Securities Act) to eligible closed-end funds (CEFs), eligible business development companies (BDCs), and certain Interval Funds. These reforms are intended to reduce regulatory burdens in capital raising by these investment companies and require current disclosure of certain events.


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