Kaal claims by topic: securities-law

308 atomic, individually citable claims from the published work of Wulf A. Kaal tagged securities-law.

Broker quotes are an unreliable fallback for valuation: they can be hard to obtain and can vary by 20 to 30 percent for instruments such as mortgage-backed securities, which makes accurate valuation of those securities difficult. 2009
State de minimis investment adviser registration exemptions can be an attractive alternative to federal law for hedge fund managers, especially in a fund's start-up phase, because state registration would require an ADV filing and significant transaction costs the manager wants to avoid. 2009
State Blue Sky investment adviser registration exemptions are not by themselves sufficient to explain retailization or to justify the absence of data on it; they only indicate theoretically how previously unqualified investors could gain access to hedge funds. 2009
Raising the Regulation D numerical tests by adding an investable assets requirement would probably not address how to remedy investors' lack of understanding of hard-to-value assets. 2009
Mandatory risk disclosure to the SEC would probably fail on staffing grounds, because professionals capable of understanding hedge fund risk data would be disincentivized to use that knowledge for supervision rather than economic gain, finding the private sector far more lucrative. 2009
Requiring hedge funds to supply risk and valuation data in a simplified format would in fact impose a significant burden on the industry, since simplification requirements would raise transaction costs, require pre-screening, and possibly additional staff. 2009
Recent SEC proposals to toughen the numerical wealth requirements for hedge fund investing fail, because they do not ascertain the appropriate level of sophistication or adequate understanding of highly complex financial instruments. 2009
In securities regulation the SEC has continuously expanded its extraterritorial reach, and it has done so with strong support from the judiciary, most notably the Second Circuit Court of Appeals. 2010
Allowing foreign plaintiffs to sue foreign defendants in US courts over securities purchased and sold in foreign countries would turn the United States into the global arbiter of securities fraud allegations. 2010
Because many countries choose to combat securities fraud through government enforcement rather than private litigation, the United States should respect the right of other countries to regulate their own markets. 2010
Regardless of how the Supreme Court rules in Morrison v. NAB, Congress could overrule the holding, because the question presented is one of statutory construction and Congress may amend a statute whose interpretation it dislikes. 2010
Under section 7216 US law could apply to EU companies accused of conduct violating US securities laws even if those companies have no securities traded in the United States. 2010
Relative to the total number of US securities fraud and securities class action cases, foreign cubed cases are still relatively rare, although there was a substantial increase in them in 2008. 2010
Banks, brokers and other financial intermediaries figure in a large proportion of US securities fraud cases because they often have the deep pockets that plaintiffs' lawyers are looking for. 2010
If section 7216 extends US securities fraud provisions to non-US securities transactions, European financial intermediaries could become the dominant target for plaintiffs' attorneys. 2010
Regardless of the relative merits of securities regulation in the United States and Europe, European investors are most likely to benefit if Europe addresses the problem of investor protection itself rather than through US courts. 2010
Exporting and imposing rules through extraterritorial reach could be counterproductive not only for US diplomacy but also for international cooperation in combating securities fraud, whereas cooperative mutual adjustment between the US and the EU is the better course. 2010
If national securities regulators are unable or unwilling to cooperate with each other, there is likely to be more securities fraud. 2010
The EU's Market Abuse, Transparency, Markets in Financial Instruments and Prospectus Directives improved European securities regulation but still do not mandate coherent and comprehensive disclosure, leaving issuers free to disclose in disparate ways. 2010
The more a country leads in financial innovation, the more exposed its disclosure regime is to misrepresentation and fraud, which makes the U.S. regime more vulnerable than Germany's despite being formally stricter. 2010
The United States compensates for its lenient corporate law treatment of risk taking under the business judgment rule with a comparatively strict disclosure regime and a robust securities class action litigation regime; substantive corporate law pushes the monitoring requirement toward leniency while securities enforcement pushes it back toward stringency. 2010
In the United States the duty to disclose risk indirectly generates risk monitoring, because directors who know they are responsible for disclosing risk have reason to monitor it even though corporate law imposes no explicit duty to monitor. 2010
Delaware courts have not explicitly imposed a duty to monitor risk, but that omission may be moot: because failing to disclose risk violates federal securities law, unmonitored risk is likely to become undisclosed risk and therefore actionable. 2010
Because contingent capital is a hybrid instrument that pays fixed returns while bearing equity like risk, it may receive low or no ratings, attract a much smaller investor base, and carry higher funding costs. 2011
