Resources by Ron

Forthcoming.

Key Case Applying the Investment Advisers Act of 1940

• "SEC vs. Capital Gains Research Bureau" - This 1963 U.S. Supreme Court case should be required reading for everyone who is an investment adviser. In its elaboration of the legislative history underlying the Investment Advisers Act of 1940, the U.S. Supreme Court discusses the fiduciary duties of investment advisers and hints at the type of conduct expected of them.

Select SEC Proposed and Final Rules

No password is required to open the following materials.

• SEC Release IA-2876, Proposed Rule, "Custody of Funds or Securities of Clients by Investment Advisers" (May 20, 2009) (comments due June 28, 2009)
• SEC Release No. IA-2866, Proposed Rule, "Interagency Proposal for Model Privacy Form Under the Gramm-Leach-Billey Act" (comment period re-opened April 15, 2009)
• "Consumer Comprehension of Financial Privacy Notices: A Report on the Results of the Quantitative Testing" (Dec. 15, 2008) (includes test forms) (relates to SEC Release IA-2598 and SEC Release IA-2866)
• SEC Release No. IA-2598, Proposed Rule, "Interagency Proposal for Model Privacy Form Under the Gramm-Leach-Billey Act" (Proposed Rule, including model forms) (March 20, 2007)
• SEC Release No. IC-28346, Final Rule, "Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies" (Jan. 13, 2009) (i.e., "Summary Prospectus" rule)
• SEC Release No. 34-59221, Final Rule, "Indexed Annuities and Certain Other Insurance Contracts" (Jan. 8, 2009)
• SEC Release No. IA-2711, Proposed Rule, "Amendments to Form ADV" (March 3, 2008)
• SEC Release No. IA-2653, "Temporary Rule Regarding Principal Trades with Certain Advisory Clients" (Sept. 24, 2007)
• SEC Release No. IA-2652, Proposed Rule, "Interpretive Rule Under the Advisers Act Affecting Broker-Dealers" (Sept. 24, 2007) (i.e., discretion, discount brokerage services, and the "two hats" "special rule")
• SEC Release No. IA-2256, Final Rule, "Investment Adviser Code of Ethics" (July 2, 2004)
• SEC Release No. IA-2204, Final Rule, "Compliance Programs of Investment Companies and Investment Advisers" (Dec. 17, 2003)
• SEC Release No. IA-2106, Final Rule, "Proxy Voting by Investment Advisers" (Jan. 31, 2003)
• SEC Release No. IA-1945, Final Rule, "Electronic Recordkeeping by Investment Companies and Investment Advisers" (May 21, 2001)

Recent SEC Administrative Proceedings

No password is required to open the following materials.

• INTECH, SEC Release No. IA-2872 (May 7, 2009) (Administrative Order) (RIA exercised voting authority over client securities without having written policies and procedures that were reasonably designed to ensure it voted its clients' securities in the best interests of its clients because those policies and procedures did not include how the adviser would address material potential conflicts of interests that may arise between its interests and those of its clients.)
• Hennessee Group LLC and Charles J. Gradanta, SEC Release No. IA-2871 (April 22, 2009) (Administrative Order) (Breach of Fiduciary Duty; failure to conduct due diligence review represented to their clients they would undertake).
• Cornerstone Capital, SEC Release No. IA-2855 (March 20, 2009) (Administrative Order) (RIA filed to revalue securities, collecting higher AUM fees as a result, and issuing false portfolio statements to investors.)
• Merrill Lynch, SEC Release No. IA-2834 (Jan. 30, 2009) (Administrative Order) (Merrill Lynch, through its pension consulting services advisory program, breaches its fiduciary duty to certain of the firm's pension fund clients and prospective clients by misrepresenting and omitting to disclose material information; Merrill Lynch failed to disclose the facts creating the material conflict of interest in recommending clients use directed brokerage to pay hard dollar fees, and in recommending the use of Merrill Lynch's transition management desk. In addition, Merrill Lynch made misleading statements to the clients served by its Ponte Vedra South, Florida, office regarding its manager identification process.)
• Diane M. Keefe, SEC Release No. IA-2828 (Jan. 13, 2009) (Order Instituting Administrative Proceedings) (SEC alleges Portfolio manager of Pax World High Yield Fund created notes of "investment committee meetings" that were never conducted.)
• Thomas J. Smith, SEC Release No. IA-2810 (Nov. 25, 2008) (Order Instituting Administrative Proceedings) (RIA alleged to have engaged in principal trades with clients through matched trades in thinly traded stocks in after-hours trading.)
• Medcap Management, SEC Release No. IA-2802 (Oct. 16, 2008) (Order Instituting Administrative Proceedings) (RIA alleged to have engaged in portfolio pumping to boost value of hedge fund's holdings prior to reporting values to fund shareholders.)
• Battery Wealth Management, Inc. and Wayne Cassaday, SEC Release No. IA-2800A (Oct. 15, 2008) (Order Instituting Administrative Proceedings) (CCO of RIA firm alleged to have neglected responsibilities, to-with: Compliance Manual, which was a generic compliance manual purchased for $179, did not address the particular risks of RIA firm's business, particularly the conflicts of interest resulting from operating of a side business that offered and managed pooled funds that were recommended to RIA firm's advisory clients. In addition, the manual did not address conflicts of interest arising from borrowing by insiders from advisory clients. CCO barred from RIA industry for 1 year, fined $40,000, plus disgorgement and interest.)
• Sterling Capital, SEC Release No. IA-2797 (Oct. 8, 2008) (Order Instituting Administrative Proceedings) (SEC alleged that RIA misappropriated investor funds, and while in custody or possession of funds or securities in which clients had a beneficial interest, that had not been verified by actual examination at least once during each calendar year by an independent public accountant at a time chosen by the accountant without prior notice.)
• AmSouth Bank, SEC Release No. IA-2784a (Sept. 23, 2008) (Order Instituting Administrative Proceedings) (SEC alleged that AmSouth, as investment adviser to a mutual fund, entered into two written side agreements with BISYS, pursuant to which BISYS rebated a portion of its administration fee to AmSouth so that AmSouth would continue to recommend BISYS as an administrator for the AmSouth Funds to the AmSouth Funds' board of trustees; also, under a consulting arrangement, BISYS and AmSouth agreed that in exchange for AmSouth recommending to the trustees that BISYS provide securities lending services to the AmSouth Funds, BISYS would pay some of the securities lending fees it received back to AmSouth as consulting fees; non-disclosure of these agreements to independent trustees nor to fund shareholders alleged to be violation of Sect. 206(2) of the Advisers Act.)
• Kent D. Nelson, SEC Release No. IA-2765 (August 1, 2008) (Order Instituting Administrative Proceedings) (Nelson, a registered representative and investment adviser in San Diego, California, pleaded guilty to one count of mail fraud; Nelson paid substantial amounts of money to corruptly influence the Treasurer of the State of New Mexico to award securities work to Nelson.)
• Pax World, SEC Release No. IA-2761 (July 30, 2008) (Order Instituting Administrative Proceedings) (SEC alleges that RIA to mutual fund represented to shareholders and board of mutual funds that it complied with "socially responsible investing" restrictions, when in fact it purchased securities in non-SRI-approved companies; and failure to continuously monitor fund holdings.)