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Investment Adviser Regulation: A Step-by-Step Guide to Compliance and the Law (3rd Edition)

by Clifford E. Kirsch

Last Updated: October 2012

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ISBN Number: 9781402416903
Page Count: 1426
Number of Volumes: 3
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Overview
Table of Contents
LAST UPDATE INFO
TABLE OF AUTHORITIES

At a time of many regulatory changes being made as a result of the economic downturn, the new third edition of Investment Adviser Regulation guides you safely through the maze of Congressional, SEC, and state standards impacting investment advisers as well as helping you understand the practical aspects of building a practice. It clarifies key status issues that determine registration and disclosure duties as well as liability exposure. Specifically, it shows you how to:

File and update Form ADV
Draft advisory contracts
Follow stringent advertising guidelines
Structure compliant soft-dollar arrangements
Meet best execution requirements and other practice standards
Satisfy recordkeeping rules

The new third edition of Investment Adviser Regulation describes Regulation S-AM, which tightens the privacy requirements on client financial information • the various proposals on harmonizing broker-dealer and financial adviser regulation • proposals on increased fiduciary responsibilities • as well as the need for the development of improved risk management systems as a result of recent market disruptions.

Updated at least once a year, Investment Adviser Regulation: A Step-by-Step Guide to Compliance and the Law is a crucial handbook for investment advisers, securities attorneys, compliance personnel, and federal and state regulators, and a useful reference for today's investors.


	Chapter 1:	Overview
§ 1:1 : The Investment Advisory Profession1-2 § 1:2 : Sources of Law1-2 § 1:3 : The Investment Advisers Act of 19401-4 § 1:3.1 : A Glance at the Advisers Act Regulatory Framework1-6 [A] : Registration Under the Investment Advisers Act1-6 [B] : Conduct Standards/Restrictions on Activities1-6 [C] : Attracting Clients1-7 [C][1] : Advertising1-7 [C][2] : Referral Fees1-8 [D] : The Adviser-Client Relationship1-8 [D][1] : Advisory Agreements1-8 [D][2] : Compensation1-8 [D][3] : Suitability1-8 [D][4] : Custody1-8 [D][5] : Proxy Voting1-9 [E] : Brokerage and Trading Pictures1-9 [E][1] : Duty of Best Execution1-9 [E][2] : Soft Dollars1-9 [E][3] : Trading1-10 [F] : Interaction with Municipalities: Pay to Play Practices1-10 [G] : Compliance1-10 [G][1] : Record-Keeping Obligations1-10 [G][2] : Compliance Program: Rule 206(4)-71-11 [G][3] : Insider Trading and Code of Ethics1-11 [G][4] : Privacy1-12 [G][5] : Business Continuity Planning1-12 § 1:4 : State Law1-12 § 1:5 : The Investment Company Act of 19401-12 § 1:6 : The Employee Retirement Income Security Act of 19741-15 § 1:7 : Financial Industry Regulatory Authority (FINRA)1-18 § 1:8 : Private Associations1-18 § 1:9 : A Note About Citations1-19
	Chapter 2:	Investment Adviser Status Questions; And Appendix 2A: The Defunct Private Investment Adviser Exemption