If regulators lack the resources to protect against systemic risk, hedge fund regulation could be futile. 2011
Even if hedge fund investing does have systemic implications, systemic risk is multifaceted enough that addressing it could require more than one regulator in a single jurisdiction, so the SEC alone may be unable to accomplish the task. 2011
The SEC would be better advised to interpret the rulemaking authority it received from Congress than to increase requirements on hedge funds in order to address concerns over potential systemic risk. 2011
A lack of regulatory guidance creates legal uncertainty, and legal uncertainty in turn generates transaction costs. 2011
Registering hedge funds with regulators and requiring disclosure of pertinent information could help minimize the moral hazard, social externalities, and systemic risk generated by the hedge fund industry. 2011
Because Morrison ties Section 10(b) to the location of the securities transaction rather than to the place where the deception originated, the logic of the holding implies that the SEC likewise has no enforcement rights over securities transactions occurring outside the United States. 2011
Before Morrison, U.S. courts refused to adopt a bright line rule for the extraterritorial reach of Section 10(b), and the resulting case by case conduct and effects analysis was applied inconsistently. 2011
Permitting Section 10(b) suits over dually listed securities traded outside the United States would undermine Morrison's own policy rationale, because it would interfere with the laws of other countries and turn the United States into a haven for plaintiffs' lawyers suing over foreign exchange purchases. 2011
If Section 10(b) were held to reach swap agreements based on stocks traded outside the United States, plaintiffs' attorneys would use that holding as precedent to limit Morrison broadly, and other courts might create a general exception for U.S. derivative contracts referencing non-U.S. securities. 2011
Section 929P(b) may not have been necessary, because Section 10(b) already gives the SEC enforcement authority whenever a single U.S. securities transaction is affected by the alleged fraud. 2011
Foreign-cubed rulings such as Morrison determined the size of the plaintiff class in private suits, but were irrelevant to the SEC's ability to enforce wherever a U.S. securities transaction is connected to the alleged fraud. 2011
Read as more than a jurisdictional grant, the Dodd-Frank provision becomes an open-ended statute rather than the targeted authority the SEC already held under Section 10(b) and Section 30, and it is undesirable for the SEC to use such powers unilaterally without consulting foreign regulators and the U.S. foreign policy establishment. 2011
Section 929P(b) risks complications where the SEC proceeds unilaterally in situations in which coordinated enforcement with foreign regulators would be more effective, for example insider trading cases involving exchanges whose home regimes do not recognize comparable insider trading rules. 2011
Expanded SEC enforcement under the Dodd-Frank provision runs a serious risk of being perceived as an encroachment on the corporate governance of foreign companies. 2011
Overuse of the Dodd-Frank extraterritorial enforcement provision by the SEC or the DOJ could deter foreign companies from having U.S. operations. 2011
Changing national rules in a spirit of cooperation among states and regulators is more productive for preventing securities fraud than imposing U.S. rules on foreign nations through extraterritorial imperialism. 2011
The SEC study is very unlikely to produce an extraterritorial extension of private rights of action so long as Republicans control the House of Representatives. 2011
A clear and restrained U.S. approach to extraterritoriality will bring predictability to global securities markets and avoid a downturn in international economic cooperation. 2011
After Morrison, parties to securities transactions can be confident that U.S. law will not apply in private suits so long as their transactions are definitively located outside the United States, a certainty that did not exist under the prior conduct and effects tests. 2012
The authors stipulate that Choice of Law Competition is a subcategory of jurisdictional competition in which jurisdictions compete on substantive legal rules to attract contracting parties ex ante, with adjudication of disputes a secondary consideration. 2012
The authors stipulate that jurisdictions which take steps only to expand the jurisdiction of their courts as venues for litigation, rather than to attract transactions, engage in Forum Competition. 2012
Because Morrison limits U.S. securities law to transactions inside the United States, plaintiffs' attorneys are predicted to look increasingly to European countries and other venues in which to file securities class actions and similar suits. 2012
Canada could engage in Forum Competition with the United States if its courts allow suits under Canadian law over all transactions in securities listed for trading in Canada, even transactions executed in the United States, assembling a class of Canadian and U.S. investors that Morrison forbids in U.S. courts. 2012
Morrison's transactional test could prove relatively short lived because it is rooted in geography while an increasing number of securities transactions defy geographical boundaries. 2012
The SEC, rather than the courts or Congress, is the institution positioned to implement a choice of law regime for securities transactions, through rulemaking. 2012
