CHAPTER 5 Regulatory Considerations

• Jurisdiction: United States
• Publication year: 2022

CHAPTER 5 Regulatory Considerations Chapter Contents

§ 5.01 Overview and Fiduciary Obligations

[1] Overview

[2] Investment Advisers as Fiduciaries

[3] Breach of Fiduciary Duty Under the Advisers Act

[4] Investment Advisers' Fiduciary Duties

[a] Duty of Care

[i] Duty to Provide Advice That Is in the Best Interest of the Client

[ii] Duty to Seek Best Execution

[iii] Duty to Provide Advice and Monitoring over the Course of the Relationship

[b] Duty of Loyalty

[i] Duty to Disclose Conflicts of Interest

[ii] Duty to Allocate Investment Opportunities Fairly Among Clients

[iii] Duty Regarding Reasonableness of Fees

[5] Common Law Fiduciary Duties

[6] Investment Company Act of 1940

[7] Employee Retirement Income Security Act of 1974

§ 5.02 Investment Adviser Registration

[1] SEC Registration Thresholds

[2] Exemptions

[a] Private Fund Adviser Exemption

[i] Exemption for Investment Advisers with Less than $150 Million Regulatory AUM in the United States

[ii] Advising Solely Private Funds

[iii] Determination of Regulatory AUM in the United States

[iv] Frequency of Calculation of Private Fund Assets

[b] Exemption for Advisers to Venture Capital Funds

[c] Foreign Private Adviser Exemption

[i] Counting Clients

[ii] Counting Investors

[iii] Meaning of "in the United States"

[iv] Meaning of "Place of Business"

[3] The SEC Registration Process

[a] Pre-Registration Preparation

[b] Form ADV

[c] Registration of Investment Advisory Affiliates

[4] State Registration and Notice Filings

[5] Family Offices

§ 5.03 SEC Regulation of Investment Advisers

[1] General Requirements

[a] Designation of Chief Compliance Officer

[b] Annual Review

[c] Written Compliance Policies and Procedures

[d] Code of Ethics

[i] Rule 204A-1

[ii] Personal Trading

[e] Custody or Possession of Client Funds or Securities

[f] Proxy Voting Procedures

[g] Recordkeeping

[h] Soft Dollars and Best Execution

[i] Business Continuity Plan

[j] Conflicts of Interest

[k] Valuation

[2] Restrictions and Prohibitions

[a] Principal and Cross Trades

[b] Cross Transactions

[c] Cash Payment for Client Solicitations

[d] SEC Rule 206(4)-5 ("Pay-to-Play")

[e] State and Local Pay-to-Play and Lobbyist Registration Requirements

[f] Performance Fees

[g] The "Hedge Fund Anti-Fraud Rule"

[h] Assignment of Investment Advisory Contracts

[i] Allocation and Aggregation of Investments

[j] Trade Errors

[k] Gifts and Entertainment

[l] Outside Business Activities

§ 5.04 Registration with the CFTC

[1] Commodity Pool Operators

[2] Commodity Trading Advisers

[3] Associated Person of a CPO or CTA

[4] Principal of a CPO or CTA

[5] Registration Process

[a] Fingerprinting

[b] Proficiency Requirements for Associated Persons

[6] Exemptions from CPO...