§ 2:1 : Introduction2-3 § 2:2 : Definition Under the Investment Advisers Act2-5 § 2:2.1 : “Engaging in the Business of Advising Others”2-6 [A] : Holding Out2-6 [B] : Special or Additional Compensation2-7 [C] : Specificity and Regularity of Investment Advice2-7 [D] : Advising Others2-8 § 2:2.2 : Providing Advisory Services Concerning Securities2-9 [A] : Concerning Securities2-9 [B] : Judgmental2-10 § 2:2.3 : Advisory Services Provided for “Compensation”2-11 § 2:3 : Entities Excluded from the Definition2-12 § 2:3.1 : Banks and Bank Holding Companies2-12 [A] : Banks and Bank Holding Companies That Act As Advisers to a Registered Investment Company2-13 § 2:3.2 : Lawyers, Accountants, Engineers, and Teachers2-14 § 2:3.3 : Broker-Dealers2-15 [A] : Elements of the Broker-Dealer Exclusion2-19 [A][1] : Solely Incidental2-19 [A][1][a] : 2005 Rulemaking—“Original” Rule 202(a)(11)-12-20 [A][1][a][i] : Circumstances Under Which Services Were Not Incidental Under “Original” Rule 202(a)(11)-12-21 [A][1][b] : FPA Decision—Original Rule 202(a)(11)-1 Vacated2-22 [A][1][c] : 2007 Rulemaking—“New” Proposed Rule 202(a)(11)-12-23 [A][2] : Special Compensation2-24 [A][2][a] : 2005 Rulemaking—“Original” Rule 202(a)(11)-12-25 [A][2][b] : FPA Decision2-25 [A][2][c] : 2007 Rulemaking—Proposed “New” Rule 202(a)(11)-12-26 [B] : Fee-Based Brokerage Programs2-26 [C] : Discount Brokerage Programs (Including Electronic Trading Programs)2-27 [D] : Dual Registrants2-28 [E] : Recent Regulatory Developments2-28 [E][1] : The RAND Report2-28 [E][2] : Calls for Harmonization of Broker-Dealer and Adviser Regulation2-29 [E][2][a] : Background2-29 [E][2][b] : The 2009 Investor Protection Act2-30 [E][2][b][i] : Generally2-30 [E][2][b][ii] : Broker-Dealer Fiduciary Duty2-31 [E][2][b][iii] : Adviser Fiduciary Duty2-31 [E][2][b][iv] : Compensation Practices2-31 [E][2][b][v] : SRO for Investment Advisers2-31 [E][2][c] : The House Proposal2-31 [E][2][d] : Senate Banking Committee Proposal2-32 [E][2][e] : Dodd-Frank Wall Street Reform and Consumer Protection Act of 20102-33 [E][2][e][i] : The SEC Study2-33 [E][2][e][ii] : Review of Comments Submitted2-35 [E][2][e][iii] : SEC Report2-36 [E][2][f] : Practical Implications to Consider—Potential Harmonized Standard of Care2-39 § 2:3.4 : Registered Representatives2-41 [A] : Ability of Registered Representatives to Rely on Broker-Dealer Exclusion2-41 [B] : Registered Representatives Engaging in the Advisory Business2-42 [B][1] : Brokerage Firm Duty to Supervise Representative Advisory Activity2-42 § 2:3.5 : Publishers and Authors2-43 [A] : Investment Website Operators2-45 § 2:3.6 : U.S. Government Obligations2-46 § 2:3.7 : Family Offices2-47 § 2:3.8 : Parties Excluded by SEC Regulation or Order2-48 § 2:4 : Exemptions from Registration2-48 § 2:4.1 : The Intrastate Exemption (Section 203(b)(1))2-49 § 2:4.2 : The Insurance Company Exemption (Section 203(b)(2))2-49 § 2:4.3 : Historical Note: The Defunct Private Investment Adviser Exemption2-49 § 2:4.4 : Foreign Private Adviser Exemption (Section 203(b)(3) and Rule 202(a)(30)-1)2-52 § 2:4.5 : Exemption for Small Business Investment Company Advisers (Section 203(b)(7))2-54 § 2:4.6 : Venture Capital Fund Adviser Exemption (Section 203(l) and Rule 203(l)-1)2-55 § 2:4.7 : Small Private Fund Adviser Exemption2-56 [A] : Exemption Under the Investment Advisers Act (Section 203(m) and Rule 203(m)-1)2-56 [B] : NASAA’s Proposed Model Rule2-57 § 2:4.8 : Charitable Organization Exemption (Section 203(b)(4))2-57 § 2:4.9 : Exemption for Commodity Trading Adviser (Section 203(b)(6))2-58 § 