Newly Created “Capital Acquisition Broker” Rule Reduces Regulatory Burdens on Some Broker-Dealers

Lauren Mack Broker Dealer Registration, Compliance, FINRA, SEC

By Greg Caramenico and Lauren Mack On August 18th, the Securities and Exchange Commission (“SEC”) approved a Financial Industry Regulatory Authority Inc. (“FINRA”) rule that establishes less burdensome regulations for “Capital Acquisition Brokers” (“CABs”), which are a subclass of broker-dealers that engage only in limited activities. CABs can elect to be governed by the new rules by converting their current FINRA membership or by submitting a new …

Debate Over Accredited Investor Definition Gaining Momentum

Simon Riveles Accredited Investor, Private Placement, SEC

Discussions surrounding the accredited investor definition have crescendoed of late, demonstrating a sharp divide in opinion among regulators. On one side lies the North American Securities Administrators Association (“NASAA”), the lobbying group that represents the state securities administrators. The NASAA published a comment letter on the definition on May 25, 2016, evidencing a highly conservative approach.[1] The group relies on investor protection concerns in calling …

SEC Staff Issues Report and Recommendations in Connection with Changes to the Accredited Investor Standard

Simon Riveles Accredited Investor, Dodd-Frank, SEC

By William Kelly and Simon Riveles On December 18, the SEC staff issued a report summarizing its review of the accredited investor definition. The report offers historical and current analyses of the definition, evaluates relevant comments on and suggested modifications to the definition, and considers alternative approaches under federal and state securities laws for identifying financially sophisticated investors. The report concludes with SEC staff recommendations …

SEC Unanimously Approves Regulation A+ Rules

Simon Riveles Capital Raising, Regulation A+, SEC

On Wednesday March 25th, 2015, the Securities & Exchange Commission (SEC) unanimously adopted amendments to Regulation A. Due to its low dollar threshold and failure to preempt state blue sky laws, Regulation A has heretofore been a little utilized exemption from registration for certain smaller offerings by private companies. The amendments, mandated by Title IV of the JOBS Act, and commonly known as Regulation A+, …

Simon Riveles, Chairman of the HFA’s Regulatory and and Government Advisory Board, Comments on Impact of Raising Accredited Investor Net Worth Requirements by the SEC

Simon Riveles Accredited Investor, SEC

On October 7, 2014, The Hedge Fund Association (“HFA”), an international not-for-profit organization representing the interests of investors, hedge funds and service providers, has submitted a comment letter, which can be found at HFA-SEC-Comment-Letter, to the U.S. Securities and Exchange Commission’s (SEC) as the regulatory agency considers proposed changes to the definition of an “accredited investor” under Rule 501 of Regulation D. On behalf of the …

SEC Considers Change to Accredited Investor Standard

Simon Riveles SEC

Under the Dodd-Frank Act of 2010, the Securities and Exchange Commission (the “SEC”) is required to examine the definition of “accredited investor” every four years to determine if it should be modified.  Under the current standard, a natural person qualifies as an “accredited investor” for purposes of participating in a Rule 506 offering if he or she has earned at least $200,000 in annual income in each …

SEC issues Investor Alert: 10 Red Flags that a Private Placement May be Fraudulent or a Scam

Simon Riveles SEC

August 2014 Earlier this month, the Securities & Exchange Commission’s (the “SEC” or “Commission”) Office of Investor Education and Advocacy released a list of ten red flags investor’s should be wary of when evaluating a private offering. Under the securities law, sales of securities in a fund, a company or other issuer that have not been registered with the SEC are not subject to the …

SEC Issues New Guidelines on Social Media Use

Simon Riveles Investment Advisers, SEC, Social Media

By Masha  Goncharova and Simon Riveles In response to growing interest among investment advisers to communicate to clients through social media, the SEC staff has been establishing new informal guidelines on proper social media use. New parameters set forth this spring limit the scope of client testimonials and now allow advisers to provide required cautionary legends via hyperlinks, making it easier to communicate on platforms …

Simon Riveles Panelist at the Infovest21 Seminar Entitled “Regulatory Update for Hedge Funds and Funds of Funds”

Simon Riveles Hedge Funds, SEC

  On June 3, 2014, Infovest21, an information provider to hedge fund investors, managers, funds of funds, and service providers, sponsored a seminar at the Cornell Club in New York entitled “Regulatory Update for Hedge Funds and Funds of Funds.” The seminar featured an expert panel comprised of Simon Riveles of Riveles Law Group, Jillian Timmermans of compliance consulting firm, Cordium, and Gene DaCosta of …

SEC Launches New Group Focused on Private Equity & Hedge Funds

Simon Riveles Hedge Funds, Private Equity Fund, SEC

By Simon Riveles and Simon Cooke According to a report by Reuters, the U.S. Securities and Exchange Commission (“SEC”) has formed a group dedicated to examine private equity funds and hedge funds (the “Group”). The Group will focus on how these funds value their assets, disclose their fees and communicate with investors. The Group is co-chaired by Igor Rozenblit and Marc Wyatt. Mr. Rozenblit, both …

