For Investment Advisers: SEC Actions
Between a Rock and a Hard Place: SEC’s FAQs on Conflicts of Interest and Recent Settlements Set Bar Impossibly High for Advisers. The SEC is going on the offensive, tackling advisers for receiving compensation above and beyond their advisory fees with its recent FAQs and administrative actions. In the FAQs, the Division of Investment Management provides guidance on what it considers the material facts about a firm’s practices and disclosures for payments received in connection with client investments, along with a caveat that the disclosures “should be concise and in plain English”. The SEC also indicates through the FAQs that offsetting or rebating 12b-1 fees or sales charges may be the appropriate course of action for an adviser to meet its fiduciary duties. Reading between the lines, the Commission is de facto expecting a higher fiduciary standard from advisers, similar to the standard imposed by the now-dead DOL Fiduciary Rule.
To hammer its point home, the SEC also announced 17 settlements with investment advisers for “disclosure failures” in connection with its Share Class Selection Disclosure Initiative (the “SCSD Initiative”). This is in addition to the settlements with 79 investment advisers announced in March 2019. In its press release, the SEC noted that 16 of the firms had self-reported during the SCSD Initiative. All told, the advisers were required to refund money to clients, along with prejudgment interest, for a total of nearly $10 million. Mid Atlantic Financial Management, Inc., a firm that failed to participate in the SCSD Initiative, was required to refund more than $1 million to clients in 12b-1 fees and prejudgment interest, along with a $300,000 penalty.
But there’s more! In an administrative proceeding against BMO Harris Financial Advisors, Inc. and BMO Asset Management Corp., the SEC found two affiliated investment advisers guilty for failing to disclose a conflict of interest caused by investing clients in proprietary mutual funds, and in higher-cost share classes of mutual funds (when cheaper share classes were available). The SEC ordered the two advisers to refund clients $25 million (along with more than $4.5 million in prejudgment interest) and pay a penalty of $8.25 million. Similarly, the SEC found Founders Financial Securities, LLC, a dually registered investment adviser and broker-dealer, breached its fiduciary duty and provided inadequate disclosures regarding its receipt of 12b-1 fees. It’s the same old story – Founders Financial purchased mutual fund share classes with 12b-1 fees for its clients when lower-cost share classes were available. Predictably, Founders Financial will have to refund clients to the tune of $1.25 million, along with prejudgment interest, and pay a $140,000 penalty.
Our advice to advisers is to review the SEC’s FAQs on Conflicts of Interest carefully. The SEC is (finally!) explaining what it expects and will be looking for changes to Form ADV as a result. Advisers should also consider their sources of income and any help received from service providers in defraying costs that would otherwise be borne by the firm, such as support provided by mutual fund companies for marketing or training of sales personnel. This type of support is also considered “compensation” as far as the SEC is concerned. We also recommend that you review the disclosure your firm prepared for the DOL Fiduciary Rule and see if there is anything new to add. (Need a refresher? Check out our Blog Post.) It might also be time to consider if it may make sense to rebate fees paid by clients if such payments end up in the Firm’s pocket. Contributed by Jaqueline M. Hummel, Partner and Managing Director.
RIAs — Get our Your Checkbooks! It’s Time to Fund Your Annual Renewal Accounts on IARD. It is time for the annual renewal of investment adviser (IA) firms and their IA representatives’ (IARs) registrations with jurisdictions/states. Preliminary renewal statements for the IARD system will be available on or around November 11, 2019, and the deadline for the receipt of preliminary statement payment is December 16, 2019. Firms are encouraged to submit renewal payments by December 11, 2019 to ensure payments get processed in time. See the Investment Adviser Filings and To-Do Checklist for November below for details. Contributed by Jaqueline M. Hummel, Partner and Managing Director.