2:5 : Specific Contexts2-58 § 2:5.1 : Financial Planners2-58 § 2:5.2 : General Partner in a Limited Partnership2-60 § 2:5.3 : Affiliates of a Registered Investment Adviser2-61 [A] : Insurance Companies2-62 [B] : The Richard Ellis No-Action Letter2-63 [C] : Foreign Advisers2-64 [D] : Special Purpose Vehicles2-66 § 2:5.4 : Real Estate Advisers to Pension Plans2-67 § 2:5.5 : Financial Advisors to Municipal Issuers2-68 [A] : Municipal Advisor Rule2-70 Appendix 2A : The Defunct Private Investment Adviser ExemptionApp. 2A-1
	Chapter 3:	The Jurisdictional Divide Between the SEC and the States
§ 3:1 : Introduction3-2 § 3:2 : Determining Whether an Adviser Is Subject to SEC Registration or State Registration3-3 § 3:2.1 : Buffer for Mid-Sized Advisers3-7 § 3:2.2 : The “Regulatory Assets Under Management” Test3-7 [A] : Securities Portfolio3-7 [B] : Continuous and Regular Supervisory or Management Services3-8 § 3:2.3 : Advisers Exempt from the Prohibition on SEC Registration3-9 [A] : Pension Consultants; Affiliates of SEC Advisers; and Newly Formed Advisers Expecting to Be Eligible for SEC Registration3-10 [B] : Multi-State Investment Advisers3-11 [C] : Internet Investment Advisers3-11 § 3:2.4 : Annual Filing3-12 § 3:3 : What Authority Do States Have over SEC-Registered Advisers?3-12 § 3:4 : What Authority Does the SEC Have with Respect to State-Registered Advisers?3-13 § 3:5 : To Which State Law Is a State-Registered Adviser Subject?3-14 § 3:6 : Are Individuals Working for SEC-Registered Advisers Subject to State Regulation?3-15 § 3:6.1 : Investment Adviser Representative3-16 [A] : Definition of Investment Adviser Representative3-16 [A][1] : Supervised Person3-16 [A][2] : The Ten-Percent Test3-16 [B] : Place of Business3-17 § 3:6.2 : Solicitors to SEC-Registered Advisers3-18 § 3:7 : Are Individuals Who Work for State-Registered Advisers Subject to State Regulation?3-19 § 3:8 : Are Individuals Who Work for State-Registered Advisers Subject to SEC Regulation?3-19
	Chapter 4:	Investment Adviser Registration and Disclosure: The Form ADV; And Chapter 4A: Form of Organization
§ 4:1 : Introduction4-3 § 4:2 : Registration: Form ADV Part 1A4-5 § 4:2.1 : Adviser Background Information (Items 1–4)4-5 § 4:2.2 : The Adviser’s Business (Items 5–6)4-5 § 4:2.3 : Conflicts of Interest and Private Fund Reporting (Items 7–8)4-6 § 4:2.4 : Custody (Item 9)4-8 § 4:2.5 : Persons Controlling the Adviser (Item 10)4-9 § 4:2.6 : Disciplinary History (Item 11)4-9 § 4:2.7 : Small Business (Item 12)4-9 § 4:3 : Form ADV Part 1B4-9 § 4:4 : Client Disclosure: Form ADV Part 24-10 § 4:4.1 : Prior Framework—Pre-20104-10 [A] : Delivery Requirements Under ADV Part II4-10 [A][1] : Requirement to Deliver ADV Part II to Private Fund Investors4-11 [B] : Completing ADV Part II4-12 [B][1] : Adviser Background and Information4-12 [B][2] : Other Activities4-13 [B][3] : Participation or Interest in Client Transactions4-13 [B][4] : Investment or Brokerage Discretion4-13 [B][5] : Additional Compensation4-14 [B][6] : Disclosure of Balance Sheet4-14 [B][7] : Code of Ethics4-15 § 4:4.2 : Recent Amendments to ADV Part II4-15 [A] : The 2000 Proposal4-15 [B] : The 2008 Re-Proposal4-16 [C] : The 2010 ADV Part 2 Amendments4-16 [C][1] : Background4-16 [C][2] : Part 2A: The Brochure—Items That Need to Be Included4-17 [C][2][a] : Item 1: Cover Page4-17 [C][2][b] : Item 2: Material