Although many jurisdictions may protect investors less well than the United States, it is not at all certain that U.S. law does a better job of deterring securities fraud. 2012
Freedom from supervision and disclosure obligations was functional rather than incidental for hedge funds: it enabled successful fund launches, helped generate higher returns, and attracted investors, which is why manager registration is contested. 2012
The immediate deregistration of hedge fund advisers following Goldstein v. SEC is revealed-preference evidence of the industry's opposition to registration and disclosure requirements, not merely a technical response to the vacatur. 2012
Before Dodd-Frank the perimeter of hedge fund regulation was set by SEC no-action letters on client counting and by courts that gave very limited and sometimes contradictory guidance, so compliance rested on an unstable and uncertain base rather than on rules. 2012
Losing the private adviser exemption imposed a bundle of obligations, disclosure duties and code of ethics requirements on top of inspections and record keeping, and the direct consequence was significantly higher legal fees for hedge funds. 2012
The SEC's 2004 attempt to reach hedge fund advisers failed as a matter of administrative law: in July 2006 the D.C. Circuit vacated the hedge fund rule in Goldstein v. SEC as an instance of arbitrary rulemaking, because the SEC had no authority to define a term the Advisers Act left undefined. 2012
Under the Private Fund Investment Advisers Registration Act, hedge funds with more than $150 million in assets under management must register as investment advisers and disclose information about their trades and portfolios to the SEC, making assets under management the operative trigger for the regime. 2012
Because Title IV's registration exemptions are broad enough to threaten the rule they qualify, the Dodd-Frank Act deliberately gives the SEC rulemaking authority to keep the exemptions from swallowing the rules. 2012
Revised Form ADV requires advisers to report gross rather than net regulatory assets under management and narrows their discretion to include or exclude assets, so the registration threshold becomes harder to manage down through reporting choices. 2012
This Article reports the first survey study of hedge fund advisers conducted after the SEC's registration effective date, drawing on a population of 1267 private fund advisers who registered before March 30, 2012. 2012
Managers who avoided registration by restructuring, for example by changing organizational form or assets under management, are practically and administratively very difficult to identify, so the population that adapted away from the rule remains largely unobservable to researchers. 2012
A majority of surveyed advisers, 72.09%, do not plan any strategic response to the Dodd-Frank Act registration and reporting requirements. 2012
Although some regulators use the term dynamic regulation in the context of SEC exemptive powers, the literature on financial regulation mostly ignores dynamic elements for regulation. 2013
Systemic risk reports filed by registered investment advisers are confidential and are not publicly available, so any effect of these filings on bankruptcy practice depends on the prospect of disclosure rather than on actual public access. 2013
Because the SEC is still working out the appropriate use of Form PF and still improving the form and its instructions, its enforcement division is unlikely to open investigations into alleged misreporting or failures to report. 2013
Hedge fund adviser registration and disclosure requirements under Title IV and the SEC implementation rules were instituted for the opposite reason: to stop hedge funds from operating in the shadows of financial markets. 2013
Exemption from registration under the IAA does not exempt an adviser from the antifraud provision, which reaches both negligent misstatements and misstatements made with intent to defraud. 2013
Investment adviser status under the IAA requires that the advice concern a security; without a security in the dealings between adviser and client the statutory definition does not apply. 2013
Providing investment advice without compensation makes a person less likely to fall within the IAA definition of investment adviser, but the SEC construes compensation for advisory services broadly, which narrows the practical value of that limit. 2013
A broker dealer who holds himself or herself out as a financial planner does not thereby trigger registration obligations under the IAA. 2013
Mid-sized investment advisers, those with between $25 and $100 million AUM, fall to state authorities rather than the SEC, though they may still have to register with the state agency where their principal place of business is located. 2013
Advisers with more than $150 million in regulatory assets under management are defined as large private fund advisers and must register with the SEC. 2013
Registering large private fund advisers works by increasing the volume of data available to regulators, which in turn may help protect against systemic risk. 2013
The pre Dodd-Frank exemption for advisers with fewer than fifteen clients failed as a regulatory boundary because most hedge fund advisers deliberately designed their operations and legal structures to fit within it and thereby escape SEC registration and supervision. 2013
The foreign private adviser exemption that replaced the fewer than fifteen clients exemption is conjunctive: it requires fewer than fifteen U.S. clients and investors, no U.S. place of business, no holding out to the U.S. public, and less than $25 million AUM attributable to U.S. clients and investors. 2013
