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IAA Urges Congress to Restore, Expand Deduction
for Investment Advice in Next Stimulus Package

The IAA is urging Congress to restore and expand the deduction for advisory fees when it considers a “phase 4” stimulus package in response to the COVID-19 crisis. Congress is in recess until April 20 and will begin consideration of another stimulus bill upon its return.

As noted in the one-pager we distributed to key lawmakers and their staffs, the repeal of this deduction may have appeared inconsequential in light of 2017’s rising stock market, sustained job growth and real wage growth. But today, Americans are deeply troubled by stock market volatility, the business environment and the state of their personal household finances. Access to professional financial advice is critically important in these turbulent times.

The IAA is asking advisers to use our Contact Congress tool to send emails of support to their federal legislators.
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IAA Schedules Three New Coronavirus-Related Webinars:
Answering Client Questions, Trading and Best Execution

The IAA has scheduled three new webinars to assist members in dealing with business challenges presented by the Coronavirus pandemic – one focusing on answering clients’ portfolio questions and two on trading and best execution in the equities, fixed income and ETF markets.
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IAA Adds New Charts Detailing Relief to Coronavirus Response Resources

To help members keep abreast of new filing deadlines and other Coronavirus-related regulatory relief, the IAA has added two new charts to its Coronavirus Response Resources web section. One is a quick reference guide – At a Glance: New Adviser Filing Deadlines Under SEC Orders Related to COVID-19. The second – IAA COVID-19 Relief Resource Chart – is a more comprehensive chart detailing relief measures, including required conditions to relief and convenient links to the original regulatory source, from a broad range of regulators.

 

March 25 Coronavirus Regulatory Updates

SEC Extends Relief for Adviser Filing Deadlines, Eases Conditions
Extends Relief for Fund Filing Deadlines and Board Meetings
Adds Flexibility for Obtaining Short-Term Funding, ILF Arrangements
NFA Extends Regulatory Relief for CPOs and CTAs

The latest expansions of regulatory relief in response to the coronavirus pandemic.
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A Message from IAA President & CEO Karen Barr

Barr__Karen_4x5_LR.jpgThere has never been a more important time for investment advisers to serve their clients. We have all been broadsided by an unprecedented public health crisis that is also producing a devastating financial impact. Advisers are playing a crucial role in guiding anxious clients through the current turmoil and volatile markets. We will have an even more important role to play as the economic damage caused by the coronavirus pandemic deepens, and the longer-term impact becomes clearer.
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OCIE Moves Most Examinations Off-Site, Assures Advisers Reliance on Coronavirus-Related Regulatory Relief Will Not Trigger Exams

The SEC’s Office of Compliance Inspections and Examinations (OCIE) has issued a statement announcing that because of health, safety, and firm operations disruption concerns, OCIE has moved to conducting examinations off-site through correspondence unless it is “absolutely necessary” for its teams to be on-site. Recognizing that firms are focused on maintaining operations and ensuring the safety of their employees, OCIE is working with registrants on timing, availability of personnel, and other ways to minimize disruption.

The statement also assures advisers that a firm’s reliance on regulatory relief provided by the SEC will not be a risk factor utilized in determining whether OCIE commences an examination. OCIE “encourage[s] registrants to utilize available regulatory relief as needed.”
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CFTC, NFA Provide Filing Delays for CPOs and CTAs

In response to the coronavirus pandemic, the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter providing blanket relief to commodity pool operators (CPOs), temporarily extending the filing deadlines for Form CPO-PQR, Pool Annual Reports, and Pool Periodic Account Statements under Rules 4.27, 4.22 and 4.7. The National Futures Association (NFA) also provided filing deadline relief in its Notice to Members on March 23 for commodity trading advisors (CTAs) and CPOs.
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Recording of Member Call on Cviru-Related Issues Available

The IAA held a member call today with Partners Jason E. Brown and Joel Wattenbarger of IAA Associate Member Ropes & Gray to discuss considerations for firms in addressing a wide range of implications of coronavirus developments – BCP, regulatory filing obligations, disclosure, remote working arrangements and more. A recording of the call is now available.
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SEC Proposes Amendments to Private Offering Rules
To Increase Investor Opportunities, Expand Access to Capital

The SEC has voted to propose amendments to simplify, harmonize, and improve certain aspects of the exempt offering framework. In its proposing release, the Commission says the proposals are designed to “facilitate capital formation and increase opportunities for entrepreneurs.”
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IAA to SEC: Expand Accredited Investor, QIB Definitions  to Include Discretionary Clients of SEC-Registered Advisers

In a comment letter to the SEC, the IAA maintains that the private markets have evolved significantly in recent year, and now constitute a considerably larger and mainstream portion of the capital markets. Given the importance of access to the capital markets, including to private offerings, for our members as they help their clients meet their financial goals, we recommended the SEC amend the definitions of accredited investor and QIB so advisers’ clients may invest where the investment is in their best interests.
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At IAA Conference, SEC’s Lee Expresses Advertising Rule Concerns, Criticizes Proxy Proposals as “Opposite of Investor Empowerment”

In her keynote address at the IAA’s 2020 Investment Adviser Compliance Conference in Washington, DC, SEC Commissioner Allison Herren Lee said that while she broadly supports the agency’s proposed modernization of the Advertising Rule – which she called a “meaningful improvement over the existing framework” – she is concerned that some elements of the proposal may be too vague and could lead to uncertainty among compliance professionals. She also had harsh criticisms of the SEC’s proxy reform proposals, saying they would “disempower” investors.
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SEC Guidance on Reg BI, Form CRS Expected This Month, More to Follow
Conflicts of Interest Disclosure Around Fees a Top Enforcement Priority