Changes4-17 [C][2][c] : Item 3: Table of Contents4-18 [C][2][d] : Item 4: Advisory Business4-18 [C][2][e] : Item 5: Fees and Compensation4-18 [C][2][f] : Item 6: Performance-Based Fees and Side-by-Side Management4-19 [C][2][g] : Item 7: Types of Clients4-19 [C][2][h] : Item 8: Methods of Analysis, Investment Strategies and Risk of Loss4-19 [C][2][i] : Item 9: Disciplinary Information4-20 [C][2][j] : Item 10: Other Financial Industry Activities and Affiliations4-20 [C][2][k] : Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading4-20 [C][2][l] : Item 12: Brokerage Practices4-21 [C][2][m] : Item 13: Review of Accounts4-21 [C][2][n] : Item 14: Client Referrals and Other Compensation4-21 [C][2][o] : Item 15: Custody4-21 [C][2][p] : Item 16: Investment Discretion4-21 [C][2][q] : Item 17: Voting Client Securities4-22 [C][2][r] : Item 18: Financial Information4-22 [C][2][s] : Item 19: Requirements for State-Registered Advisers4-22 [C][3] : Part 2A: Appendix 1—The Wrap-Fee Program Brochure4-23 [C][4] : Part 2B: The Brochure Supplement4-23 [C][4][a] : Generally4-23 [C][4][b] : Covered Advisory Personnel4-23 [C][4][c] : Required Items4-23 [C][5] : Delivery Requirements4-25 [C][5][a] : Brochure4-25 [C][5][a][i] : Initial Delivery4-25 [C][5][a][ii] : Annual Delivery4-25 [C][5][a][iii] : Interim Delivery4-26 [C][5][b] : Brochure Supplement4-26 [C][6] : Updating Requirements4-27 [C][6][a] : Brochure4-27 [C][6][b] : Brochure Supplement4-27 [C][7] : Extension of Compliance Effective Date for Brochure Supplements4-27 § 4:5 : Financial and Disciplinary Information4-28 § 4:5.1 : 2010 Amendments4-28 § 4:5.2 : Prior to the 2010 ADV Amendments: Rule 206(4)-44-28 § 4:6 : SEC Approval of the Adviser’s Form ADV4-30 § 4:7 : Duty to Maintain Current Form ADV4-30 § 4:8 : Termination of Registration4-31 § 4:9 : Electronic Filing Requirement—The Investment Adviser Registration Depository4-32 § 4:9.1 : Electronic Filings by SEC-Registered Advisers4-32 § 4:9.2 : Electronic Filings by State-Registered Advisers4-33 § 4:9.3 : Investment Adviser Representative Filings4-33 § 4:9.4 : Public Access to the IARD4-33 § 4:9.5 : Electronic Filing of an Adviser’s Customer Disclosure Document (ADV Part 2)4-33 § 4A:1 : Introduction4A-2 § 4A:2 : Whether to Form a Legal Entity4A-2 § 4A:2.1 : Sole Proprietorship4A-2 [A] : Advantages of a Sole Proprietorship4A-3 [B] : Disadvantages of a Sole Proprietorship4A-3 § 4A:2.2 : Legal Entity4A-3 § 4A:3 : Types of Legal Entities4A-4 § 4A:3.1 : Corporation4A-4 [A] : C Corporation4A-4 [A][1] : Advantages of a C Corporation4A-4 [A][2] : Disadvantages of a C Corporation4A-5 [B] : S Corporation4A-5 [B][1] : Advantages of an S Corporation4A-5 [B][2] : Disadvantages of an S Corporation4A-5 [C] : Shareholder Liability4A-6 § 4A:3.2 : Limited Liability Company4A-6 § 4A:3.3 : Partnership4A-7 [A] : General Partnership versus Limited Partnership4A-7 [B] : Limited Liability Partnership4A-8 § 4A:3.4 : Business Trust4A-9 § 4A:4 : Selecting the Form of Entity4A-9 § 4A:4.1 : Choosing the Best Form of Entity4A-9 § 4A:4.2 : Number of Entities4A-10 § 4A:5 : Naming the Business4A-11 § 4A:5.1 : Name Availability4A-11 § 4A:5.2 : Reserving the Name4A-12 § 4A:6 : Where to Form the Entity4A-12 § 4A:6.1 : Advantages of Home State4A-13 § 4A:6.2 : Advantages of Delaware4A-13 § 4A:6.3 : Organizing the Entity in a State Other Than Its Location4A-13 § 4A:7 : Setting Up the Entity4A-14 § 4A:7.1 : Setting Up a Corporation4A-14 § 4A:7.2 : Setting Up an LLC4A-15 § 4A:7.3 : Setting Up a Partnership4A-15 § 4A:7.4 : Setting Up a Business Trust4A-16 § 4A:8 : Employer Identification Number4A-16 § 4A:9 : Governing Agreement4A-16 § 4A:10 : Business Formalities4A-17 § 4A:11 : Other Considerations4A-18
