DOL Advice Proposal Confirms Five-Part Fiduciary Test, Includes Class Exemption Based on Impartial Conduct Standards

States that Rollover Advice is Investment Advice

Two years after its fiduciary rule was vacated, the DOL has officially reinstated the five-part test to determine whether a person is an investment advice fiduciary. The agency has also  proposed a prohibited transaction class exemption to allow investment advice fiduciaries, including investment advisers, to receive compensation for providing fiduciary investment advice, including advice regarding rollovers, and to engage in certain principal transactions.

Like the original rulemaking, this proposal covers only non-discretionary advice, so its primary application for investment advisers providing discretionary management will likely be with respect to advice about rollovers. 
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DOL ERISA Proposals Single Out ESG Investments for Extra Scrutiny

Amendments Would Make It More Difficult to Include ESG Options in Plans

The DOL has proposed amendments to its ERISA investment duties regulation regarding ESG investments. The proposal, according to the related press release, “is designed, in part, to make clear that ERISA plan fiduciaries may not invest in ESG vehicles when they understand an underlying investment strategy of the vehicle is to subordinate return or increase risk for the purpose of non-financial objectives.” Secretary of Labor Eugene Scalia said private employer-sponsored plans “are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan.”
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New, 11th Hour Form CRS FAQs Published by SEC

With the June 30 compliance date less than two business days away, the SEC staff on June 26 published new and modified Frequently Asked Questions addressing various issues – including some raised by the IAA – relating to the scope, formatting, and delivery requirements of Form CRS.
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Regulation Best Interest – and Form CRS – Are Here to Stay:
Court of Appeals Rejects Challenges to New SEC Rule for Broker-Dealers

The Court of Appeals for the Second Circuit has denied petitions to overturn the SEC’s Regulation Best Interest (Reg BI), which adopts a new standard of conduct for broker-dealers when they make recommendations to retail customers. The court unanimously found that the SEC had the authority to adopt Reg BI and that, as adopted, the rule is not arbitrary and capricious. Following this decision, brokers will need to comply with, and the SEC will begin to enforce, Reg BI beginning on June 30. Because Reg BI remains in place, the SEC will not need to revisit Form CRS, the new client relationship summary that goes into effect at the same time.
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Supreme Court Rules Both For – and Against – SEC on Disgorgement Question

In an important case for the SEC’s enforcement powers, the Supreme Court has affirmed the SEC’s ability to impose a disgorgement award as an equitable remedy – but at the same time has limited that equitable award to the amount of the wrongdoer’s net profits.
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Highlights from the IAA/CMS Trading and Best Execution Summit:
Market Structure Changes and IAs’ Trading, Best Ex Obligations

The IAA’s second annual Trading and Best Execution Summit, cosponsored by Capital Markets Strategies, took place on June 18 in the midst of sweeping SEC initiatives designed to bring significant change to market structure and trading in the United States. The virtual event – attended by more than 300 mostly buy-side professionals – focused on how regulatory changes are likely to affect how investment advisers approach and manage their trading and best execution obligations and governance.
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OCIE Issues Risk Alert on Private Fund Adviser Exam Deficiencies

OCIE has issued a Risk Alert describing common deficiencies in exams of advisers to private equity and hedge funds. Identified deficiencies include inadequate disclosure of conflicts of interest, inaccurate assessment or disclosure of fees and expenses, and inadequate policies and procedures to prevent the misuse of material non-public information (MNPI) and inadequate codes of ethics.
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SEC Extends Relief for In-Person Board Meetings

Declines to Extend Form ADV and Other Filing, Delivery Requirements

The SEC has issued an order that extends the time for relief from the in-person fund board meeting requirement until no earlier than December 31, 2020. This order supersedes the SEC’s prior order that extended this relief until August 15, 2020. The IAA has strongly advocated on behalf of our members for the extension of this relief.
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New Governors Elected to IAA Board, New Board Officers Set

2ofEm.jpgCatherine C. Halberstadt of Osterweis Capital Management and R. Kelly Williams, Jr. of Atlanta Capital Management Company, LLC have been elected to the IAA Board of Governors and were formally installed into their three-year terms at the Board’s annual meeting on June 10. New Board officers were also named at the meeting.
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Karen Barr
Karen Barr
Together, We Can Help Build a More Equitable Future

