The Securities and Exchange Commission (SEC) has recently taken significant steps to enhance regulations and enforcement actions related to investment advisers. In this SEC News Roundup, we will provide an overview of three recent enforcement and administrative items that private fund advisers should be aware of.
On September 11, 2023, the SEC charged and settled proceedings with nine registered investment advisers. These advisers were found to have violated various provisions of the Investment Advisers Act of 1940, including the duty to disclose conflicts of interest and the duty to seek best execution for client transactions. The settlements resulted in monetary penalties and other remedial actions.
One of the key developments in the investment advisory industry is the implementation of new SEC rules that regulate financial advisers' relationships with private funds and investors. These rules, adopted on August 23, 2023, aim to enhance investor protections and promote transparency. They require advisers to adopt and implement written compliance policies and procedures, conduct periodic reviews of their practices, and disclose conflicts of interest to clients.
The adoption of these new rules under the Investment Advisers Act of 1940 is a significant step towards safeguarding the interests of investors. The SEC believes that these rules will help improve the integrity of the advisory industry and ensure that advisers act in the best interests of their clients.
It is important to note that the term "financial planner" encompasses a wide range of professionals, including accountants, insurance agents, and investment advisers. The new SEC rules apply to all individuals and firms that meet the definition of an investment adviser under the Advisers Act.
In a separate enforcement action, the SEC announced settled charges against registered investment adviser DWS Investment. The charges alleged that DWS breached its fiduciary duty by failing to disclose a conflict of interest related to revenue sharing with its affiliated broker-dealer. The settlement required DWS to pay disgorgement, prejudgment interest, and a civil penalty.
The SEC's adoption of new and amended rules under the Investment Advisers Act of 1940 is part of its ongoing effort to modernize and strengthen regulations in the investment advisory industry. These rules address issues such as advertising practices, custody of client assets, and the use of third-party solicitors. They also provide additional guidance on the fiduciary duty owed by investment advisers to their clients.
The SEC's recent actions demonstrate its commitment to investor protection and the enforcement of regulations. Private fund advisers should familiarize themselves with these new rules and ensure compliance to avoid potential enforcement actions.