SEC Establishes Asset Management Advisory Committee. Although it is not yet known which specific initiatives the Committee will tackle first, its objectives are to “provide the Commission with (a) diverse perspectives on asset management, including (i) trends and developments affecting investors and market participants, (ii) the effects of globalization, including as it relates to operations, risks and regulation, and (iii) changes in the role of technology and service providers, as well as (b) related advice and recommendations”. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant
For Broker-Dealers: SEC and FINRA Actions
- 11/11/2019 (Monday) – PRELIMINARY Statements are available through E-Bill;
- 12/16/2019 (Monday) – DEADLINE for receipt of payment in full of Preliminary Statements;
- 12/26/2019 (Thursday) – LAST DAY to submit Forms U4, U5, BD, and BDW for the year;
- 01/02/2020 (Thursday) – Final Statements are available through E-Bill; and
- 01/17/2020 (Friday) – DEADLINE for receipt of payment in full of Final Statements.
Additional details, including payment methods, can be found in FINRA Notice 19-35. Hardin recommends that funds be remitted through E-Bill, in advance of the deadlines, to allow sufficient time for processing. Contributed by Rochelle A. Truzzi, Senior Compliance Consultant.
FINRA Wants to Know if Broker-Dealers are Ready for Regulation Best Interest. William St. Louis, FINRA’s Northeast Region director for sales practice and senior vice president, announced that FINRA will be conducting Regulation Best Interest “preparedness reviews” of its member firms starting in November. He made during the SIFMA (Securities Industry and Financial Markets Association) Compliance and Legal Seminar in New York on October 22, 2019. The deadline for compliance with the regulation is June 30, 2020, but apparently FINRA wants to see where firms stand in advance of the compliance date. If your firm needs a starting point for getting ready, check out the checklist published by FINRA, created to help member firms to comply with Reg BI and Form CRS Relationship Summary and visit Hardin’s dedicated Reg BI webpage. Contributed by Jaqueline M. Hummel, Partner and Managing Director.
Attention Underwriters, Syndicate Managers and Members, and Selling Group Members. Broker-dealers that use transactions in US treasury securities to hedge a primary market “List or Fixed Offering Price Transaction” or “Takedown Transaction,” (generally a primary sale transaction on the first day of trading of a security at the published or stated list or fixed offering price – or at a discount), will be required to report these hedging transactions through TRACE using a new modifier (“P1”), no later than the next business day during TRACE system hours. Refer to FINRA Notice 19-30 that outlines the amendments to FINRA Rule 6730 (Transaction Reporting). Contributed by Rochelle A. Truzzi, Senior Compliance Consultant.
Does Your Firm Issue Investment Fund Research Reports? On September 26th, FINRA announced amendments to Rules 2210 (Communications with the Public) and 2241 (Research Analysts and Research Reports), so they conform to the Fair Access to Investment Research Act of 2017 (“FAIR Act”). In accordance with the FAIR Act, Rule 139b of the Securities Act of 1933 provides a safe harbor for Covered Investment Fund Research Reports whereby distribution of such research reports by a broker-dealer that is not an investment adviser to the Covered Investment Fund and is not an affiliated person of the investment adviser will not constitute an offer for sale or offer to sell a security that is the subject of an offering pursuant to a registration statement of the Covered Investment Fund. As such, these reports are excluded from the filing requirements of Rule 2210 and are no longer subject to the “Quiet period” restrictions under Rule 2241 on publishing a report or making a public appearance concerning such funds. Contributed by Rochelle A. Truzzi, Senior Compliance Consultant.
FINRA 2019 Industry Snapshot. Last year, for the first time, FINRA published a high-level overview of its membership, including data on registered representatives, branch offices, as well as member revenue, trading activity, and advertising. On October 2, 2019, FINRA published its 2019 Industry Snapshot to provide updated numbers through the end of 2018. As was evident in last year’s report, and again this year, FINRA’s membership is shrinking. From 2014 to 2018 the number of FINRA registered firms decreased by 11.31%. During the same period, the number of broker-dealer only registered firms shrunk by 10.20%. In contrast to the shrinking population of broker-dealers, investment adviser only registered firms increased by 7.50%. The decreasing membership numbers is a long-term trend. FINRA’s website shows that membership has decreased every year since 2004 (data did not go back further than 2004).
