As most of you have heard, on March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit issued an opinion vacating, in its entirety, the Department of Labor’s amendment to regulations defining “investment advice” for the purpose of determining who is a fiduciary (the “DOL Fiduciary Rule”) on the basis that the Department violated the Administrative Procedures Act and exceeded its regulatory authority.  The Department had the right to request an en banc review of the decision by the full Fifth Circuit panel within 45 days of the date of the decision and to appeal the decision to the U.S. Supreme Court within 90 days after the date of the decision.  The Department of Labor did not file the request for review or an appeal to the Supreme Court within such deadlines.  On June 21, 2018, the Fifth Circuit issued the mandate implementing its decision to vacate the DOL Fiduciary Rule. Continue Reading The Department of Labor Fiduciary Rule: Lots of Work, Lots of Drama, Lots of Uncertainty

What is the GDPR?

Even if an investment adviser or its private funds have no presence in the European Union (EU), it may still need to be concerned about EU data protection laws, in particular the new European General Data Protection Regulation (EU) 2016/679 (the “GDPR”).  The GDPR came into force on May 25, 2018, and replaced the prior data protection law, the EU Directive 95/46/EC.  The GDPR introduces significant changes from the prior EU Directive, including new jurisdictional scope that makes the GDPR apply not only to businesses established in the EU but also to any non-EU businesses that offer goods or services to individuals within the EU or that monitor individuals in the EU.  This means that investment advisers and funds with investors in the EU may potentially be subject to the GDPR, which is significant because of the other changes brought about by the GDPR, including a maximum fine for non-compliance of the higher of 4 percent of an enterprise’s worldwide turnover or €20 million per infringement, a 72-hour data breach notification requirement and new data subject rights (including the “right to be forgotten”). (For more information about these changes, please see our website page on the GDPR.)

Continue Reading GDPR: Practical Considerations for Investment Advisers and Their Private Funds

The Omnibus Act signed in March by President Trump made many changes and technical corrections to existing tax laws, including corrections to the 2015 PATH Act that introduced the new concept of qualified foreign pension funds (QFPFs). QFPF status is beneficial in that it entitles a foreign pension to a complete exemption from the so-called FIRPTA rules, including withholding taxes that generally apply to REIT capital gain dividends attributable to sales of U.S. real estate.  Because many U.S. real estate funds employ REIT structures, QFPF status is attractive for foreign pensions that invest in those funds. Continue Reading Changes to Qualified Pension Fund Rules Provide Answers, Questions

In the past 2 years, we have seen a clear uptick in desk exams by the SEC’s investment adviser examination staff. These “desk” exams consist of the staff sending a preliminary document request (the same as they would if they intended to arrive in person), reviewing the materials presented, and then typically sending additional requests. Sometimes requests from the staff can reach double digits depending upon what information is previously submitted. Following that production, and any subsequent follow-up phone calls, the staff typically issues a deficiency letter and the registrant responds.

There are pros and cons to this kind of exam. Continue Reading SEC Desk Exams: Up Close But Not Personal

The California Legislature is considering amendments to the California Financing Law (the “CFL”), which requires most non-bank commercial lenders active in California to be licensed by the State’s Department of Business Oversight.  Senator Steve Glazer proposed new measures earlier this year that would require CFL lenders to provide standardized price disclosures to small-business borrowers (currently defined as loans of $500,000 or less).   The bill would apply to both closed-end and open-end commercial loans, as well as purchases of accounts receivable.  Although regulated banks are exempt, companies that have agreements with banks to fund such loans would not be exempt unless they qualify for their own exemption.  The Senate already adopted the bill, and it is pending a floor vote by the Assembly following clearance by its Banking and Finance Committee on June 26, 2018.

Continue Reading Proposal to Require New Disclosures by California Finance Lenders

Many alternative funds in recent years have included environmental, social or governance (“ESG”) considerations as part of their investment strategies. On April 23, 2018, the U.S. Department of Labor (“DOL”) issued new guidance under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) on the extent to which a plan fiduciary can consider ESG factors when making investment decisions and the use of plan assets in exercising shareholder rights. Continue Reading New DOL Guidance May Cause ERISA Plans to Be Wary of Environmental, Social and Governance (ESG) Themed Investment Options