SEC Moves to Update Regulation A

Simon Riveles Jobs Act, Regulation A+, SEC

By Kathryn Dachille and Simon Riveles December 18, 2013, the SEC voted to propose amendments to Regulation A that would allow  offerings of up to $50 million in any twelve month period (“Tier 2 offerings”), as mandated by Title IV of the JOBS Act (so called Regulation A+”). While Tier 2 offerings would be subject to significant additional requirements, such as the provision of audited …

Proposed Crowdfunding Rules Available for Public Comment

Simon Riveles Accredited Investor, Advertising, Crowdfunding, SEC, Uncategorized

On October 23, 2013, the SEC released a set of proposed rules under the JOBS Act (the “Act”), which would permit emerging growth companies (EGC’s) to offer and sell securities through crowdfunding platforms.  In their current form, the proposed rules closely resemble the original parameters outlined in Section III of the Act, the section from which the crowdfunding provision was born.  The rules will be …

SEC Monitoring the Use and Market Impact of General Solicitation

Simon Riveles General Solicitation, SEC, Uncategorized

At the Managed Funds Association Outlook 2013 Conference, held on October 18, 2013, SEC Chair Mary Jo White delivered a speech emphasizing the importance of transparency in the hedge fund industry.  Chair White highlighted that the JOBS Act, which allows private funds to participate in the general solicitation, increases the responsibility of private funds to be open and honest with potential clients and regulators.  Chair …

SEC Repeals the Ban on General Solicitation under Rule 506

Simon Riveles Accredited Investor, Advertising, General Solicitation, Reg D Rule 506, SEC

On July 10, 2013, the Securities and Exchange Commission (the “Commission”) adopted amendments to Rule 506 of Regulation D (“Rule 506(c)”) implementing changes mandating by the Jumpstart Our Business Startups Act (“JOBS Act”). Rule 506(c) permits an issuer to engage in general solicitation or general advertising[1] in offering and selling of securities under Rule 506 provided such issuer reasonably believes and takes “reasonable steps” to …

SEC Shows Commitment to Whistleblower Program Following Second-Ever Whistleblower Award

Simon Riveles SEC, Uncategorized, Whisteblower

By Peter Tyson and Simon Riveles On June 12 2013, the Securities and Exchange Commission (SEC) issued its second-ever whistleblowing award to three anonymous tipsters who helped the SEC enforce an action for fraud against Locust Offshore Management, LLC and its CEO, Andrey Hicks. Two of the tipsters provided information to the SEC regarding the fraudulent offer and sale of shares in the Locust Offshore …

SEC and CFTC Establish Identity Theft Detection and Prevention Guidelines

Simon Riveles CFTC, Cyber-security, Identity Theft, SEC

By Ryan Finn and Simon Riveles In an effort to reduce the ever-increasing threat of identity theft, the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) (together, the “Commissions”) recently adopted the Identity Theft Red Flag Rule ( or Regulation “S-ID”). Broadly speaking, S-ID requires entities regulated by the Commissions that maintain “transaction accounts” to develop and implement a written identity …

SEC Provides Guidelines for Use of Social Media in Compliance with Regulation Fair Disclosure

Simon Riveles Dodd-Frank, Regulation Fair Disclosure, SEC, Social Media

By Ryan Finn and Simon Riveles In the age of Facebook, Twitter and LinkedIn, companies and their executives are increasingly using social media to interact with customers, investors and the public. This rapid change in the way public companies disseminate information has presented challenges for the Securities and Exchange Commission (the “SEC” or the “Commission”) in its application of Regulation FD (Fair Disclosure), which requires …

SEC Grants “Accredited Crowdfunding” Platforms Relief from Broker Dealer Registration

Simon Riveles Broker Dealer Registration, Crowdfunding, Jobs Act, SEC

By Ryan Finn and Simon Riveles In two recent no action letters the SEC granted exemptive relief from broker dealer registration to crowdfunding sites on the basis that the platforms received carried interest rather than transaction base compensation. Although the SEC made it clear that the no-action letters were to be narrowly construed to the specific facts of each case, some commentators extrapolated that the …

SEC Sees Deficiencies in “Custody Rule”: Warns Clients to be Vigilant.

Simon Riveles Custody Rule, Investment Advisers, SEC

The Securities and Exchange Commission (the “Commission”) recently issued an Investor Bulletin with guidelines on compliance with its “custody rule” for investment advisers. While the rule is designed to enhance safeguards over client assets, clients still need to be aware of the specific steps taken by their advisers to comply with the rule. Custody relates to the holding of client funds or securities, directly or …

Private Equity Funds Compliance Lapses Lead to SEC Sanctions

Simon Riveles Compliance, Private Equity Fund, SEC

By Ryan Finn and Simon Riveles On March 11th, the SEC announced two decisions involving private equity firms that demonstrate its commitment to emphasizing the important role of compliance in preventing and detecting possible violations of the securities laws.  Although these cases dealt specifically with the activities of private equity firms, the issues raised by the SEC’s decisions were broad enough to be relevant and …