In 2004, there were 5,187 members of FINRA (members include broker-dealer only and dually registered firms). As of the end of 2018, that number decreased to 3,607 members, representing more than a 30% decrease in membership in the last 14 years. During this time frame, there wasn’t a single year in which membership numbers increased. This trend is likely to continue as small firms (150 or fewer registered representatives) continue to struggle managing compliance programs with more stringent and complex requirements added every year. Contributed by Doug MacKinnon, Senior Compliance Consultant.
2019 Report on FINRA Examination Findings and Observations. On October 16, 2019, the 2019 Report on FINRA Examination Findings and Observations was published, providing the public with a summary of member examination results. In 2017 and 2018, the FINRA reports focused on findings, but this year’s report emphasized both examination findings and observations. Findings constitute a determination that relevant rules have been violated. By contrast, observations are recommendations that do not rise to the level of a violation and are shared with members as a means to improve identified weaknesses in their compliance programs (which may elevate risks to the members). Observations are communicated separately from the formal examination report. FINRA’s report is intended to reflect critical findings and observations identified in recent examinations. The report also contains (where noted) effective practices that were identified by the examiners that the staff believes will help members improve their compliance and risk management programs.
The report covered findings and observations related to:
- Sales Practice and Supervision (Supervision, Suitability, Digital Communication, Anti-Money Laundering, UTMA & UGMA)
- Firm Operations (Cybersecurity Observations, Business Continuity Plans, Fixed Income Mark-up Disclosure)
- Market Integrity (Best Execution, Direct Market Access Controls, Short Sales)
- Financial Management (Liquidity & Credit Risk Management Observations, Segregation of Client Assets, Net Capital Calculations)
While all findings and observations may not apply to your firm, the report provides valuable insight into the areas that FINRA is focused and the missteps to avoid during your next FINRA examination. Contributed by Doug MacKinnon, Senior Compliance Consultant.
For Investment Advisers and Broker-Dealers: SEC and Other Actions
Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets. On October 11, 2019, leaders of the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC) issued a joint statement reminding persons of their anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations related to activities involving digital assets. Requirements include establishing and implementing an effective AML Program, maintaining records, and making required reports. The joint statement reminds anyone conducting business involving digital assets that the obligation to support suspicious activity still exists and will be enforced, even though these assets lack the same level of regulation as other financial products. Contributed by Doug MacKinnon, Senior Compliance Consultant.
For Mutual Fund Managers: SEC Actions
SEC Adopts New ETF Rule and Modernizes ETF Regulations. In a long-awaited move, the SEC adopted Rule 6c-11 (the “ETF Rule”) and related amendments to Form N-1A, largely as proposed. Under the ETF Rule, ETFs will be deemed to be “redeemable shares” of an open-end investment company, which is the classification that will allow most ETFs to operate without obtaining an exemptive order. Additionally, ETFs will no longer need to publish an “intraday indicative value” during the trading day once the ETF Rule is effective. Daily disclosure requirements by ETFs according to the Final Rule include (i) portfolio holdings and cash comprising the NAV, (2) the NAV, market price and premium (or discount), (3) median bid-ask spread during the last 30 calendar days, and (4) providing a table and line graph reporting the number of days that the ETF’s shares traded at a premium or discount during the last calendar year and most recent calendar quarter, and if greater than 2% for seven consecutive trading days, an explanation as to why.
The SEC will rescind previously granted exemptive orders one year following the effective date of the ETF Rule. Although funds already operating under an exemptive order may need to retool certain disclosures to comply with the conditions of the new ETF Rule, this modernization is generally viewed positively by ETF managers – new ETFs will have a faster and less expensive path to market under the Final Rule and the playing field across ETFs has been leveled, removing the patchwork of conditions associated with years of exemptive orders. Another hope is that the exemptive order process itself returns to a more streamlined experience, with the SEC being better positioned to process exemptive order requests more efficiently without being bogged down with ETF requests, as has been the case for several years. See our Worth Reading section below for detailed analyses of the ETF Rule components by Dechert LLP and K&L Gates LLP. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.
