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

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

Proxy Advisory Firms And Investment Adviser Registration

Recently, I wrote about a shareholder proposal seeking to hold a proxy advisor popularity contest.  I commented that this could raise some interesting compliance challenges for proxy advisory firms that are registered as investment advisers.  I waited, it turns out in vain, for someone to point out that not all proxy advisors are registered as

Defining “Qualified Client” – Uff Da!

Corporations Code Section 25234 generally prohibits an investment adviser registered in California to be compensated on the basis of a share of capital gains.  This prohibition is analogous to the prohibition found in Section 205(a)(1) of the Investment Advisers Act of 1940 (IAA).  Congress included this prohibition because it was believed that performance fees might induce

Commissioner Proposes Successor To Rule 260.204.9

With the enactment of the National Securities Markets Improvement Act of 1996, Congress divided registration authority over investment advisers between the Securities and Exchange Commission and state securities regulators.  In general, large advisers (i.e., those with at least $25 million in assets under management) were required to register with the SEC and smaller advisers were subject to

Truth Endures For All Generations And Perhaps So Can A Family Office

Many rich people establish “family offices” to provide investment advisory services to family members.  Section 409 of the Dodd-Frank Act excludes “family offices” from the definition of “investment adviser” under the Investment Advisers Act of 1940.  Congress left it up to the Securities and Exchange Commission to define who is and who isn’t family for purposes of the family office exclusion.

California Gets Ready For SEC Hand-off of Midsized Advisory Firms

Department of Corporations Letter To Midsized Firms If you are an SEC registered investment adviser with assets under management of between $25 million and $100 million, you should check your mailbox for this October 7 letter from Commissioner Preston Dufauchard.  The Commissioner is sending this letter to those firms that are likely to be required to transition

SEC Slays Redwoods At Fearsome Pace

Yesterday, was a big day for both the regulated and the unregulated adviser industry. “The very rich are different from you and me . . . they have more money” The Securities and Exchange Commission adopted its final “family office” rules.  According to the SEC, “family offices” are established by wealthy families to manage their riches,

Commissioner Takes Emergency Action To Put More Time On The Clock For Rule 260.204.9

Yesterday, Commissioner Preston DuFauchard started the process for adding six months to the lifespan of Rule 260.204.9.  The Commissioner took this action in light of the imminent expiration of the “private adviser” exemption set forth in Section 203(b)(3) of the Investment Advisers Act of 1940.  The Dodd-Frank Act eliminates this exemption effective July 21, 2011. SEC To Adopt Final

Commissioner To Ask For Comments On Rule 260.204.9

Look for the Commissioner of Corporations to be issuing a solicitation for comments on proposed changes to Rule 260.204.9.  As will be discussed in a Guest Blog to be posted on Monday, the Commissioner has announced that he is considering changes to Rule 260.204.9 in light of the enactment of the Dodd-Frank Act last summer.  Currently,