Nov. 21, 2019

Former OCIE Director Carlo di Florio Discusses the SEC’s National Exam Program, Technology and CCOs (Part Two of Two)

After nearly a decade at the SEC and FINRA, Carlo di Florio has joined ACA Compliance Group (ACA). In his new role at ACA as a partner and global chief services officer, di Florio will marshal his regulatory experience in fulfilling his responsibilities that include oversight, management and strategic growth of ACA’s global regulatory compliance; cybersecurity and risk; anti-money laundering and financial crimes; and performance practices. The Hedge Fund Law Report recently spoke to di Florio in connection with his new position. This second article in our two‑part series discusses his time at the SEC’s Office of Compliance Inspections and Examinations (OCIE) reviewing and redesigning the National Exam Program; the impact of technology and data analytics on that program; the benefits of regulatory transparency; and the challenges faced by chief compliance officers. The first article covered his move to the private sector; his experience at the SEC and FINRA; and the relationship between OCIE and the Division of Enforcement. For insights from another SEC veteran, see our two‑part interview with former OCIE Deputy Director Jane Jarcho: “The Relationship Between OCIE and Enforcement” (Mar. 28, 2019); and “OCIE’s National Exam Program and Annual Priorities” (Apr. 4, 2019).

HFLR Fireside Chat With SEC Commissioner Hester M. Peirce Explores Fiduciary Duty, Accredited Investor Standard and CCO Liability (Part One of Two)

The Hedge Fund Law Report recently held a webinar in which Associate Editor Robin L. Barton had a wide-ranging conversation with SEC Commissioner Hester M. Peirce, who offered her characteristically unvarnished perspectives on a variety of topics of specific interest to private fund managers. This two‑part series summarizes the key takeaways from the webinar. This article details Peirce’s views on the fiduciary duty for investment advisers; the accredited investor standard; and the duties and liabilities of chief compliance officers. The second article will set forth Peirce’s perspectives on the need for updates to various SEC rules, including those pertaining to advertising and custody; managing technological change in rulemaking; the proper role of enforcement; hot-button issues; and unwritten rules. For additional commentary from Peirce, see “SEC Commissioner Peirce Shares Views on Gender Diversity, Shareholder Issues, Cryptocurrency and Her SEC Dissents” (May 30, 2019); and “The Power of ‘No’: SEC Commissioner Peirce on Enforcement As Last Resort” (Jun. 21, 2018).

Luxembourg Plays Prominent Role in ESG Investing and Sustainable Finance

A recent seminar presented by the Association of the Luxembourg Fund Industry (ALFI), hosted by ALFI chairwoman Corinne Lamesch, offered a snapshot of the current state of the Luxembourg funds industry and addressed key business and regulatory developments that may have an impact on E.U. fund managers. As with prior ALFI events, the program featured remarks from H.E. Pierre Gramegna, the Luxembourg Minister of Finance, and panel discussions with representatives from financial services, asset management, legal and accounting firms. This article covers the portions of the seminar that discussed the current state of the Luxembourg funds industry; the growth of sustainable finance; and the increasing use of environmental, social and governance investment criteria. For coverage of ALFI’s October 2018 event, see our two‑part series: “Luxembourg Positions Itself As a Calm in the Brexit Storm” (Jan. 10, 2019); and “How Luxembourg Is Affected by Regulatory Developments and the E.U. Retail Distribution Environment” (Jan. 31, 2019).

SEC Settles With 16 Additional Advisers Under SCSD Initiative, Severely Penalizes One That Did Not Self‑Report

In February 2018, the SEC announced its Share Class Selection Disclosure Initiative (SCSD Initiative), offering advisers that self-reported inadequate disclosure regarding selection of mutual fund share classes an opportunity to resolve SEC charges without paying a financial penalty. Earlier this year, the SEC announced settlements with 79 investment advisers, yielding restitution of more than $125 million to affected clients. The SEC recently announced an additional 16 settlements under the SCSD Initiative, yielding an additional $9.86 million in disgorgement and interest for affected investors. This article details the terms of the recent settlements and an additional SEC order that imposed a significant penalty, in addition to disgorgement and interest, on an adviser that did not self-report under the SCSD Initiative. See “SEC Settles With 79 Investment Advisers Under Its Share Class Selection Disclosure Initiative” (Apr. 4, 2019).

In Latest Chapter of the Och‑Ziff FCPA Saga, Court Confirms Victims of Bribery Are Owed Restitution

In 2016, to resolve claims that it had engaged in widespread bribery to win mining rights in Africa, OZ Africa Management GP, LLC (OZ Africa) pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA). Prior to sentencing, a group of shareholders of one of the companies affected by that bribery claimed that they were victims of OZ Africa’s misconduct and sought restitution under the Mandatory Victims Restitution Act (MVRA). The U.S. District Court for the Eastern District of New York (Court) recently issued a memorandum and order confirming that the shareholders qualify as victims under the MVRA and are entitled to restitution, but reserving judgment on the amount of restitution. This article discusses the factual and procedural background of the dispute and the Court’s reasoning as to the restitution issue. For an overview of the FCPA, see “WilmerHale Attorneys Discuss FCPA Concerns for Private Fund Managers (Part One of Two)” (May 28, 2015); and “Expert Panel Underscores Heightened Foreign Corrupt Practice Act Enforcement Risk Facing Hedge Fund and Other Private Fund Managers” (Dec. 19, 2013).

Former SEC and CFTC Enforcement Attorney Joins Barnes & Thornburg’s D.C. Office

Financial and regulatory litigation attorney David Slovick has joined Barnes & Thornburg’s Washington, D.C., office as a partner in the firm’s litigation department. Formerly a senior enforcement attorney at both the SEC and the CFTC, Slovick now regularly represents financial services firms and individuals in investigations and litigation conducted by the SEC, CFTC, FINRA, NFA and CME Group, as well as other regulators and organizations. For commentary from another Barnes partner, see “How Can Hedge Fund Managers Both Advertise and Accept Investments From Non-Accredited Employees, Friends and Family Members?” (Jun. 14, 2012).