Notice to Mutual Fund Managers – Review your Performance and Related Disclosures. The Division of Investment Management’s Disclosure Review and Accounting Office (DRAO) is responsible for reviewing fund disclosure filings. Similar to OCIE risk alerts, DRAO issues notices from time to time to highlight common issues it has encountered during its reviews. In this notice, fund managers are encouraged to review performance and related disclosures in fund disclosure documents, with emphasis placed on the accuracy of fund reported returns (including between share classes, and ensuring sales loads are reflected correctly), acquired fund fees and expenses, the calculations presented in the expense example, and the XBRL tag used on the risk/return summary. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.
For Hedge Fund Managers: NFA Actions
NFA Updates Rules on Supervision. NFA released I-19-19 in early October, updating its Interpretive Notice 9019, “Compliance Rule 2-9: Supervision of Branch Offices and Guaranteed IBs”, effective 1/1/2020. Changes are grouped into three categories: (1) due diligence reviews, (2) written supervisory policies and procedures, and (3) employee training. Members who have branch offices or guaranteed IB relationships should note that substantive changes include enhanced due diligence requirements regarding knowledgeable persons at branches/IBs, increased flexibility regarding surveillance and exceptions to annual on-site branch/IB inspections, and new requirements for AP 8-R disclosures and Member escalation of issues uncovered through surveillance or inspection.
NFA also recently updated its Frequently Asked Questions based on Member questions to date regarding Swaps Proficiency Requirements, which will come into effect January 31, 2020. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.
Lessons Learned from SEC and FINRA Cases
SEC Takes Rare Action against Advisers for Voting Proxies. In its rush to settle cases before its fiscal year-end, the SEC found Amadeus Wealth Advisors and Three Bridge Wealth Advisors voted proxies on behalf of clients even though their Form ADV Part 2A brochures explicitly stated that they did not accept proxy voting authority. The Commission found that these actions violated the anti-fraud provisions under Section 206(2) of the Advisers Act. The SEC fined Three Bridge Wealth Advisors $60,000 and Amadeus Wealth Advisors $40,000. These cases come a month after the SEC issued its Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers. In that release, the SEC said that investment advisers are not required to vote client proxies, but if they agree to do so, they will be held to a fiduciary standard. Advisers should take heed that the SEC is going to start looking more closely at their proxy voting practices and disclosures. Contributed by Jaqueline M. Hummel, Partner and Managing Director.
Large Adviser Fined for Paying Referral Fees without Telling Clients. Cetera Investment Advisers LLC (“Cetera”) built its $10B advisory business in part by maintaining agreements with hundreds of banks and credit unions where it agreed to pay a portion of investment advisory fees received from referred clients’ to the referring institutions. The SEC recently found that Cetera willfully violated the Cash Solicitation Rule (Advisers Act Rule 206(4)-3) by paying referral fees without requiring the intermediaries to provide solicitor disclosure documents to clients. Beginning in 2006, PrimeVest Financial Services, Inc. (“PrimeVest”), a dual registrant since acquired by Cetera, received a deficiency letter for a similar violation. In response, PrimeVest amended its agreements with credit unions, but took a different approach with its bank agreements, claiming relief under a 1991 SEC no-action letter issued to Kingland Capital Corporation. Notably, this letter did not reference the Cash Solicitation Rule, and the examination staff advised that relying on the Kingland letter would be at PrimeVest’s own risk. PrimeVest, however, did not seek affirmative no-action relief for its updated approach. When questioned again during a 2014 SEC examination, Cetera stated that it continued to rely on the Kingland letter; however, this time around, the staff objected, and Cetera failed to adjust its practices accordingly, ultimately resulting in its censure and fine.