The Title IV threshold registration requirement pulls a majority of the hedge fund advisers who had previously relied on the fewer than fifteen clients exemption into SEC registration. 2013
Registration is the gateway that makes data collection and enhanced disclosure by hedge fund managers possible, and the Dodd-Frank Act raised disclosure requirements for registered advisers specifically to address systemic risk concerns. 2013
The division of labor in adviser regulation dates to the 1996 National Securities Markets Improvement Act, under which Congress assigned larger investment advisers to the SEC and smaller advisers to the states. 2013
An adviser that would otherwise have to register in fifteen or more states because of the $100 million AUM threshold may register directly with the SEC instead, so multi-state registration burden operates as an escape hatch to federal oversight. 2013
Investment advisers that provide advice exclusively through the Internet may register with the SEC regardless of how much they have under management, so the delivery channel rather than size determines the forum. 2013
Excluding the primary residence from the net-worth test removed a large population from qualified client status: SEC estimates suggest roughly 1.3 million households no longer qualify under the revised test. 2013
A person who provides investment advice over the Internet escapes registration only if the advice is impersonal; personalized advice delivered through chat rooms and websites can trigger the registration requirement. 2013
The passive electronic bulletin board exemption holds only so long as the provider gives no advice on the merits of any particular trade and stays out of securities purchases and sale negotiations. 2013
The SEC mandated written compliance policies and procedures for investment advisers as a reaction to mutual fund industry scandals and in an effort to curb IAA violations. 2013
Title IV of the Dodd-Frank Act represents the most significant regulatory change in the history of the hedge fund industry, imposing mandatory adviser registration and disclosure for the first time since the industry's inception. 2014
The hedge fund adviser registration requirement under the Dodd-Frank Act creates a discontinuity in hedge fund returns at the registration effective date of March 30, 2012. 2014
Hedge fund adviser registration under the Dodd-Frank Act positively affects adviser returns in March 2012, but the effect does not persist in the months after the registration effective date. 2014
The authors find no empirical evidence that hedge fund adviser registration under the Dodd-Frank Act negatively affects hedge fund performance, contradicting the industry's claims. 2014
The largest number of strategic funds moving their AUM below $150 million occurs in the April to May 2012 window, which suggests a lagged response to the March 30, 2012 registration effective date. 2014
In the period close to and following the registration effective date, fund size has a positive relationship with fund performance, with positive beta coefficients in March through May and July 2012. 2014
Under the sharp regression discontinuity design, the estimated treatment coefficient exceeds one only in March 2012, at 1.104 with a p-value of 0.015, and is close to zero and insignificant in every other month. 2014
The March 2012 discontinuity effect is not persistent and is completely absorbed in the months following the registration effective date for private fund advisers. 2014
Hedge fund advisers with very small AUM likely did not respond to the Dodd-Frank Act registration requirement because they anticipated that disclosure would remain voluntary for them. 2014
The mandatory registration requirement of the Dodd-Frank Act affects the hedge fund industry asymmetrically, with advisers whose AUM floats around the $150 million threshold showing evidence of strategic AUM reduction. 2014
The Form PF filing obligation is triggered by a bright line asset threshold: every registered investment adviser with more than $150 million in assets under management attributable to private funds at the end of its most recently completed fiscal year must file. 2014
If advisers' allegations that Form PF disclosures cannot be answered other than by guessing are correct, then the SEC's capacity to evaluate the data is compromised, and regulation built on incomplete and misleading data will itself be questionable. 2014
Measured against this study's survey data, the SEC marginally overestimated the cost of the initial Form PF filing for both annually filing smaller advisers and quarterly filing larger advisers. 2014
For quarterly filing larger private fund advisers, the SEC substantially overestimated the cost of subsequent Form PF filings; the survey's estimate is roughly half of what the SEC projected. 2014
The SEC's error runs in the opposite direction for small advisers on recurring filings: the agency marginally underestimated the cost of subsequent Form PF filings for annually filing smaller private fund advisers. 2014
The SEC's time burden estimates for Form PF are miscalibrated in the same direction as its cost estimates for large filers: the study's data suggest the agency overestimates the hours larger private fund advisers need. 2014
Asked what the SEC should fix first, respondents named the burdensome nature and the ambiguity of Form PF as the most pressing issues, not the substance of what is disclosed. 2014
