Purpose This paper aims to provide an overview of recent US Securities and Exchange Commission (SEC) Division of Investment Management staff (“Staff”) guidance related to investment funds registered under the Investment Company Act of 1940 that seeks to provide exposure to cryptocurrencies or cryptocurrency-related products. Design/methodology/approach This paper provides analysis regarding the Staff’s view on registered investment companies that intend to invest in cryptocurrencies or cryptocurrency-related products, including an overview of the questions posed by the Staff with respect to registered investment companies that seek to hold cryptocurrencies or cryptocurrency-related products, which are divided into five categories: valuation, liquidity, custody, arbitrage (for exchange-traded funds) and potential manipulation and other risks. Findings The Staff is asking for additional information from industry participants to fully analyze and evaluate registered investment companies that seek to invest in cryptocurrencies. Practical implications The industry should continue to provide information to the Staff with the short-term goal of fostering an open dialogue and with the long-term goal of launching a registered investment company that invests in cryptocurrencies or cryptocurrency-related products. Originality/value This paper provides practical guidance from experienced lawyers of the Investment Company Act and Securities Act.
Purpose To analyze and identify the key findings from the April 8, 2020, U.S. Securities and Exchange Commission’s (the “SEC”) recently approved rule amendments (“Adopted Rules”) extended to business development companies (“BDCs”) and registered closed-end funds and an Exemptive Order providing regulatory flexibility to BDCs. Design/methodology/approach Discusses the key takeaways and implications from the Adopted Rules and Exemptive Order. Findings The Adopted Rules provide BDCs and registered closed-end funds some of the more efficient registration, reporting, offering, and communication requirements currently applicable to operating companies. The Exemptive Order provides BDCs additional flexibility with respect to (1) the issuance and sale of senior securities and (2) the participation in certain joint transactions. Practical implications Firms and their representatives should heed the trends in both the substantial restitution FINRA is ordering and the related enforcement issues in the cases FINRA has brought. Originality/value Expert analysis and guidance from experienced asset management lawyers.
Purpose This article provides an overview of the US Securities and Exchange Commission’s (SEC) recent approval of a package of rulemakings and interpretations designed to enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers. Design/Methodology/Approach The article provides legal analysis for and historical context of the requirements of the SEC’s adopted rules, Regulation Best Interest and Form CRS in addition to the two separate interpretations under the Investment Advisers Act of 1940, the Standard of Conduct for Investment Advisers; and the Broker-Dealer Exclusion from the Definition of Investment Adviser. Findings The SEC’s adopted regulatory package does not adopt a uniform fiduciary standard for broker-dealers and investment advisers but instead promulgates legal requirements and mandated disclosures in order to conform to the SEC’s perceived expectations for reasonable investors. Practical implications Investment advisers and broker-dealers should consult with their legal counsel in assessing how and to what extent the new regulatory package is applicable to them. Originality/Value This article provides practical guidance from lawyers who have extensive experience with the Investment Company Act, Investment Advisers Act, and the Securities Acts.
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