	Chapter 5:	Referrals
§ 5:1 : Introduction5-2 § 5:2 : Rule 206(4)-35-2 § 5:2.1 : Scope of the Rule5-2 [A] : Generally5-2 [B] : Solicitor versus Adviser5-3 [C] : What Is Solicitation Activity?5-4 [C][1] : Generally5-4 [C][2] : Collective Investment Vehicles5-4 [D] : When Is a Fee Deemed to Be Paid to Cover Solicitation Activity?5-5 § 5:2.2 : Qualification Requirements5-5 § 5:2.3 : Written Agreement Requirement5-6 § 5:2.4 : Disclosure and Other Additional Requirements5-6 [A] : Generally5-6 [B] : Third-Party Solicitation Arrangements5-7 [C] : Affiliated Solicitors5-8 [D] : Impersonal Advisory Services5-8 § 5:3 : Status of the Solicitor5-8 § 5:3.1 : Registration Under the Investment Advisers Act5-8 § 5:3.2 : Registration and Licensing Under State Law5-9 [A] : Solicitor to an SEC-Registered Adviser5-9 [B] : Solicitor to a State-Registered Adviser5-9 § 5:4 : Duty to Supervise Solicitation Activity5-10
	Chapter 6:	Advertising by Investment Advisers
§ 6:1 : Introduction6-2 § 6:2 : Investment Advisers Act Rule 206(4)-16-2 § 6:2.1 : Definition of “Advertisement”6-2 § 6:2.2 : The Rule’s Framework6-4 § 6:2.3 : Testimonials6-5 § 6:2.4 : Past Specific Recommendations6-7 [A] : SEC Staff Interpretative Positions6-7 § 6:2.5 : Automatic Selection Devices6-9 § 6:2.6 : Free Services6-9 § 6:2.7 : Catchall Category6-9 § 6:3 : Performance Advertising6-9 § 6:3.1 : Public Communications of Model Performance6-11 § 6:3.2 : Public Communications of Actual Performance6-12 [A] : Which of the Adviser’s Accounts Must Be Included in Determining Actual Performance6-12 [B] : Conditions Imposed on Actual Performance6-13 § 6:3.3 : One-on-One Presentations of Model and Actual Performance6-14 § 6:4 : SEC Enforcement Focus on Misleading Advertisements6-15 § 6:5 : Investment Company Advertising6-17 § 6:5.1 : Rule 482 Advertisements6-18 § 6:5.2 : Generic Advertisements6-18 § 6:5.3 : Supplemental Sales Literature6-18 § 6:5.4 : NASD Rules6-18
	Chapter 7:	Practical Considerations for Performance Advertising by Advisers
§ 7:1 : Introduction7-2 § 7:2 : Performance Advertising7-3 § 7:2.1 : General Requirements7-4 § 7:2.2 : Model Performance7-6 § 7:2.3 : Hypothetical Backtested Performance7-7 § 7:2.4 : Gross-of-Fee and Net-of-Fee Performance7-9 [A] : Net-of-Fee Performance7-9 [B] : Gross-of-Fee Performance7-9 [B][1] : One-on-One Presentations7-9 [B][2] : Consultants7-10 [B][3] : Side-by-Side Gross and Net-of-Fee Performance7-10 § 7:2.5 : Model Fees7-11 § 7:2.6 : Portability7-12 § 7:2.7 : Record-Keeping7-14 § 7:2.8 : Advertising Policies and Procedures7-17 § 7:3 : Global Investment Performance Standards (GIPS®)7-19 § 7:3.1 : General Background7-20 [A] : Overview of the Standards7-20 [B] : Interpretation of the Standards7-21 [C] : Enforcement of the Standards7-22 § 7:3.2 : Fundamentals of Compliance7-23 [A] : Definition of the Firm7-23 [A][1] : General Guidelines7-23 [A][2] : Redefinition of the Firm7-25 [A][3] : Total Firm Assets7-26 [A][4] : Sub-Advisors7-27 [B] : GIPS Policies and Procedures7-27 [C] : Claim of Compliance7-28 [D] : Firm Fundamental Responsibilities7-28 § 7:3.3 : Input Data7-29 § 7:3.4 : Calculation Methodology7-31 § 7:3.5 : Constructing Composites7-32 [A] : Carve-Outs7-36 [A][1] : General Requirements7-36 [A][2] : Cash Allocation Requirements7-37 [A][3] : Required Disclosures7-39 § 7:3.6 : Disclosures7-39 § 7:3.7 : Presentation and Reporting7-42 [A] : Performance Record Portability7-45 [B] : Supplemental Information7-49 § 7:3.8 : Advertising Guidelines7-50 § 7:3.9 : Verification7-52
