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Advisers Act Anti-Fraud Rules: Custody, Political Contributions, Solicitors and Proxy Voting Requirements
This is an in-person course being taught as part of the Scottsdale Investment Adviser Compliance Symposium.
The SEC’s anti-fraud rules pursuant to Section 206 of the Investment Advisers Act of 1940 lay the regulatory foundation of the adviser’s relationship with its clients. Rules promulgated under Section 206 prohibit an adviser from defrauding, deceiving or manipulating any client or prospective client in its business practices.
In addition to the general anti-fraud prohibition of Section 206, Rules 206(4)-2, 206(4)-3, 206(4)-5 and 206(4)-6 under the Advisers Act regulate, respectively: custody or possession of client funds or securities; the payment of fees by advisers to third parties for client solicitations; political contributions by certain investment advisers, and proxy voting. Each of these rules and how they may be effectively integrated into an investment adviser’s compliance program and disclosures will be examined in detail during this session.
The SEC’s most recent revisions to the custody rule (Rule 206(4)-2) continue to generate many questions and concerns, and some confusion, among investment advisers. This course will explore the many facets of the rule, provide details regarding the definition of custody and examples of custody and delineate best practices for complying with this formidable and important rule. The course will also address the SEC’s guidance on custody via first- and third-party transfers of client assets.
Among the many regulatory changes the SEC has made, Rule 206(4)-5, known better as the “pay to play” rule, is designed to stop investment advisers from making campaign contributions with the hope of winning contracts to manage government investment accounts or public pension plan assets. Advisers that violate this rule may not be compensated for providing advisory services to local and state government clients for two years. This potentially draconian sanction should be sufficient cause for advisers to be completely conversant with the inner workings of the rule and how to protect the firm from violations, even if the firm is not presently subject to its provisions.
After attending this course, attendees should be able to:
- Analyze the custody rule (including the most recent guidance) and employ best practices to meet your firm’s practices
- Be conversant with the pay-to-play rule to avoid illegal and unethical consequences that affect investors and the firm’s sustainability
- Integrate solicitor and proxy voting rule requirements with the firm’s compliance program to help establish full and fair disclosure
- Pinpoint the SEC areas of concern that should drive required written compliance policies and procedures
- Monitor regulatory changes as they occur
For Whom: Designed to increase the professional competence of investment adviser professionals with legal, compliance and management responsibilities.
Suggested Skill Level: Intermediate
Instructional Method: Group Internet-Based and Group Live
Pre-requisites for participation: No prerequisites are required. However, attendees can benefit by reviewing the Investment Advisers Act of 1940, especially Section 206 and Rules 206(4)-2, 206(4)-3, 206(4)-5 and 206(4)-6.
Advance Preparation: None
NRS Continuing Education Guide
Recommended CPE Credit: 2 in the Regulatory Ethics field of study
Recommended IACCP® CE Credit: 2
Recommended CA MCLE Credit: 2
Recommended CFP Credit: 2