Most Recent Proposed or Adopted SEC Rule Changes

Securities Litigation and FINRA Arbitration Lawyer, Russell L. Forkey, Esq.

In reviewing this post, please keep in mind that this post is being provided for informational purposes only. Thus, it should not be relied upon as legal advice. Additionally, the described proposal may be further amended, which may or may not be reflected in this post, before the rule is either put into effect or withdrawn. Consequently, there may be more recent information available for your consideration.

May 13, 2011:

Investment Adviser Performance Compensation:

The Securities and Exchange Commission (SEC) intends to issue an order that would adjust two dollar amount tests in the rule under the Investment Advisors Act of 1940 that permits investment advisers to charge performance based compensation to "qualified clients."  The adjustments would revise the dollar amount tests to account for the effects of inflation.  The SEC is also proposing to amend the rule to: provide that the Commission will issue an order every fives years adjusting for inflation the dollar amount tests: exclude the value of a person's primary residence from the test of whether a person has sufficient net worth to be considered a "qualified client;" and add transition provisions to the rule. If you would like to read a full copy of the release related to this proposal, please follow the highlighted link.

June 1, 2011:

Proposed Disqualification of Felons and other Bad Actors from Rule 506 Offerings:

The Securities and Exchange Commission (SEC) is proposing amendments to its rules to implement Section 926 of the DOD-Frank Wall Street Reform and Consumer Protection Act. Section 926 requires the SEC to adopt rules that disqualify securities offerings involving certain felons and other bad actors from reliance on the safe harbor from Securities Act registration provided by Rule 506 of Regulation D. The rules must be substantially similar to Rule 262, the disqualification provision of Regulation A under the Securities Act and must also cover matters enumerated in Section 926 (including certain state regulatory orders and bars).

Rule 506 is one of three exemptive rules for limited and private offerings under Regulation D.  Rule 506 is by far the most widely used Regulation D exemption, accounting for an estimated 90 - 95% of all Regulation D offerings.  As a reminder, Rule 506 of Regulation D permits sales of an unlimited dollar amount of securities to be made, without registration, to an unlimited number of accredited investors and up to 35 non-accredited investors, so long as there is no general solicitation, appropriate resale limitations are imposed, information requirements are satisfied and the other conditions of the rules are met.  To review a copy of the release concerning this  proposed rule change, please follow the highlighted link.

June 24, 2011:

SEC Adopts Dodd-Frank Amendment to Investment Advisers Act:

The Securities and Exchange Commission recently adopted rules that require advisers to hedge funds and other private funds to register with the SEC, establish new exemptions from SEC registration and reporting requirements for certain advisers, and reallocate regulatory responsibility for advisers between the SEC and states. The rules adopted by the Commission implement core provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding investment advisers, including those that advise hedge funds.

These rules will give the Commission, and the public, insight into hedge fund and other private fund managers who previously conducted their work under the radar and outside the vision of regulators.

In addition, the Commission amended rules to expand disclosure by investment advisers, particularly about the private funds they manage, and revised the Commission's pay-to-play rule.

The rules implement a transitional exemption period so that private advisers, including hedge fund and private equity fund advisers, newly required to register do not have to do so until March 30, 2012. The rules regarding exemptions for venture capital fund and certain private fund advisers are effective July 21, 2011.

Historically a large number of individuals and institutions invest a significant amount of assets in private funds, such as hedge funds and private equity funds. However, until the passage of the Dodd-Frank Act, advisers managing those assets were subject to little regulatory oversight.

With the Dodd-Frank Act, Congress closed this regulatory gap by generally extending the registration requirements under the Investment Advisers Act . The new law also provided the Commission with the ability to require the limited number of advisers to private funds that will not have to register to file reports about their business activities.

Further, in acknowledging the Commission's limited examination resources - and in light of the new responsibilities for private fund advisers - the Dodd-Frank Act reallocated regulatory responsibility for certain mid-sized investment advisers to the state securities authorities.  Read More.

June 23, 2011:

The Securities and Exchange Commission (SEC) recently approved a new rule to define "family offices" that are to be excluded from the Investment Advisers Act of 1940. The rulemaking stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Read More.

July, 2011:

SEC Issues Order Raising Performance Fee Rule Dollar Limit to Adjust for Inflation.  Read More.

August, 2011:

MSRB FILES INTERPRETIVE NOTICE CONCERNING THE APPLICATION F MSRB RULE G-17 TO MUNICIPAL ADVISORS ADVISING OBLIGATED PERSONS OR SOLICITING MUNICIPAL ENTITIES ON BEHALF OF OTHERS.  Read More.

December, 2011:

SEC Amendment to the Definition of "Accredited Investor."

The Securities and Exchange Commission has amended its rules to exclude the value of a person's home from net worth calculations used to determine whether an individual may invest in certain unregistered securities offerings. The changes were made to conform the SEC's definition of an "accredited investor" to the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.  Read More.

February, 2012:

SEC Tightens Rules on Advisory Performance Fee Charges.

The Securities and Exchange Commission recently announced it is tightening its rule on investment advisory performance fees to raise the net worth requirement for investors who pay performance fees, by excluding the value of the investor's home from the net worth calculation.  Read More.

October, 2012:

The Securities and Exchange Commission (SEC) Proposes Temporary Principal Trading Rule Extension Relating Rule 206(3)-T:

The Commission proposed extending the date on which Rule 206(3)-3T of the Investment Advisers Act will sunset from December 31, 2012 to December 31, 2014. Rule 206(3)-3T is a temporary rule that allows investment advisers that are registered as broker-dealers to engage in principal transactions. Without the two year extension, the rule would expire on December 31, 2012.  Read More.