This case includes several reminders for advisers; the most obvious is that the SEC hasn’t forgotten about solicitors. Paid solicitation may only take place under an agreement in keeping with the Cash Solicitation Rule where, among other conditions, referred clients must acknowledge receipt of a disclosure statement before any compensation is paid to the solicitor. Providing disclosure in an investment management agreement is not sufficient. Another takeaway is that advisers must understand the application of no-action letters under which they claim relief. The Kingland letter may provide relief from registration requirements for banks in certain networking agreements, but it does not provide the relief sought by PrimeVest and, later, Cetera. Beyond the rules, this case also highlights that lack of response by the examination staff during one exam is not indicative of its agreement with a practice, nor does it guarantee that a future exam team won’t reach a different conclusion. While the 2006 examination staff decided not to pursue the disclosure issue further, PrimeVest and later Cetera had no staff opinion or no-action letter on which to rely, so the 2014 staff was free to take a new approach. Check out “12 Things You Need to Know about the Cash Solicitation Rule” for additional guidance, including a checklist to help review solicitor’s agreements. Contributed by Mark L. Silvester, Compliance Associate.
SEC Charges Investment Adviser with Custody Rule and Related Violations. New York-based investment advisory firm ED Capital Management, LLC, and its owner Elliot Daniloff, agreed to settle charges that the firm did not comply with Advisers Act Rule 206(4)-2,the Custody Rule; made untrue statements in its Form ADV; and failed to conduct annual reviews of its compliance policies and procedures. The violations included the firm’s failure to distribute annual audited financial statements to investors in the largest private fund they were advising for four years and filing a Form ADV that falsely stated that the firm had distributed audited financial statements to investors. The order further found that the firm had failed to implement reasonable written policies and procedures to prevent these violations. Ed Capital and Daniloff paid civil penalties of $75,000 and $25,000 respectively. Contributed by Doug MacKinnon, Senior Compliance Consultant.
SEC Finds Failures to Supervise Rogue IAR and Implement Sufficient Policies and Procedures. The SEC settled proceedings against HCR Wealth Advisors (“HCR”) with HCR agreeing to censure and a penalty of $220,000 for failing to supervise an investment adviser representative (“IAR”) who defrauded firm clients and for various related policy and procedure violations. According to the SEC, the IAR defrauded a married couple for over three years by stating they were receiving a “VIP” fee rate of 0.15-0.20% when they were actually paying 1.0%. Additionally, the IAR misappropriated client assets for personal investments in a restaurant venture. This occurred after an outside compliance consultant identified the risk of misappropriation given the IARs outside business activity in the restaurant. The HCR compliance team did not, however, take additional steps to monitor for this risk. Finally, HCR failed to investigate and adequately follow up on complaints it received about the IAR’s services. These failures formed the groundwork for the SEC’s claims.
This case serves to remind advisers about steps that can be taken to avoid a failure to supervise charge. First, client complaints should be treated seriously and thoroughly investigated to ensure their proper resolution. Additionally, firms that use a third-party compliance consulting firm should ignore its advice at their peril. There may be acceptable reasons for not implementing the advice, but the adviser should document its rationale for doing so. Finally, the SEC Order noted specific actions HCR did NOT take in response to the IAR’s restaurant OBA. First, HCR failed to determine the source of the IAR’s investment in the restaurant. Second, HCR failed to monitor accounts related to the restaurant as recommended by the outside consultant. Advisers should consider including these extra steps in the outside business activity procedures when dealing with an elevated risk. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.
Inadequate Comp-Related Conflict Disclosures Continue. The Securities and Exchange Commission (“SEC”), in collaboration with the Securities Division of the Commonwealth of Massachusetts, recently fined Strategic Planning Group, Inc. (“SPG”), a registered investment adviser, and its principals, David Rourke and Jarrod Sherman, for failing to disclose their interest in a publicly-traded company that they were routinely recommending to clients. Sherman served as the firm’s Chief Compliance Officer.