	Chapter 8:	Standard of Care
§ 8:1 : Introduction8-2 § 8:2 : Chronology—Regulatory Response to Convergence of Broker-Dealer and Advisory Services8-2 § 8:3 : Standard of Care Imposed Under the Current Regulatory Structure8-4 § 8:4 : Treatment of Broker-Dealers Under the Advisers Act8-6 § 8:4.1 : Generally8-6 § 8:4.2 : RAND Report8-6 § 8:5 : Harmonizing the Broker-Dealer and Investment Adviser Standard of Care8-7 § 8:6 : Legislative Proposals8-8 § 8:6.1 : Investor Protection Act of 20098-8 § 8:6.2 : House Proposal8-9 § 8:6.3 : Senate Banking Committee Proposal8-10 § 8:6.4 : Dodd-Frank Wall Street Reform and Consumer Protection Act of 20108-10 [A] : The SEC Study8-13 [B] : The GAO’s Financial Planner Study8-16 § 8:7 : Practical Implications to Consider8-17 § 8:8 : Separate Department of Labor Proposed Rule— Definition of the Term “Fiduciary”8-18
	Chapter 9:	The Advisory Contract
§ 9:1 : Introduction9-1 § 9:2 : Fees9-2 § 9:3 : Scope of Services9-3 § 9:4 : Conflicts of Interest9-4 § 9:5 : Administrative Issues9-4 § 9:6 : Liability9-5 § 9:7 : Controversies and Dispute Resolution9-5 § 9:8 : Representations and Acknowledgments9-7 § 9:9 : Terminating, Assigning, and Amending9-7
	Chapter 10:	Investment Adviser Compensation
§ 10:1 : Introduction10-2 § 10:2 : Disclosure Requirements Under the Investment Advisers Act10-3 § 10:3 : SEC Staff Positions10-3 § 10:3.1 : Reasonableness of the Fee Amount10-3 § 10:3.2 : Percentage Guidelines10-4 § 10:3.3 : Fees Received in Connection with Affiliated Mutual Funds10-4 § 10:4 : Imposition of Fees Upon the Termination of an Advisory Relationship10-5 § 10:5 : Performance Fees10-6 § 10:5.1 : Relevant Statutory and Rule Language10-7 § 10:5.2 : Types of Compensation Arrangements Falling Within Performance Fee Prohibition10-15 [A] : Direct Incentive Fees10-15 [B] : Contingent Fee Arrangements10-15 [C] : Mutual Fund Fee Arrangements10-16 § 10:5.3 : Exceptions10-17 [A] : Exception for Asset-Based Fees10-17 [B] : Exception for Fulcrum Fees10-17 [B][1] : Appropriateness of Index10-18 [B][2] : Period over Which Performance Is Measured10-19 [C] : Exception for Wealthy Clients10-20 [C][1] : The 2011–2012 Threshold Adjustments10-21 [D] : Qualified Purchaser Fund10-23 [E] : Foreign Clients10-23 § 10:6 : Performance Fees Under ERISA10-24 § 10:7 : Performance Fees: Dually Registered Broker-Dealers/Investment Advisers10-24
	Chapter 11:	Custody and Protection of Customer Accounts
