SEC rule upends process for shareholder reports (Fund Directions)

The SEC’s rule requiring tailored shareholder reports for mutual funds and ETFs has created a number of extra steps for advisers to these funds. Fund CCOs are finding the rule’s requirement to make shareholder reports more useful for retail investors has created more compliance burdens than expected while increasing costs. Difficulties arise from the amount of effort necessary to rewrite and redesign reports to comply with the concise and visually engaging format defined in the…

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ComplianceAlert

SEC’s Marketing Exams Reveal Compliance Shortcomings

On April 17, 2024, the SEC’s Division of Examinations issued a Risk Alert (the “Alert”) on its findings from adviser examinations conducted since the revised Rule 206(4)-1 (the “Marketing Rule”) compliance date. Firms were required to be in compliance as of November 4, 2022, and the SEC has actively been examining advisers for compliance since then. Several targeted exams or “sweeps” were conducted covering topics such as the substantiation of material facts in advertisements, use…

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Lack of uniformity throws confusion into ESG regs (IGNITES)

Sets of European regulatory measures dictating how fund managers name ESG funds are causing confusion in determining what guidelines to follow. Regulations proposed by the European Securities and Market Authority (ESMA) and those of the Sustainable Finance Disclosure Regulation (SFDR) lack consistency and flexibility for fund ESG criteria. The regulations would directly impact US fund managers distributing products in the European Union. FrontLine Compliance Founder and President Amy Lynch states that the lack of uniformity…

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Violations of Marketing Rule adding up (AdvisorHub)

There are new enforcement actions against investment advisers for non-compliance with the SEC’s Marketing Rule. In these cases, the SEC focused on the advertisement of hypothetical performance on the firms’ websites that violated the Rule, as well as other false or misleading statements made. Amy Lynch, FrontLine’s Founder and President, has the exclusive comments in the AdvisorHub story detailing the cases brought by the SEC. She explains why investment advisers need to be extra cautious…

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Auditors of funds face scrutiny over conflicts (IGNITES)

These days audit independence rules are posing even greater challenges for fund accounting firms. With only a few large firms handling the majority of fund audits, maintaining full independence can be tripped up when other services occur at the same time. One firm, PwC, was recently fined by the Public Company Accounting Oversight Board (PCAOB) for violating independence rules by auditing a technology company while also seeking a joint venture with it. With exclusive comments,…

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