We at the IAA have been deeply appalled and saddened by the tragic deaths of George Floyd, Breonna Taylor, Ahmaud Arbery, and too many others and the injustice and inequities that they highlight.  We condemn racism and systemic injustice and will strive to be part of the positive change that is needed. Now is the time to bring our community together to share perspectives on how we can do better and drive effective change. The IAA plans to convene conversations with our members to share ideas, best practices, and resources, and to think collectively about the path forward. These conversations are intended to generate tangible action items for implementation. We encourage you and others within your organization to participate.
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ESG, Sustainable Investing’s Inherently Active Process Helps Investors Align with Their Goals, AMC Paper Finds

Sustainable investing inherently involves active decision making, concludes a new white paper, Sustainable Investing is an Active Process, from the Investment Adviser Association’s Active Managers Council (AMC). In addition, the paper observes that “the traditional fully active approach allows for a more nuanced consideration of quantitative and qualitative factors, which helps investors tailor their portfolios to their sustainability goals.”
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Developing an ESG Policy | A Practical Guide for CCOs

ESG investing has gone mainstream. Once a niche in the investment business, ESG offerings have become core offerings for many advisers.

That’s because there’s been “a fundamental shift in the view of sustainable investing,” from being solely a matter of ethics to being financially material, says John Hoeppner, Head of US Stewardship and Sustainable Investments at Legal & General Investment Management America. At an IAA Compliance Conference breakout, he and his fellow panelists provided advice for advisory firms that are just starting to develop ESG strategies.
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Private Equity Liquidity Solutions in the Time of Coronavirus

Financing operations during a period of reduced revenues has been a challenge for many companies during the COVID-19 pandemic – including companies that are part of a private equity portfolio. Steps that private equity fund managers can take to manage portfolio financing needs and preserve financial flexibility were the focus of the recent IAA webinar Private Equity Managers and the COVID-19 Liquidity Crunch.
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Volcker Rule Covered Fund Amendments Welcomed by Bank-Affiliated Asset Managers
The five agencies charged with implementing the Volcker Rule have issued final amendments to the regulations governing the so-called “covered fund” prohibition, which places limits on the ability of a bank and its affiliates to sponsor or own interests in hedge funds, private equity funds, and certain other investment vehicles. The amendments, adopted on June 25, address several important concerns raised by the IAA on behalf of bank-affiliated asset managers, which we discussed in an April 2 article on IAA Today.

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SEC Provides Relief Related to Mailing Adviser and Fund Documents to Clients in International Jurisdictions

The SEC’s Divisions of Investment Management and Trading and Markets have issued a statement providing no-action relief from failure to deliver certain international adviser and fund communications. The relief applies to clients – who have not consented to electronic delivery – who have international mailing addresses in jurisdictions where the U.S. Postal Service or other common carrier has temporarily suspended international mail service due to COVID-19. The relief will expire when the respective jurisdiction resumes mail delivery.
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IRS Extends RMD Rollover Period to August 31, Provides Additional Guidance

The IRS issued a notice on June 23 regarding the CARES Act waiver of 2020 required minimum distributions (RMDs). Under the notice, anyone who already took an RMD in 2020 from certain retirement accounts may roll that money back into a retirement account.
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With July 1 CCPA Enforcement Date Imminent, Final Regulations are Proposed

The California Attorney General has submitted final California Consumer Privacy Act Regulations to govern compliance with the California Consumer Privacy Act of 2018 (CCPA).

The CCPA will impact investment advisers that are doing business in California (e.g., have clients in California) and have over $25 million in annual gross revenue (regardless of the state) or meet one of two sales thresholds.
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Supreme Court Dismisses Case Brought by DB Plan Participants for Lack of Standing

In a 5-4 decision written by Associate Justice Brett Kavanaugh, the U.S. Supreme Court found that two retired participants in a defined benefit plan did not have standing under Article III of the Constitution, affirming a lower court decision. The participants sued the plan sponsor and others under ERISA, claiming mismanagement of the plan between 2007 and 2010.
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DOL Requests Information on PEPs, MEPs

The DOL has published a request for information regarding pooled employer plans (PEPs), which were introduced in the SECURE Act, and multiple employer plans (MEPs). The DOL is considering whether to propose a class exemption to cover prohibited transactions involving PEPs and MEPs.
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IAA Recommends Improvements to CFTC’s Proposal to Amend Form CPO-PQR 

The IAA recently filed a comment letter in support of the CFTC’s proposed amendments to Form CPO-PQR for registered commodity pool operators.
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SEC Obtains $30 Million Judgment Against Adviser, Founder in Connection with Misleading Performance

