UpFront » August 2023

The SEC charged an investment adviser under the former cash solicitation rule for failing to provide required disclosures and documentation. Although the old cash solicitation rule was weaved into the new Marketing Rule, other cases based on the old rule are still in the pipeline at the SEC, explains Amy Lynch, FrontLine’s Founder and President. The recent case against Fundrise Advisors involved violations of the rule that resulted from the firm paying social media influencers…

The SEC’s new private fund rule has been adopted and advisers to private funds will face a host of new requirements. Despite softening some aspects of the rule in its final form, several significant parts of the rulemaking will mandate changes to the traditional practices of managers. Prohibitions will be required on preferential terms, usually found in side letters for negotiating special agreements with certain investors. There will also be a new requirement to provide…

With its first enforcement case based on the new Marketing Rule, the SEC wants firms to take note of how they use hypotheticals in their marketing and advertising. In its case against a robo-advisor, the SEC warned that the use of hypothetical performance metrics must have proper disclosures and comply with the rule’s requirements designed to prevent fraud. With the lead comments, FrontLine’s Founder and President Amy Lynch states that while the findings in the…

A Congressional House committee is pursuing details on investments by numerous mutual funds and ETFs in certain “flagged” Chinese companies. The 27 Chinese companies named are considered national security risks and are acting directly against the interests of the US, according to the chairs of the House Select Committee on the Chinese Communist Party. The select committee is seeking information on the investment process for certain funds offered by at least one large money manager,…

A third-party fund administrator to a hedge fund was recently charged by the SEC for failing in its gatekeeper responsibilities. The hedge fund was previously charged for misappropriation and misuse of investors’ funds when it incurred significant losses. During the fraudulent activity, the fund admin calculated the hedge fund’s net asset value and sent account statements to investors that did not recognize the losses. With the story’s lead comments, Amy Lynch, FrontLine’s Founder and President,…