The SEC hopes to issue guidance on Regulation Best Interest and Form CRS later this month, OCIE Director Peter Driscoll told attendees at the IAA’s 2020 Investment Adviser Compliance Conference, while urging firms that have questions to contact OCIE before the July 1 implementation deadline. Enforcement Co-Director Steven Peikin said attendees should be devoting their attention to conflicts of interest disclosure around fees – including for mutual funds, UITs, cash sweeps and revenue sharing.
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Christopher D. Carlson, Counsel
Seward & Kissel LLP

Common Provisions in Investment Subadvisory Agreements for Registered Funds

March 19, 2020

A registered investment adviser (“adviser”) that advises an investment company (“fund”) registered under the Investment Company Act of 1940, as amended (“1940 Act”) may engage one or more unaffiliated advisers as a subadviser (“subadviser”) to perform all or a portion of the adviser’s investment management services for the fund. Advisers generally engage subadvisers for the subadviser’s expertise and reputation for investing within a particular asset class, or for other strategic reasons.  Some fund advisers delegate to the subadviser either the management of an entire fund, or only a portion of the assets of the fund.  The fund’s adviser must enter into a written subadvisory agreement with the subadviser (“fund subadvisory agreements”) to comply with the 1940 Act.  While the 1940 Act expressly requires certain terms to be included in a contract for advisory services to a fund (e.g., that the contract automatically terminates in the event of its assignment, which is required by Section 15(a)(4) of the 1940 Act), many terms that are typically included in fund subadvisory agreements are not so prescribed.  This article discusses some broad categories of provisions found in fund subadvisory agreements that are not necessarily prescribed by applicable law. 
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SEC Adopts Summary Prospectus for Variable Insurance Products
The SEC has adopted a new rule that permits, on a voluntary basis, the use of a summary prospectus for variable annuities and variable life insurance contracts. The rule also permits prospectuses for underlying investment options to be made available online. The SEC also adopted amendments that update registration forms required to be used for variable contracts and that require the use of the Inline XBRL format for certain mandatory disclosures.
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SEC’s Division of Investment Management Adds List of Modified or Withdrawn Staff Statements to Website

The SEC’s Division of Investment Management has issued two Information Updates regarding no-action letters and other staff statements that have been modified or withdrawn. The first update regards withdrawn staff letters in connection with the summary prospectus for variable insurance products. The second update provides information about a list prepared by Division staff of no-action letters and other staff statements that have been modified or withdrawn.
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Dual-Registrants to Pay $35 Million for Unsuitable Recommendations Regarding Single-Inverse ETFs

The SEC fined two affiliated dual-registrants a total of $35 million in connection with unsuitable recommendations to retail investors to buy and hold single-inverse exchange-traded funds, including in retirement accounts. The SEC found that between April 2012 and September 2019, clients lost millions by holding these positions.
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SEC Requests Comment on Fund Names Rule

The SEC has published a request for comment, asking whether Rule 35d-1 under the Investment Company Act (the Names Rule) “is effective in prohibiting funds from using names that are materially deceptive or misleading, and whether there are alternatives that the [SEC] should consider,” particularly in light of market and other developments since the rule’s adoption in 2001.
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UK Regulators to Asset Managers: Prepare for the End of LIBOR

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SEC's Investor Advisory Committee Considers LIBOR Transition, Accounting and Auditing Trends

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Bureau of Economic Analysis Collecting Data on U.S. Direct Investments

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SEC Fines Two Advisers for Undisclosed Conflicts Related to Investments in the Same Enterprise

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SEC Fines New York-Based Dual Registrant for Misleading Disclosures on Adviser Compensation

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SEC Fines Adviser and its Founder for Failure to Disclose and Obtain Client Consent for Principal Transactions

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SEC Implements Registration Exemptions for Advisers to RBICs

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European Commission Seeks Feedback on Changes to Research Unbundling Rules for Small Companies  

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Neil Simon
IAA Vice President for Government Relations

IAA Urges Congress to Restore, Expand Deduction
for Investment Advice in Next Stimulus Package

The IAA is urging Congress to restore and expand the deduction for advisory fees when it considers a “phase 4” stimulus package in response to the COVID-19 crisis. Congress is in recess until April 20 and will begin consideration of another stimulus bill upon its return.

As noted in the one-pager we distributed to key lawmakers and their staffs, the repeal of this deduction may have appeared inconsequential in light of 2017’s rising stock market, sustained job growth and real wage growth. But today, Americans are deeply troubled by stock market volatility, the business environment and the state of their personal household finances. Access to professional financial advice is critically important in these turbulent times.

The IAA is asking advisers to use our Contact Congress tool to send emails of support to their federal legislators.
<< more >>

 

MORE ARTICLES

Coronavirus Response Resources

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Regulatory Proposals

See Upcoming Regulatory Proposals

Compliance Dates

See Upcoming Compliance Dates

IACCP Certification & Training

See the 2020 Training Schedule

Events

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Videos

The investment adviser industry is mourning the passing of former IAA President & CEO David Tittsworth. This video tribute by David’s longtime friends, film makers Michael Herzmark and Melissa Wayne, was shown at David’s memorial service in Washington, DC on February 13.

Fiduciary is the most important word that retail investors don't understand. Here’s how average investors answered the question: “What’s a Fiduciary?

It's not active vs. passive… it’s active and passive. These experts explain why active management is crucial for investors and the markets.