Complaints about Form PF's ambiguity coexist with acceptance of its substance: the same majority that flagged ambiguity as the most pressing issue also considered their existing reporting systems adequate and agreed with the SEC's definitions and instructions. 2014
Form PF's definition of leverage is overinclusive: respondents reported that it is inappropriately constructed and sweeps in funds that use neither leverage nor derivative securities. 2014
Contrary to the industry's public complaints about SEC support, a majority of respondents rated the best level of SEC staff guidance available for completing Form PF as sufficient or good. 2014
Where SEC guidance failed, the failure was localized: respondents who found guidance inadequate pointed predominantly to Form PF Section 1c, Item B, which concerns information about the reporting fund. 2014
SEC flexibility in answering Form PF questions is valued by filers: 72.92 percent of respondents said the flexibility the SEC provides is helpful. 2014
SEC flexibility helps filers through a specific mechanism: it authorizes advisers to apply their own internal methodologies when interpreting and answering Form PF questions and to state their own assumptions, rather than forcing them onto an unfamiliar measurement basis. 2014
Regulatory flexibility can backfire: a category of respondents reported that the flexibility the SEC provides is not useful precisely because it is unclear and generates confusion. 2014
Most of the identified problems with Form PF are self correcting over time, as the SEC issues additional and improved guidance or revises the core questions and definitions that filers flagged as problematic. 2014
The new regulatory framework for private funds in the United States requires hedge fund manager registration in combination with enhanced disclosure of sensitive proprietary information, a combination that marks a shift in how private funds are regulated. 2014
Based on these findings, adviser size may not matter as much for policy adjustments and SEC rule making as the hedge fund industry and its representatives have claimed. 2014
Title IV mandates hedge fund adviser registration in order to increase record keeping and disclosure, requiring advisers above the statutory AUM threshold to register as investment advisers and to disclose information about their trades and portfolios to the SEC. 2014
Prior work shows that registration and the increased compliance requirements under the Dodd-Frank Act only marginally increase the cost structure of hedge funds. 2014
The analysis uses data from a 2012 survey study of a population of 1,264 private fund advisers registered before the SEC's registration effective date for private funds of March 30, 2012. 2014
The clear majority of respondents prefer an asset size above the $150 million AUM registration threshold after the enactment of Title IV, indicating that advisers respond to the threshold by growing past it rather than staying below it. 2014
Even though the private fund industry broadly accepted Form PF, the form's core problems for the SEC are the ambiguity of several questions, advisers' disagreement with the definition of funds, and correspondingly insufficient SEC guidance. 2014
Form PF data was tailored primarily for the FSOC rather than for the SEC's own purposes, a design choice that shaped the level of reporting required. 2014
The SEC itself reports that the consistency of investment advisers' responses on Form PF is not ensured and may be questionable. 2014
Advisers take different approaches and make different assumptions when completing Form PF, which the SEC identifies as a further challenge to the usability of the data. 2014
The SEC's initial analysis of Form PF data turned up anomalies attributed to filer error, which prompted SEC concern about the quality of the information private fund advisers report. 2014
Expanding the uses of Form PF data remains difficult so long as there is insufficient confidence in the accuracy of what advisers report, notwithstanding SEC efforts to improve quality through interpretive FAQs and curative amendments. 2014
The substantive defects in Form PF data are the ambiguity of several key questions, inaccurate definitions paired with insufficient SEC guidance, and difficulty aggregating the required information. 2014
Confluence between mutual and hedge funds runs in two directions at once: mutual funds are converging on hedge funds along the dimension of investment strategy, while hedge funds are converging on mutual funds along the dimension of regulation. 2016
Mandatory registration and increased disclosure for certain hedge fund advisers under the Dodd-Frank Act place hedge fund advisers under registration and reporting obligations similar to those long borne by mutual fund advisers. 2016
For the first time in the industry's history, the Dodd-Frank Act required most hedge fund advisers to register with the SEC, mandating disclosure of information previously treated as proprietary and private. 2016
Once a hedge fund adviser is already required to register with the SEC, the marginal regulatory burden of also running a mutual fund or retail alternative fund is small, which gives registered advisers an incentive to enter the registered fund space. 2016
Confluence is not one directional: the SEC may counteract some confluence drivers, for instance by curtailing derivative trading and short selling used by retail alternative mutual funds to mimic hedge funds. 2016
Confluence of mutual and hedge funds contributes to the gradual erosion of the public/private distinction that structures federal securities regulation. 2016
The evidence assembled here suggests the traditional public/private distinction between mutual and hedge funds is eroding faster than previously anticipated. 2016