In 2013, Rourke and Sherman began providing consulting services to Ecoark Holdings, Inc. (“Ecoark”). They were compensated with company stock for these services and had also invested personally invested in Ecoark stock. Meanwhile, Rourke and Sherman recommended that their clients invest in Ecoark, which clearly was in their financial best interest. However, SPG’s Form ADV Part 2A failed to disclose any conflict of interest relating to its principals and their relationship with Ecoark. SPG’s Form ADV Part 1 stated that SPG did not buy or sell securities that it also recommends to its advisory clients. SPG also failed to disclose the ‘Other Business Activities’ of each of Rourke and Sherman in their respective Form ADV Part 2B Brochure Supplements.
During the relevant period, SPG hired an outside compliance firm, which offered yet another chance for the conflict of interest to be uncovered! Rourke and Sherman evaded this opportunity by failing to provide the consultant any details regarding their connections with Ecoark. SPG’s Compliance Manual required pre-clearance for outside business activities, which neither Rourke nor Sherman bothered to get, violating firm policy. Ultimately the SEC ordered the firm to pay a penalty of $200,000. Both Rourke and Sherman were fined $75,000 apiece.
This case clearly illustrates the importance of documenting the analysis of outside business activities and related conflicts. The SEC’s recent FAQs Regarding Disclosure of Certain Financial Conflicts Related to Investment Adviser Compensation (and see above HCC article), proves that the SEC continues to consider this issue high risk and worthy of careful consideration by compliance departments. For investment advisers, there is no better time than the present to reevaluate and document your firm’s conflicts of interest to ensure that you are making full and fair disclosure to your clients. Contributed by Heather A. Eastgate, Senior Compliance Consultant.
- Hardin Releases New Webpage dedicated to Regulation Best Interest and Form CRS Relationship Summary. Bookmark Hardin’s latest analysis and check back regularly for a collection of articles on all things Reg BI and Form CRS.
- Ten Reasons to Hire an RIA Compliance Consulting Firm. Expert compliance help is available, but first read this article by Jaqi Hummel, Hardin Compliance Consulting Partner and Managing Director, for advice to help ensure that your consultant is working for you.
- K&L Gates and Dechert published these helpful summaries that dig into the nuts and bolts of the ETF Rule, including key takeaways and next steps. Also check out this article from Barron’s highlighting the practical aspects and excitement surrounding this latest regulatory development in the ETF space: Will the SEC’s New ETF Rule Benefit Investors?
- Baker McKenzie provides excellent insight on the SEC’s FAQs Regarding Disclosure of Certain Financial Conflicts Related to Investment Adviser Conflicts.
- The Race to Zero Commissions published in the Wall Street Journal and How Free Trading Threatens the RIA Business Model from Investment News both discuss Schwab’s announcement to join other brokers offering $0 commissions. While this seems like good news for clients, this move has implications for advisers ranging from best execution to mutual fund selling agreements, and one thing is certain – brokers will find other ways to recoup the revenue. It is an exciting trend in the industry’s evolution that Hardin will continue to monitor.
- Ropes & Gray introduced a new quarterly asset management newsletter, which focuses on regulatory developments in Europe. “Asset Management in Review – Quarterly European Regulatory Review, September 2019” is the inaugural issue.
- In recognition of Cybersecurity Awareness Month in October, check out Leading the Defense: 5 Practical Strategies to Respond to a Cybersecurity Incident.
- Cadwalader Cabinet Creates Resource for Muni Advisors. Find information regarding MSRB rules for municipal advisers on one convenient webpage.
- Disclosure Innovations in Advertising and Other Communications with the Public. FINRA Notice 19-31 provides broker-dealers with a Q&A to assist in complying with FINRA rules when communicating with customers using electronic media. This piece can be used to enhance existing procedures regarding electronic communications and provide additional training to your representatives.
- FINRA Warns Firms about E-mail Account Takeovers (“ATO”). In Information Notice 10/2/2019, FINRA alerts firms of recent member experiences with ATOs while using cloud-based E-mail platforms and provides helpful information regarding the prevention of and response to ATOs. This is a great training piece for your agents and advisors.