A federal court has ordered a Nevada-based investment adviser to pay over $30 million in connection with an SEC complaint that charged the adviser and its founder/chief investment officer with breaching their fiduciary duty through the use of misleading marketing materials that included performance of certain investment strategies.
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IAA Comments on New York State’s Proposed Regs for IARs

The IAA has submitted a comment letter to the State of New York regarding its proposed regulations for investment adviser representatives (IARs), including representatives of SEC-registered investment advisers. Our comments focused on the definition of “investment adviser representative” of SEC-registered advisers, the application of the proposed rules to supervisors and principals of IARs of SEC-registered advisers, and the need for a longer transition period.
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DOL Sends New Fiduciary Rule Proposal, Other Items to OMB

The Department of Labor (DOL) has sent a proposal entitled “Improving Investment Advice for Workers and Retirees Exemption” to the Office of Management and Budget (OMB) for review. If adopted, this would replace the fiduciary rule that was vacated by the Fifth Circuit Court of Appeals in 2018.
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NY Federal Court: Interests in Syndicated Loans are Not Securities

A group of banks in a lending syndicate succeeded in the U.S. District Court for the Southern District of New York in a dismissal of a lawsuit that was brought against them by a trustee in a bankruptcy proceeding. The trustee represents a trust holding debt obligations (Notes) of an entity that later went into bankruptcy. The suit against the lending syndicate alleged that the lenders misrepresented information given to the trust’s beneficiaries regarding the Notes.
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SEC Provides No-Action Relief Related to Participation in Fed Lending Facility
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SEC Adopts Amendments to Financial Disclosure Rules Related to Acquisitions and Dispositions
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Neil Simon
IAA Vice President for Government Relations
Chairman Clayton “Fully Committed to and Focused” on Job at SEC

In June 25 testimony before a House Financial Services subcommittee, SEC Chairman Jay Clayton asserted that he remains fully focused on his role at the SEC despite the controversy swirling around his nomination as the next United States Attorney for the Southern District of New York.
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Caroline Crenshaw Nominated, Hester Peirce Renominated to SEC

President Trump on June 2 nominated Hester Peirce to serve a second term as an SEC Commissioner. Peirce, who occupies a Republican seat at the Commission, was sworn in on January 11, 2018. Her second term would expire on June 5, 2025. The White House on June 18 nominated Caroline Crenshaw to fill the Democratic seat vacated by Robert Jackson in February. 
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Treasury/SBA to Provide Full PPP Loan Data to Congress

Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza notified Congress on June 25 that they plan to give lawmakers “full access to all PPP loan-level information – including, but not limited to, all borrower names and loan amounts” by July 4. According to their letter, they would be sharing the data with the understanding that “nonpublic personally identifiable and commercially sensitive business information will be treated as confidential.”
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IAA Presses Case for Advisory Fee Deductibility on Capitol Hill

The IAA continues its effort to persuade Congress to restore and expand the deduction for advisory fees in its “Phase 4” stimulus package in response to the widespread financial distress caused by the COVID-19 pandemic. We urge IAA members and other investment advisers to use our easy to use online Contact Congress tool to support our advocacy campaign.
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Coronavirus Resources



Regulatory Proposals

See Upcoming Regulatory Proposals

Compliance Dates

See Upcoming Compliance Dates

IACCP Certification & Training

See the 2020 Training Schedule









TRADING & BEST EXECUTION SUMMIT KEYNOTE WITH SEC COMMISSIONER HESTER PEIRCE – The impact of COVID-19 on the markets – and the SEC’s response – highlighted SEC Commissioner Hester Peirce’s remarks in her keynote conversation with IAA General Counsel Gail Bernstein. Peirce also addressed the SEC’s work on equity market structure and implications for the buyside – and expressed concerns about liquidity in the fixed income and credit markets during the pandemic.


TRADING & BEST EXECUTION SUMMIT: SEC TRADING AND MARKETS DIRECTOR BRETT READFEARN – In his “Fireside Chat” with Capital Markets Strategies President Ari Burstein, Brett Redfearn – Director of the SEC’s Division of Trading and Markets – focused his remarks on the importance of addressing conflicts, increasing the public’s access to data, and fostering competition while ensuring protection of investors.


MORE IAA VIDEOS – including SEC officials speaking at our 2020 Compliance Conference – are on our VIDEOS page.