Proposed SEC Rule 18f-4 is a potential threat to the alternative mutual fund business model, because its risk based portfolio limit could undermine managers' ability to implement their investment strategies using derivatives. 2016
Title IV exempts private fund advisers with less than $150 million assets under management from registration, and requires the SEC to weigh investment strategy, size, and governance in determining the systemic risk of private funds. 2016
Fund size shows a negative relationship with performance in the months before the March 2012 registration effective date and a positive relationship afterward, with beta coefficients negative in January to March 2012 and July 2012 and positive in April and May 2012. 2016
Around the registration effective date, whether a fund's AUM sits above or below the $150 million regulatory threshold does not play a significant role in explaining hedge fund returns for the entire sample. 2016
Title IV of the Dodd-Frank Act addresses alleged hedge fund systemic risk through an information strategy rather than a substantive one: it authorized the SEC to require registration and enhanced disclosure from private fund advisers and to facilitate data collection for assessing systemic risk. 2016
Because a material omission or misstatement in Form ADV Part 2A can support a serious securities law charge, private fund managers have an incentive to keep the narrative language of that required disclosure as high level, summary, and non committal as possible. 2016
Form ADV Part II filings jumped from 3,024 in 2010 to 21,685 in 2011, and that jump was accompanied by a corresponding increase both in the number of filings mentioning investor due diligence and in the due diligence counts within those filings. 2016
While some courts found that a complete lack of investor due diligence can amount to securities fraud or breach of contract, and that lacking due diligence can breach fiduciary duties, the majority of courts evaluate private fund due diligence issues in the context of misrepresentation. 2016
Deficient due diligence does not create securities fraud liability unless it is intentional or highly reckless; conduct that is merely negligent or professionally incompetent falls short of the scienter requirement. 2016
Failing to check publicly available documentation on an investment is irresponsible but insufficient to plead fraudulent intent, and failing to perform due diligence commensurate with industry standards is inadequate to plead scienter. 2016
Failure to supervise and direct investment of assets in accordance with an investment plan's policy, together with offering memoranda or quarterly letters that misrepresent due diligence processes, can show a failure to exercise reasonable care sufficient to plead breach of fiduciary duty. 2016
Claims in which investors use hindsight to second guess due diligence practices often fail, even when the manager was clearly incompetent. 2016
Funds that promise due diligence with no intention of actually carrying it out violate federal securities laws rather than merely breaching a contract. 2016
Despite bringing enforcement actions over misrepresentations about due diligence, the SEC has not taken a rigid enforcement position on whether particular due diligence industry practices are effective, and has merely acknowledged that practices became more robust after the financial crisis. 2016
The originators of the earliest U.S. hedge funds deliberately structured the funds to maximize trading freedom by minimizing exposure to federal regulation, so the industry's private, unregistered form was a design choice rather than an accident of history. 2016
The SEC's 1985 safe harbor in Rule 203(b)(3) allowed a limited partnership itself, rather than each of its limited partners, to be counted as a single client of the general partner acting as adviser, which is what kept hedge fund advisers below the registration threshold. 2016
Expanding the client counting safe harbor in 1997 to cover legal entities generally allowed investment advisers to manage large amounts of securities indirectly for several hundred investors across multiple hedge funds without registering. 2016
The SEC's 2004 hedge fund adviser registration rule failed in court because the agency lacked authority to define the term client, which the Investment Advisers Act had not otherwise defined, and the D.C. Circuit in Goldstein vacated the rule as arbitrary rulemaking. 2016
Under Title IV of the Dodd-Frank Act, hedge funds with more than $150 million in assets under management must register as investment advisers and disclose information about their trades and portfolios to the SEC. 2016
The cost of hedge fund manager registration under the Dodd-Frank Act brings increasing returns to scale for the industry, meaning compliance burdens fall disproportionately on smaller advisers. 2016
Until the SEC finalizes verification rules and gives a clear, comprehensive definition of the reasonable steps an issuer must take, issuers cannot determine at the time of sale whether their verification attempts made general solicitation permissible. 2016
The SEC's 2004 attempt to require hedge fund adviser registration failed: after the D.C. Circuit vacated the rule in Goldstein v. SEC, the overwhelming majority of private fund advisers that had registered under the 2004 requirements deregistered. 2016
The reporting obligations imposed on private fund advisers by Form PF raised regulatory oversight of private funds to unprecedented levels. 2016
