Selected Enforcement Actions

Investment advisor settles conflicts of interest charges. The SEC instituted settled administrative proceedings against PageOne Financial, Inc., a registered investment adviser, and its sole owner and principal, for failing to disclose serious conflicts of interest to their advisory clients in connection with recommending investments in three private investment funds (the “Private Funds”). Without admitting or denying the allegations, respondents consented to the entry of an order finding that they failed to tell their clients that one of the Private Funds’ managers was in the process of acquiring at least 49 percent of PageOne for approximately US$2.7 million; that, as part of that acquisition, the sole owner and principal had agreed to raise millions of dollars for the Private Funds from his advisory clients; and that the fund manager was paying for the acquisition in installments that were partially tied to respondents’ ability to direct client money into the Private Funds. In addition, the disclosures made in respondents’ Form ADV materially misrepresented both the nature and amounts of the fund manager’s payments to the sole owner and principal. Additional proceedings will be conducted to determine the disgorgement and penalties, if any, respondent will pay. (3/10/2015) In the Matter of Edgar R, Page, SEC Release No. IA-4044. 

Brokerage settles failure to supervise matter. The SEC instituted settled administrative proceedings against H.D. Vest for failing to adequately supervise registered representatives who misappropriated customer funds. Without admitting or denying the allegations, H.D. Vest agreed to settle the matter by paying a US$225,000 penalty and retaining an independent consultant. (3/4/2015) SEC press release. See also Waiver letter (Division of Corporation Finance letter determining that H.D. Vest has demonstrated good cause for waiver of the “bad actor” automatic disqualification requirement of Rule 506(d)(2)(ii)). 

Speeches, Testimony and Presentations

Chair White’s views on disqualification waivers. Chair Mary Jo White discussed the administrative waiver of automatic disqualifications. Each waiver request should be reviewed individually and rigorously with the purpose of the disqualification at issue considered. Waivers should not be viewed as an additional enforcement tool or as an unjustified deterrence mechanism. Charging individuals, not the refusal to grant a waiver is a more effective deterrence tool. (3/12/2015) White speech. 

Division of Trading and Markets Director testifies about venture exchanges.Stephen Luparello, Director of the Division of Trading and Markets, testified before the Senate Banking Committee regarding the market structure issues facing smaller companies and how the SEC plans to address those issues. (3/10/2015) Luparello Testimony. 

Fixed income market reforms. Commissioner Daniel M. Gallagher noted his concern over the growing lack of liquidity in the fixed income markets and the steps that should be taken to address those concerns. (3/10/2015) Gallagher speech. 

Investment manager compliance. Acting Director of the Division of Investment Management, Dave Grim, spoke at the Investor Advisor Association compliance conference. Grim discussed enhanced data reporting for both registered funds and investment advisers; portfolio composition risks; and the need to plan for market stress events. (3/6/2015) Grim speech. 

SEC Advisory Committee on Small and Emerging Companies. The SEC’s Advisory Committee on Small and Emerging Companies met on March 4, 2015. Commissioners Daniel M. Gallagher and Luis A. Aguilar presented their views on venture exchanges, secondary market trading venues for the shares of small and emerging companies. The Advisory Committee submitted its recommendations to the SEC concerning the revision of the “accredited investor” definition. Presentations were also given by private groups concerning secondary trading developmentsthe need for Venture Exchangesmarket infrastructure for private and unregistered securities; and a multistate coordinated review program

Other Developments

A uniform approach. The Wall Street Journal reported that SEC Chair Mary Jo White supports a uniform fiduciary duty standard for investment advisors and broker-dealers. (3/17/2015) Uniformity. 

Questionable logic. The remarks of SEC Commissioner Michael Piwowar before the Investment Company Institute were summarized by Reuters. (3/16/2015) Questionable logic. 

Going private. Bloomberg discussed what some of the largest money market funds are doing in anticipation of new SEC rules that require them to adopt floating net asset values. (3/15/2015) Going private. 

Waiver guidance. The Division of Corporation Finance published guidance concerning the circumstances under which it will grant a waiver from the automatic disqualification provisions of Securities Act Regulation A and Regulation D. The Commission has delegated authority to grant these waivers to the Director of the Division of Corporation Finance, although the Commission retains authority to consider waiver requests and review actions taken pursuant to this delegated authority. The Division will consider, among other facts and circumstances, whether a party seeking a waiver has shown good cause that it is not necessary under the circumstances that the exemptions be denied; whether the violation involved the offer and sale of securities; and whether the conduct involved a criminal conviction or scienter based violation. No single factor is dispositive and the burden will be on the waiver applicant to show good cause. The focus of the Division’s analysis will be on how the identified misconduct bears on the applicant’s fitness to participate in exempt offerings. (3/13/2015) Guidance. 

Draft EDGAR documentation. The SEC published draft EDGAR Filer Manual (Volume I) - General Information (Version 20); draft EDGAR Filer Manual (Volume II) - EDGAR Filing (Version 30); and draft EDGAR Form SDR-XML Technical Specification (Version 1.0). 

Money market data. Money market fund data as of January 31, 2015, was released by the Division of Investment Management. (3/11/2015) Data. 

Registered ATS. The SEC has made available a list of alternative trading systems that as of March 1, 2015, have filed effective Form ATS registrations with the agency. (3/4/2015) List.