§ 11:1 : Introduction11-2 § 11:2 : Text of Advisers Act Rule 206(4)-211-4 § 11:3 : Arrangements Where an Adviser Has Custody11-11 § 11:3.1 : Determining Custody Prior to the 2003 and 2010 Amendments to Rule 206(4)-211-12 [A] : Automatic Deduction of Advisory Fees11-12 [B] : Affiliates11-13 § 11:3.2 : Current Definition of “Custody” (As Defined Under the 2003 and 2010 Amendments)11-14 [A] : Possession of Client Funds or Securities11-14 [B] : Authority to Withdraw Funds or Securities Maintained with a Custodian11-15 [B][1] : Automatic Deduction of Advisory Fees11-15 [C] : Legal Ownership—Pooled Investment Vehicles and Trusts11-16 [D] : Affiliates of the Adviser11-16 § 11:4 : Rule 206(4)-2 Controls11-16 § 11:4.1 : Requirements Prior to the 2003 Amendments11-16 § 11:4.2 : Current Requirements (Requirements Imposed Pursuant to the 2003 and 2010 Amendments)11-18 [A] : Assets Must Be Held by a Qualified Custodian11-18 [A][1] : Exception for Mutual Fund Shares Purchased Directly from Transfer Agent11-18 [A][2] : Privately Offered Securities11-19 [B] : Notice11-19 [C] : Delivery of Account Statements to Clients11-19 [D] : Surprise Audit Requirement11-20 [D][1] : Hiring of an Independent Public Accountant11-20 [D][2] : Contents of Written Agreement with an Independent Public Accountant11-20 [D][3] : Conducting the Surprise Examination11-21 [E] : Internal Control Report11-22 [E][1] : Form of the Internal Control Report11-22 [F] : Exceptions11-23 [F][1] : Advisers to Limited Partnerships11-23 [F][2] : Advisers to Registered Investment Companies11-24 § 11:4.3 : Treatment of Dually Registered Investment Advisers/Broker-Dealers Under the Rule11-24 § 11:5 : Custody of Mutual Fund Assets11-24
	Chapter 12:	Investment Restrictions
§ 12:1 : Introduction12-1 § 12:2 : Establishment of Investor Guidelines12-2 § 12:2.1 : Generally12-2 § 12:2.2 : Enforcement Actions12-3 § 12:3 : Suitability Under the Advisers Act12-4 § 12:3.1 : Generally12-4 § 12:3.2 : Proposed Adviser Suitability Rule12-5 § 12:3.3 : Churning12-6 § 12:4 : Investment Restrictions Under the Investment Company Act12-6 § 12:4.1 : Generally12-6 § 12:4.2 : Investments in Other Investment Companies12-7 § 12:4.3 : Investing in Securities-Related Business12-9 § 12:4.4 : Liquidity12-10 § 12:4.5 : Diversification Requirements12-11 § 12:4.6 : Leveraged Investments12-11 § 12:5 : ERISA12-12
	Chapter 13:	Proxy Voting
§ 13:1 : Introduction13-2 § 13:2 : Requirements Under the Advisers Act: Rule 206(4)-613-3 § 13:2.1 : Written Policies and Procedures13-4 § 13:2.2 : Disclosures to Clients About How to Obtain Voting Information13-6 § 13:2.3 : Describe Policies and Procedures13-6 § 13:2.4 : Record Keeping13-6 § 13:3 : Requirements Under the Investment Company Act13-6 § 13:3.1 : Funds Covered Under the Rules13-6 § 13:3.2 : Disclosure of Proxy Voting Policies and Procedures13-7 [A] : Whose Policies and Procedures Are Required to Be Disclosed?13-7 [B] : What Type of Disclosure Is Required About the Policies and Procedures?13-7 § 13:3.3 : Disclosure of Actual Voting Records13-8 [A] : Mechanism for Disclosing Voting Record to SEC13-9 [B] : Mechanism for Disclosing Voting Record to Shareholders13-9 § 13:4 : DOL Interpretive Bulletin 94-213-10
	Chapter 14:	Privacy of Client Financial Information: An Overview
§ 14:1 : Introduction14-2 § 14:2 : Scope of Coverage14-2 § 14:2.1 : Which Advisers Are Subject to Regulation S-P?14-2 § 14:2.2 : What Type of Information Is Covered?14-3 [A] : Personally Identifiable Financial Information14-3 § 14:2.3 : Which Advisory Clients Are Covered?14-3 [A] : Individuals14-3 [B] : Application to Institutions14-4 § 14:3 : Privacy and Opt-Out Notices14-4 § 14:3.1 : Requirement to Provide Initial Privacy Notice14-4 [A] : Who Is a Consumer?14-4 [B] : Who Is a Customer?14-4 § 14:3.2 : Requirement to Provide Annual Privacy Notice to Customer14-5 § 14:3.3 : Requirement to Provide Revised Notice14-5 § 14:3.4 : Information Required to Be Included in Privacy Notices14-5 § 14:3.5 : Manner of Delivery14-6 § 14:4 : Opt-Out Requirements14-6 § 14:4.1 : Form of Opt-Out Notice14-7 § 14:4.2 : Exercising the Right to Opt Out14-7 § 14:5 : Exceptions14-7 § 14:6 : Required Procedures14-8 § 14:6.1 : Safeguard Rule14-8 § 14:6.2 : Proper Disposal of Consumer Information14-9 § 14:6.3 : 2008 Rulemaking Proposal14-9 § 14:7 : Regulation S-AM14-10
