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    Mar. 31, 2022

SEC’s Proposed Short Sale Rules Increase Transparency Into Large Short Positions

The SEC recently announced that it had approved proposed changes to its existing short sale regulations to provide greater transparency both to the regulator and the public. Proposed Rule 13f‑2 would require institutional investors whose short positions exceed specified thresholds to file a monthly report on new Form SHO, which would detail their end-of-month positions and intra-month changes to those positions. The SEC would then aggregate and publish the reported data each month. The rule proposal also covers a new requirement for marking “buy to cover” orders and certain amendments to Consolidated Audit Trail (CAT) reporting. This article analyzes the SEC’s proposal, which consists of new Rule 13f‑2, new Form SHO, new Rule 205 and amendments to CAT reporting. See “Fireside Chat With SEC Chair Gensler: Reporting; Voting and Proxies; Individual Accountability; and Market Structure Issues (Part Two of Two)” (Dec. 2, 2021).

ESMA Guidelines on Marketing Communications: New E.U. Content Requirements

Discussion of marketing to E.U. investors has been receiving increased attention since summer 2021, following implementation of the E.U. rules on facilitating cross-border distribution of collective investment undertakings (collectively, the CBDF Rules). The CBDF Rules included certain changed approaches under the E.U.’s Alternative Investment Fund Managers Directive on pre-marketing and reverse solicitation and introduced high level content requirements for marketing materials. Some accompanying guidelines setting detailed E.U. regulatory expectations on the content of marketing materials are also part of the same package of rules. Those latter guidelines, the ESMA Guidelines on Marketing Communications (Guidelines), recently came into application. They have been creating a lot of debate around their scope of application, from what fund managers they apply to and what materials are in-scope to how exactly the content of materials needs to be adapted going forward to comply with the Guidelines. In a guest article, Simpson Thacher attorneys Owen Lysak, Daniel Deacon and Ramya Juwadi consider those points. See “The New E.U. Cross‑Border Distribution of Funds Rules” (Aug. 5, 2021).

Compliance Issues Associated With Advisers’ Integration of ESG Criteria

Advisers face mounting pressure from investors to integrate environmental, social and governance (ESG) factors into the investment process. At the same time, the SEC is paying closer and closer attention to how advisers do that and how their practices gibe with their disclosures to investors. A recent Seward & Kissel program examined how advisers can begin to integrate ESG factors into the investment process and the associated compliance issues, including allocation of ESG-related expenses, use of third-party ESG scoring providers, ESG disclosures, side letters, commitments to ESG initiatives and ERISA concerns. The program featured Seward & Kissel partners Debra Franzese, Nicholas R. Miller, Patricia A. Poglinco and S. John Ryan. This article distills their insights. See “Taking a Measured and Forward-Looking Approach to ESG Compliance” (Mar. 3, 2022).

Managing Compliance Scope Creep

Does compliance validate parking? That may not be such a strange question because compliance often seems to be tasked with just about everything, compliance officers said at the Society for Corporate Compliance and Ethics’ Compliance & Ethics Institute. Uncontrolled scope creep is not good for the organization or for individual compliance officers, who often do not get more resources to handle the new tasks, observed Adam Balfour, vice president and GC, corporate compliance and Latin America at Bridgestone America. He, along with Ellen M. Hunt, then of LifePoint Health and now at Spark Compliance Consulting, and Melanie Sponholz of WCP Healthcare at Waud Capital Partners, offered strategies for evaluating new tasks and opportunities, and for graciously turning down the wrong ones. See our three-part series on the first 100 days as GC/CCO: “Preparing for the Role and Setting the Tone” (Apr. 29, 2021); “Developing Knowledge and Forging Key Relationships” (May 6, 2021); and “Managing Daily Work, Performing Risk Assessments and Looking Ahead” (May 13, 2021).

KPMG Report Examines the Pandemic’s Disproportionate Impact on the Careers of Women in Asset Management

The pandemic prompted and accelerated numerous changes to employment practices across all industries, including asset management. In particular, lockdowns, travel restrictions and social-distancing mandates resulted in many employees working from home for extended periods of time, presenting a unique opportunity for asset management firms to test drive remote and hybrid work models. Although those changes were particularly welcomed by women tasked with also serving as primary caregivers for their families, many worry about the potentially negative professional impact on their future promotions and career advancement. KPMG explored the impact of the pandemic’s remote and flexible work arrangements on women by surveying 491 asset management industry professionals, the results of which were summarized in KPMG’s report (Report). This article summarizes key takeaways from the Report and perspectives from asset management professionals. For additional coverage of KPMG surveys and reports, see “ALFI/KPMG Survey Details Evolution and Growth of Luxembourg Private Debt Funds” (Feb. 11, 2021); and “KPMG Reports on AIFMD’s Efficacy Five Years After Implementation” (May 30, 2019).

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