Firms that outsource the chief compliance officer role to third parties face heightened SEC scrutiny and examination risk, and the SEC has signaled that CCO liability arises where CCOs mislead regulators, engage in affirmative misconduct, or fail to carry out assigned compliance responsibilities. 2016
Registered investment advisers should expect a more demanding regulatory environment ahead, including new or proposed regulations, more SEC enforcement actions against private fund managers, and longer and more intrusive examinations. 2016
Rather than outsourcing required compliance work, the industry is on some metrics increasingly performing that work in-house, a shift consistent with the SEC's emphasis on compliance officer liability and post-2012 enforcement actions aimed at compliance departments. 2016
After the D.C. Circuit vacated the SEC's 2004 hedge fund adviser registration rule in Goldstein v. SEC, the overwhelming majority of private fund advisers who had registered under that rule deregistered. 2016
Title IV requires private fund advisers with more than $150 million in assets under management to register with the SEC as investment advisers. 2016
Form PF raised regulatory oversight of private funds to unprecedented levels by requiring managers to disclose, for the first time, information about themselves, their funds, their investors, performance, financing, risk metrics, strategies, and credit exposure. 2016
Form PF data from the SEC Risk and Examinations Office for the fourth quarter of 2014 show net asset value of about $3,399 billion for hedge funds, $2,672 billion for Qualifying Hedge Funds, and $1,744 billion for private equity. 2016
The SEC's clarifying and optimizing of the legal framework after the Dodd-Frank Act effectively supports the private fund industry in its efforts to comply with the revised standards. 2016
The same SEC implementation and clarification of Dodd-Frank registration and reporting requirements that helps the industry comply also creates uncertainty and higher costs for it, so continuing rule development cuts both ways. 2016
Post-crisis legislation accelerated the convergence of mutual funds and private funds, because the registration and increased disclosure requirements the Dodd-Frank Act imposed on certain private fund advisers subject them to substantively the same obligations that apply to advisers of mutual funds. 2016
Proposed Rule 18f-4 would be highly limited in mitigating liquidity and other risks in an unconstrained mutual fund portfolio, because material leverage, counterparty, and liquidity risks in such a fund can arise from investments in a range of non-derivative instruments that the rule does not reach. 2016
The authors operationalize unconstrained status by binary coding eleven prospectus characteristics and treating a score of nine or better as unconstrained, producing a final study sample of 84 funds out of 114 funds identified in the Morningstar Nontraditional Bond index. 2016
Unconstrained mutual funds are predominantly credit-oriented funds intended to be sold on a retail basis that nonetheless authorize the investment manager, similar to a private fund manager, to trade any type of credit security or derivative. 2016
Reliance on prospectuses and other disclosures by an unconstrained mutual fund that in all material respects complies with the Company Act may be insufficient to protect retail investors. 2016
It is questionable whether retail investors typically have the experience or training to fully appreciate the risks disclosed in unconstrained mutual fund prospectuses. 2016
The proliferation of unconstrained mutual funds has contributed to the confluence of mutual and private funds and weakened the traditional public/private distinction in federal securities regulation. 2016
Given the risks to retail investors of investing in complex unconstrained mutual funds and the SEC's own concern about the retailization of private funds, it is unclear why the SEC has not acted to enhance protections for retail purchasers of unconstrained mutual fund shares. 2016
The SEC should re-evaluate its reliance on the Company Act's disclosure regime in its current form as the best means of protecting retail investors from the risks of investing in unconstrained mutual funds. 2016
The SEC continues to rely on disclosure as the means of mitigating investor risk from unconstrained and other mutual funds irrespective of the complexity of those funds' portfolios and strategies. 2016
The absence of any current requirement to present unconstrained portfolio risks in detail raises the question whether unconstrained mutual fund prospectuses provide the adequate, accurate, and explicit information required by Section 1(b)(1) of the Company Act. 2016
The notice and comment procedures of the SEC are too slow, and the SEC's outdated micromanagement of markets is itself slowing down venture capital. 2016
The SEC's denial of the Winklevoss Bitcoin exchange traded fund on grounds of susceptibility to fraud reflects the agency's distrust of the crypto asset class as a whole, and especially of funds that trade digital currencies. 2017
The SEC's reasoning against the Bitcoin exchange traded fund does not transfer to blockchain based private investment funds, because such funds trade a diverse array of cryptocurrencies rather than Bitcoin alone and reach a much narrower investor audience, which curtails investor risk. 2017
Private investment funds operating solely on the Melon protocol are less likely to be required to register as a commodity pool operator or commodity trading advisor, because the CFTC has not labelled digital assets a currency under its guidelines. 2017
