Pay-To-Play Meets The California Labor Code

In 2010, the Securities and Exchange Commission adopted a rule (17 CFR § 206-4(5)) prohibiting an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or employees make a contribution to certain elected officials or candidates.  The rule applies to any investment adviser

Was This “Whiz Kid” An Investment Adviser?

Earlier this week, the Securities and Exchange Commission announced that a self-styled “stock trading whiz kid” and his Los Angeles, California company have agreed to pay $1.5 million to settle a complaint for violations of Rule 10b-5.  There is an odd disconnect between the SEC’s press release and its complaint.  The press release is headlined “stock newsletter fraud” and repeatedly refers to the

Investment Advisor or Investment Adviser?

Even though the federal statute is named the Investment Advisers Act of 1940, persons regulated by that act often refer to themselves as “advisors” and not “advisers”.  Which is spelling is correct? In English, we use both the –er and –or as endings to create agent-nouns.  For example, the verb “create” becomes the agent-noun “creator”.  The question

California’s Other Investment Adviser Law

California’s Corporate Securities Law of 1968 defines and provides for the comprehensive regulation of most, but not all, investment advisers.  Some investment advisers are subject to an entirely different law found in the California Civil Code – Section 3372. Section 3372 applies to any person “engaged in the business of advising others for compensation as to the

Commissioner Ponders Whether To Exempt Real Estate Brokers From Investment Adviser Registration

Last week, the Commissioner of Business Oversight issued an invitation for comment on whether to exempt real estate brokers from the investment adviser certification requirement under the Corporate Securities Law of 1968.  The exemption would require a real estate broker to be operating under the scope of a license issued by the Bureau of Real

Is A “Rule” An “Order” And Why Would Anyone Care?

Pay-to-Play Rule Challenged Doug Cornelius recently wrote about the dismissal of a lawsuit challenging the Securities and Exchange Commission’s anti “pay-to-play” rule under the Investment Advisers Act of 1940.  New York Republican State Comm. v. SEC, 2014 U.S. Dist. LEXIS 138964 (D.D.C. Sept. 30, 2014).  In a nutshell, the rule (206(4)-5) prohibits federally registered and

CalPERS Proposes Conflict Of Interest Disclosure Regulation

CalPERS recently gave notice that it is proposing to adopt a new rule requiring disclosure of conflicts of interests by consultants and external managers.  Under the California Administrative Procedure Act, Cal. Gov’t Code § 11340 et seq., an agency must include in its initial statement of reasons “the problem the agency intends to address”.  Cal.

Commissioner Adopts Rewrite Of Investment Adviser Custody Rule

To many, the words “custody” and “hide” would seem to have absolutely nothing in common.  Etymologically speaking, however, they are cognates (blood relatives).  Their common ancestor is the Proto-Indo-European etymon – “(s)keu”, meaning to cover or hide.  In Latin, this word became “custos”, meaning a guardian.  It’s easy to see how the “(s)keu” might become “custos” because they both include

DBO to Licensees: “Thou Shalt Have A Dedicated Electronic Mailbox And Read Your Email Daily”

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Late last month, Department of Business Oversight Commissioner Jan Owen issued an order requiring licensees to: establish within their computer electronic mail system an electronic mailbox; dedicate the email address to receiving communications from the DBO; and monitor the mailbox daily. The Commissioner’s order further requires that the mailbox have the capability of receiving attachments.  The Commissioner

Subcommitee Recommends SEC Rules Imposing Fiduciary And Disclosure Duties On Brokers

Recently, the Securities and Exchange Commission posted two recommendations by the Investor as Purchaser Subcommittee of the Investor Advisory Committee.  In general, the Subcommittee recommended: The SEC should conduct a rulemaking to impose a fiduciary duty on broker-dealers when they provide personalized investment advice to retail investors; and As part of its rulemaking, the SEC should adopt