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The purpose of this paper is to explain a study released by the Securities and Exchange Commission on January 21, 2011, the “Fiduciary Study,” concerning legal and regulatory standards of care for providing investment advice and recommendations to retail customers.

The paper explains the Fiduciary Study's concern that retail investors do not fully understand the roles played by, and the different standards of care that apply to, investment advisers and broker‐dealers. It summarizes the SEC's core recommendations concerning uniform investment adviser and broker‐dealer standards for conduct, avoidance of conflicts of interest, fiduciary duties, principal trading, duty of care owed to investors, personalized investment advice about securities, and investor education. It summarizes the SEC's recommendations on harmonizing investment adviser and broker‐dealer regulations on advertising and other communications, use of finders and solicitors, supervision, licensing and registration of firms, licensing and continuing education requirements for professionals, and books and records.

The SEC's core recommendations are designed to clarify the respective roles of, and establish uniform standards for, investment advisers and broker‐dealers, so that retail investors will be better informed and protected.

This paper provides a useful summary and practical advice from experienced financial services lawyers.

What exactly is the best execution duty of investment advisers? There is no clear consistent definition relied upon by regulators and courts and it has assumed different forms in different cases with different facts. Nevertheless everyone understands that it is an integral part of the fiduciary duty of an investment adviser. This article will endeavor to answer the question with an emphasis on the dynamic process by which an adviser can achieve best execution and monitor its compliance on an ongoing basis responding to changes in regulation, markets, and its own operations. The discussion of statutory standards in this article will refer to the fiduciary standards imposed on investment advisers pursuant to the Investment Advisers Act of 1940, as amended, (the “Advisers Act”) as interpreted by the Securities and Exchange Commission (the “SEC”) and will not address the additional requirements that may be imposed by other federal statutes on advisers providing services to certain types of clients such as the Investment Company Act of 1940, as amended, and Employee Retirement Income Security Act of 1974, as amended.

Part I of this series appeared in the Summer 2002 issue of The Journal of Investment Compliance. It addressed the regulation of wrap fee programs under the Investment Company Act of 1940 (“Investment Company Act”) and the requirements of Rule 3a‐4 thereunder, which must be met so that a wrap fee program is not deemed to be an investment company. Part I also discussed certain issues arising under the Investment Advisers Act of 1940 (“Advisers Act”), including how program sponsors and any third‐party portfolio managers generally are viewed as investment advisers and are subject to the Advisers Act. Part II discusses additional Advisers Act issues such as suitability, fees, and advertising. It also briefly reviews issues arising under the Securities Exchange Act of 1934 (“Exchange Act”) and the Employee Retirement Income Security Act of 1974 (“ERISA”). The information provided in Part II assumes that readers have some basic familiarity with Part I.

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.

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.

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.

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.

This article provides practical guidance from lawyers who have extensive experience with the Investment Company Act, Investment Advisers Act, and the Securities Acts.

This article takes a close look at the requirements of the 1940 Investment Advisors Act for both registered and unregistered investment advisors — such as hedge funds and private equity funds. It highlights the significant issues that arise from the regulation for unregistered funds that are considering the consequences of SEC registration. It also reviews briefly the requirements of the Act that are already applicable to unregistered investment advisors.

The Securities and Exchange Commission (SEC) has defined “soft dollar” practices as arrangements under which products or services, other than execution of securities transactions, are obtained by an investment adviser from or through a broker‐dealer in exchange for the direction by the adviser of client brokerage transactions to the broker‐dealer. In the wake of the mutual fund scandals of 2003, soft dollar practices have come under increased scrutiny by the SEC, the U.S. Congress, and others. This article is based on testimony presented by the Investment Counsel Association of America (ICAA) to the U.S. Senate Committee on Banking, Housing, and Urban Affairs at a hearing on soft dollars held on March 31, 2004. The article outlines the following positions: (1) the SEC should ensure that there is adequate disclosure about soft dollar practices, combined with appropriate inspection and enforcement of regulations governing such practices; (2) the consequences of abolishing soft dollars ‐ an outcome that would require Congressional action ‐ most likely would affect smaller investment advisory firms adversely, create entry barriers for new investment advisory firms, and diminish the quality and availability of proprietary and third‐party research; (3) investment advisers should be required to keep appropriate records relating to soft dollar arrangements and to develop and implement internal controls and procedures designed to ensure that soft dollar arrangements are supervised, controlled, and monitored; and (4) eliminating the use of soft dollars for third‐party research would harm investors, diminish the availability of quality research, provide a regulatory‐driven advantage for full‐service brokerage firms, disadvantage third‐party research providers, and result in less transparency to investors, regulators, and market participants.

To provide an overview of the US Securities and Exchange Commission’s (SEC’s) recently proposed rulemaking package relating to standards of conduct for investment professionals. The three proposals included: interpretation regarding the standard of conduct of investment advisers under the Investment Advisers Act of 1940; Form CRS which both registered investment advisers and registered broker-dealers would have to provide to retail investors; and proposed regulation best interest.

Reviews and summarizes the three individual proposals.

The SEC has proposed this rulemaking package in order to meet three goals: enhance retail investor protection and decision making, preserve investor choice and cost, and raise retail investor awareness of whether they are doing business with a registered financial professional. The SEC is looking for feedback, particularly from retail investors, on whether these proposals would achieve the SEC’s goals.

Summarizes the three proposals in a manner that provides insight into how investment advisers and broker-dealers would be required to conduct business with retail investors if the proposals are adopted in the current form.

The purpose of this paper is to analyze new SEC Rule 206(4)‐8 under the Investment Advisers Act of 1940 and discuss its practical implications.

The paper describes the new rule, the types of advisers and funds to which the rule applies, examples of topics on which advisers might make statements that run afoul of the new rule, the application of the rule to both existing and potential investors, the application of the rule beyond statements made in the context of a securities transaction, and the application of the rule to any conduct that is fraudulent, deceptive, or manipulative, including negligent conduct. The paper explains that the scope of the new rule extends beyond Section 34(b) under the Investment Company Act of 1940, that the rule creates no new fiduciary duty, and that it creates no new private right of action against fund advisers.

The new rule signals that the SEC continues to focus intently on the fund activities of both registered and unregistered investment advisers, in particular with respect to their unregistered funds.

The new rule is an indicator of the SEC's enforcement intentions. Advisers should review their compliance programs, particularly as they relate to communication and other interaction with current and prospective fund investors, in light of the new rule.

The paper provides an helpful rule description and practical guidance from experienced securities lawyers.

This article outlines, in a very practical manner, the various methods available to investment advisors when trying to effect securities transactions for their clients. The authors examine several different ways the transactions may take place while describing in detail the pitfalls and concerns that must be considered by the careful practitioner. It also contains helpful illustrations to understand the transactions.