Despite early cautioning and a call for action from its own commissioners, the SEC has not addressed core issues pertaining to the recognition of blockchain technology applications in finance. 2017
The SEC rejected the Winklevoss Bitcoin ETF application on the ground that the unregulated nature of Bitcoin made the proposed fund susceptible to fraud. 2017
Initial coin offerings have overtaken venture capital as a funding channel for blockchain start ups, raising 331 million dollars in twelve months, and may become an alternative funding method for traditional companies as well. 2017
Initial Coin Offerings are the most efficient means of financing entrepreneurial initiatives in the history of capital formation, because they minimize transaction cost and democratize finance while dis-intermediating banks. 2017
Tokens sold in an ICO are structurally different from equity: they do not generally confer ownership rights, no right to dividends, and no claim on company assets in bankruptcy, so the risk and reward profile of a token is not that of a share. 2017
The rapid evolution of ICOs was enabled in part by the negative factors that had depressed start-up fundraising, namely post crisis banking regulation and a shadow banking sector that only marginally supports new ventures and highly innovative start-ups. 2017
In the second quarter of 2017 ICO issuances exceeded venture capital financing of start-ups for the first time, with $210 million invested in ICOs versus $180 million invested into start-ups via traditional venture capital funds. 2017
ICOs are preferable to venture capital funding for many start-ups first and foremost because ICO promoters and their developers are not forced to sacrifice equity in the project in exchange for the funds they raise. 2017
The 2012 to 2017 ICO model allowed cryptocurrencies to be raised through a token sale without any conditions, landmark requirements, or security measures to protect investors, so that in essence promoters could use ICO proceeds as they pleased. 2017
The lack of a regulatory framework creates significant legal uncertainty in the ICO market, and because cryptocurrencies are censorship-resistant and arguably regulation-resistant by design, that uncertainty may sooner or later lead the Securities and Exchange Commission to declare ICOs illegal. 2017
ICOs are not subject to predefined regulatory procedures: whitepapers do not follow prospectus disclosure guidelines, are not reviewed or audited by any authority, and are not subject to any form of rating of the new entrepreneurial initiative. 2017
Zombie ICOs, which have little chance of creating a successful market for their tokens, became increasingly common in 2017 and are identifiable by their inability to answer core questions about the problem solved, the allocation of proceeds, the viability of the product, and the team's business experience. 2017
Capped token issuances became the dominant structure between 2016 and 2017 because a cap increases the likelihood that the ICO will be oversubscribed, which creates a significant incentive for investors to attempt to get in first. 2017
Open legal questions about the DAO, including which regime governs token issuance, minority token holder protection, taxation, the binding force of DAO smart contracts, ownership of intellectual property, and conflict resolution, must be answered before future DAO structures can operate seamlessly. 2017
The Investment Advisers Act safe harbor let an adviser count an entire legal organization as one client, provided the advice followed the organization's objectives rather than those of its individual owners, which is what allowed advisers to manage money for hundreds of underlying investors while staying exempt. 2017
The 2004 registration rule failed in court because the term client was not defined in the Investment Advisers Act, leaving the SEC without authority to fix its meaning, and the D.C. Circuit vacated the rule in Goldstein as arbitrary rulemaking. 2017
Under PFIARA, private investment fund advisers with more than 150 million dollars of assets under management must register as investment advisers and disclose information about their trades and portfolios to the SEC. 2017
The SEC's efforts to clarify and optimize the post Dodd-Frank framework cut both ways: they supported industry compliance with the revised standards while simultaneously creating uncertainty and higher costs for the industry. 2017
Form PF data suffer from core shortcomings: ambiguity in several key questions, inaccurate definitions with correspondingly insufficient SEC guidance, and difficulty aggregating the required information. 2017
Hedge fund advisers already required to register with the SEC have an incentive to also manage mutual funds or set up retail alternative funds, because the incremental regulatory burden of doing so is only minimally higher than their post registration requirements. 2017
The confluence of mutual and private investment funds contributes to the gradual erosion of the public/private distinction in federal securities regulation. 2017
An issuer's ICO strategy can pre-define the token economy's monetary policy by predetermining the fixed number of tokens created and issued in the ICO. 2018
The balance between the commercial benefits and use cases attached to a token and the scarcity of its supply is critical in the issuance of a token offering. 2018
For token issuers in the dataset that did not conduct an ICO, the author used the date of first publicly listed trade as a proxy variable for launch date. 2018
Of the top 100 tokens, fifty-six held an ICO and thirty-eight did not. 2018