Aug. 29, 2019

BarkerGilmore Survey Benchmarks Compliance Personnel Compensation by Company Type, Revenue, Gender, Education and Industry

Executive search consulting firm BarkerGilmore recently released the results of its study of the compensation earned by more than 800 compliance professionals. Notably, the study found modest year-over-year increases in total compensation; a significant pay gap between male and female compliance professionals; that compliance professionals at public companies earn more than those in similar positions at private companies; and that compliance professionals with law degrees earn significantly more than those without. This article examines those and other key findings from the study. For another look at compliance officer compensation, see “RCA Compensation Trends Panel Discusses Strong Market for Private Fund Compliance and Legal Personnel” (Jan. 25, 2018). See also our series of two-part interviews with David Claypoole: “How Have Industry Developments Affected the Value of Legal and Compliance Staff?” (Feb. 2, 2017); “Will Industry Deregulation Affect the Value of Legal and Compliance Staff?” (Feb. 16, 2017); “What Is the Value of Legal and Compliance Staff?” (Mar. 12, 2015); and “Trends in Legal and Compliance Hiring and Staffing” (Mar. 19, 2015).

Is the Advertising Rule Obsolete? (Part One of Two)

At a recent forum hosted by Paul Hastings, in-house and outside counsel examined the fundamentals and underpinnings of Rule 206(4)‑1 (Rule) under the Investment Advisers Act of 1940, which governs advertising by advisers. Hosted by Kevin Broughel, vice chair of Paul Hastings’ global securities litigation practice, the discussion was moderated by Paul Hastings partner John P. Nowak and featured Ken C. Joseph, managing director and head of disputes consulting at Duff & Phelps; Michael A. Kitson, senior compliance officer and counsel at Bridgewater Associates; Ira P. Kustin, partner at Paul Hastings; Meredith Smith, general counsel of Stash; and Alastair Wood, general counsel of Kindur. This article, the first in a two-part series, explores the fundamentals of the Rule, how the Rule applies to newer forms of media and additional guidance that the SEC has provided on compliance with the Rule. The second article will discuss ways the SEC’s approach to regulating the advertising of investment advisers differs from other regulators; best practices for complying with the cherry picking provision of the Rule; ways violations of the Rule are often a result of inadequate policies and procedures on the part of the adviser; and potential amendments to the Rule. See our three-part advertising compliance series: “Ten Best Practices for a Fund Manager to Streamline Its Compliance Review” (Sep. 14, 2017); “Five High-Risk Areas for a Fund Manager to Focus on When Reviewing Marketing Materials” (Sep. 21, 2017); and “Six Methods for a Fund Manager to Test Its Advertising Review Procedures” (Sep. 28, 2017).

OCIE Issues Risk Alert on Advisers’ Oversight of Employees With a History of Disciplinary Events

In 2017, the SEC’s Office of Compliance Inspections and Examinations (OCIE) examined more than 50 advisers as part of an initiative to assess the oversight practices of advisers that employ individuals with disciplinary histories. OCIE recently issued a risk alert intended to raise awareness of certain compliance issues that OCIE staff observed in those examinations; to encourage advisers to reflect upon their practices, policies and procedures; and to help advisers consider ways to improve their supervisory practices and compliance programs. Although the initiative focused primarily on advisers with retail clients, the principles enunciated by OCIE are equally applicable to private fund advisers. This article summarizes the key takeaways from the risk alert. See our coverage of OCIE risk alerts on electronic messaging; the cash solicitation rule; best execution; fees and expenses; the advertising rule; compliance topics; custody; cybersecurity; business continuity and disaster recovery plans; and social media. See also our two-part interview with former OCIE Deputy Director Jane Jarcho: “Relationship Between OCIE and Enforcement” (Mar. 28, 2019); and “OCIE’s National Exam Program and Annual Priorities” (Apr. 4, 2019).

SEC Continues to Pursue Advisers That Fail to Disclose Conflicts of Interest

Failing to disclose conflicts of interest and making misleading disclosures about conflicts remain disturbingly frequent grounds for SEC enforcement action. In a recent example of this perennial minefield, an investment adviser and its principal allegedly failed to disclose loan arrangements that incentivized them to recommend the lender’s securities to the adviser’s clients and misled a client as to how they planned to use the proceeds of a client’s investment with the adviser. This article analyzes the facts that form the basis of the enforcement action and the SEC’s settlement order. See Identifying and Addressing the Primary Conflicts of Interest in the Hedge Fund Management Business” (Jan. 17, 2013).

Perrie M. Weiner Is New Chair of Baker McKenzie’s North America Securities Litigation Group

Perrie M. Weiner has joined Baker McKenzie’s growing Los Angeles office, where he serves as partner in charge and chair of the firm’s North America securities litigation group. Weiner advises hedge funds, private equity funds, broker-dealers, underwriters, placement agents and issuers in SEC and FINRA enforcement actions, as well as white collar criminal proceedings and complex business litigation. For additional insights from Weiner, see “Is the ‘Mosaic Theory’ a Viable Defense to Insider Trading Charges Against Hedge Fund Managers Post-Galleon?” (Dec. 15, 2011); and “SEC to Seek Third-Party Confirmation of Investor Assets Held by Regulated Firms” (Mar. 25, 2009).