Filing Deadlines and To-Do List for November 2019
INVESTMENT MANAGERS AND HEDGE/PRIVATE FUND ADVISORS
- Annual Renewal Program for IARD System: The IARD Renewal Program facilitates the annual renewal of investment adviser (IA) firms and their IA representatives’ (IARs) registrations with jurisdictions/states. Preliminary renewal statements for the IARD system will be available on or around November 11, 2019, and will be accessible only through the E-Bill System. Renewal statements reflect the registration renewal fees and annual system processing fees for all IARs and state-registered IA firms. The deadline for the receipt of preliminary statement payment is December 16, 2019. Questions? Check out the FAQs, which will be updated with 2020 IARD Renewal Program details in the coming weeks.
- Form 13F: Form 13F quarterly filing for Q3 2019 is due for advisers within 45 days after the end of the calendar quarter. Due date is November 14, 2019.
- Blue Sky Filings (Form D): Advisers to private funds should review fund blue sky filings and determine whether any amended or new filings are necessary. Generally, most states require a notice filing (“blue sky filing”) within 15 days of the first sale of interests in a fund, but state laws vary. Did you know that Hardin Compliance Consulting offers a convenient and economical blue sky filing service to help firms manage this complicated monthly task? Learn more here and give us a call to discuss your needs further. Due November 15, 2019.
HEDGE FUND/PRIVATE FUND ADVISORS
- Form PF for Large Hedge Fund Advisers: Large hedge fund advisers must file Form PF within 60 days of each quarter end on the IARD system. Due date is November 29, 2019.
REGISTERED COMMODITY POOL OPERATORS/COMMODITY TRADING ADVISORS
- Form CTA-PR (September 30 Quarter End). Commodity Trading Advisors are required to file Form CTA-PR quarterly with the NFA. Due date is November 14, 2019
- Form CPO-PQR (September 30 Quarter End): Small, Mid-Sized and Large Commodity Pool Operators are required to file Form CPO-PQR quarterly with the NFA. The due date is November 29, 2019.
- FINRA 2020 Renewal Program Preparations: Consult FINRA Notice 19-35 to access important dates and information regarding the 2019 Renewal Program. Be sure to update your calendars and ensure your Flex-funding Account is sufficiently funded prior to the due dates.
- Rule 17a-5 Monthly and Fifth FOCUS Part II/IIA Filings: For the period ending October 31, 2019. For firms required to submit monthly FOCUS filings and those firms whose fiscal year-end is a date other than a calendar quarter. Due date November 26, 2019.
- Annual Audit Reports for Fiscal Year-End September 30, 2019: FINRA requires that member firms submit their annual audit reports in electronic form. Firms must also file the report at the regional office of the SEC in which the firm has its principal place of business and the SEC’s principal office in Washington, DC. Firms registered in Arizona, Hawaii, Louisiana, or New Hampshire may have additional filing requirements. Due date November 29, 2019.
- SIPC-7 Assessment: For firms with a Fiscal Year-End of September 30, 2019. SIPC members are required to file the SIPC-7 General Assessment Reconciliation Form together with the assessment owed (less any assessment paid with the SIPC-6) within 60 days after the Fiscal Year-End. Due date November 29, 2019.
- SIPC-3 Certification of Exclusion from Membership: For firms with a Fiscal Year-End of October 31, 2019, AND claiming an exclusion from SIPC Membership under Section 78ccc(a)(2)(A) of the Securities Investor Protection Act of 1970. This annual filing is due within 30 days of the beginning of each fiscal year. Due date November 30, 2019.
- SIPC-6 Assessment: For firms with a Fiscal Year-End of April 30, 2019. SIPC members are required to file for the first half of the fiscal year a SIPC-6 General Assessment Payment Form together with the assessment owed within 30 days after the period covered. Due date November 30, 2019.
Partner with Hardin Compliance
Have a compliance question or want an independent review of your compliance program? Hardin Compliance can help! Call us today at 1.724.935.6770, or visit our website at www.hardincompliance.com for more information.
Hardin Compliance Consulting provides links to other publicly-available legal and compliance websites for your convenience. These links have been selected because we believe they provide valuable information and guidance. The information in this e-newsletter is for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting of any kind.