Avoid An Era Of Judgement As Dodd-frank Countdown Begins
by Brendan Wilde,
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on the net: http://www.familyhealthguide.co.uk
UNITED KINGDOM, Dec 19 — The deadline for private fund managers and advisers to apply for Securities and Exchange Commission (“SEC”) registration under Dodd-Frank (The Dodd-Frank Wall Street Reform and Consumer Protection Act) is now closing in. As the countdown starts to 14 February 2012, when firms requiring registration must have submitted their application to meet the formal implementation deadline of 30 March, many non-US managers and advisers still appear confused to whether they require SEC registration, they cast an SEC footprint or they can escape the regulator’s inspection altogether.
Some risk making the fundamental error of doing nothing, wrongly thinking the many exemptions the SEC has created a way out of SEC oversight and responsibilities altogether.
Another potential error firms could make is to re-paper SEC requirements alongside existing FSA compliance arrangements, building parallel approaches to SEC and FSA compliance
T
he deadline for private fund managers and advisers to apply for Securities and Exchange Commission (“SEC”) registration under Dodd-Frank (The Dodd-Frank Wall Street Reform and Consumer Protection Act) is now closing in. As the countdown starts to 14 February 2012, when firms requiring registration must have submitted their application to meet the formal implementation deadline of 30 March, many non-US managers and advisers still appear confused to whether they require SEC registration, they cast an SEC footprint or they can escape the regulator’s inspection altogether.
Some risk making the fundamental error of doing nothing, wrongly thinking the many exemptions the SEC has created a way out of SEC oversight and responsibilities altogether. This is far from the real situation, especially when it comes to Exempt Reporting Advisor status.
Non-US fund managers will come under the SEC’s scope if they have more than $25m AUM attributable to US clients or if they have 15 or more US clients, irrespective of the related AUM, where US clients includes US investors in a fund (i.e. US individuals, corporations, trusts etc). Many non-US based asset managers meet these criteria; however full SEC registration applies only to managers that actually undertake activities in the US; those that do not have a place of business in the US, but otherwise meet the criteria, must report to the SEC as Exempt Reporting
Advisers (“ERA’s”) or make use of another exemption.
So, where does the confusion around ERA status arise? It appears to come from the way the SEC defines “exempt”, as this new regulatory status is not what it says on the tin. Why? Because whilst the SEC’s new regulatory category of ERA status provides an exemption from SEC registration, it also creates new obligations on non-US based managers.
The oxymoron of ERA status is that firms are exempt from SEC registration but subject to many of the same responsibilities of an SEC regulated firm;
a disclosure regime to obtain the information the SEC requires
record-keeping obligations under Rule 204-2
compliance with anti-fraud and pay to play provisions
the threat of external SEC examination.
Many firms will find themselves exempt in name alone.
Another potential error firms could make is to re-paper SEC requirements alongside existing FSA compliance arrangements, building parallel approaches to SEC and FSA compliance. Our analysis of the respective rules shows that there is more in common between the FSA and SEC than there are differences.
References
That’s why IMS have developed their own SEC and FSA compliance policies, procedures and monitoring programme.
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