	Chapter 15:	Practical Implications Regarding the Safeguarding of Customer Information
§ 15:1 : Introduction15-2 § 15:2 : SEC Investigations and Enforcement15-5 § 15:2.1 : Improper Recruiting Practices15-6 [A] : NEXT Financial Group, Inc.15-6 [B] : Woodbury Financial Services, Inc.15-8 § 15:2.2 : Unsecure Disposal of Client Records: J.P. Turner & Co. LLC15-8 § 15:2.3 : Insufficient Antivirus Protection: Commonwealth Equity Services, LLP15-9 § 15:2.4 : Fraudulent Use of Client Information15-9 [A] : SEC v. Mondschein & UNCI, Inc.15-9 [B] : Merriman Curhan Ford & Co.15-10 § 15:2.5 : Inadequate Server and Web Portal Security15-11 [A] : LPL Financial Corp.15-11 [B] : D.A. Davidson & Co.15-12 [C] : Lincoln Financial Securities Inc.15-12 § 15:2.6 : Supervisors/Executives Accountable: Gunn Allen Financial15-13 § 15:3 : FINRA Enforcement Actions15-13 § 15:3.1 : Transmitting Information to Non-Affiliates: Jeffrey N. Lombardi15-13 § 15:3.2 : Failure to Safeguard Hard Copy Records: Hernan Chassy, Jr.15-14 § 15:3.3 : Failure to Update Written Supervisory Procedures: Patrick Walker15-14 § 15:4 : FINRA Guidance15-15 § 15:4.1 : Registered Representatives Changing Firms: Regulatory Notice 07-3615-15 § 15:4.2 : FINRA Rules: Information Encryption Requirements: FINRA Rule 821015-16 § 15:5 : SEC Regulation S-P Safeguards Rule—Proposed Amendments15-16 § 15:5.1 : Information Security Programs15-19 [A] : Generally15-19 [B] : Internal and External Risk Assessment15-20 [C] : Developing Safeguarding Policies15-20 [D] : Additional ISP Safeguards15-22 § 15:5.2 : Responding to Unauthorized Access or Use of Personal Information15-23 § 15:5.3 : Disposal of Personal Information15-23 § 15:5.4 : Record-Keeping15-24 § 15:5.5 : Additional Exception to Notice and Opt-Out Requirements—Limited Information Disclosure When Personnel Leave Their Firms15-24 § 15:6 : States’ Efforts to Safeguard Customer Information15-26 § 15:6.1 : Breach Notice Statutes15-26 § 15:6.2 : Security Freeze Laws15-27 § 15:6.3 : Social Security Number Protection Laws15-27 § 15:6.4 : Disposal of Personal Information Laws15-28 § 15:6.5 : Encryption Statutes15-28 § 15:7 : Red Flags Rule: Identity Theft Prevention Programs15-28 § 15:8 : Implementing Policies and Procedures15-29 § 15:9 : Safeguarding Examinations15-31 § 15:10 : Conclusion15-32
	Chapter 16:	Selecting the Broker
§ 16:1 : Introduction16-1 § 16:2 : Who Selects the Broker?16-1 § 16:3 : Duty of Best Execution16-2 § 16:4 : SEC Review of Best Execution16-3 § 16:4.1 : Internal Controls16-3 § 16:5 : Conflicts of Interest16-4
	Chapter 17:	Soft Dollars
§ 17:1 : Introduction17-2 § 17:2 : Section 28(e)17-4 § 17:2.1 : Eligible Research17-6 [A] : Research17-6 [B] : Meetings17-7 [C] : Data and Software17-7 [D] : Research and Ratings17-7 [E] : Mass-Marketed Publications17-7 [F] : Tangible Products and Services17-7 [G] : Proxy Services17-7 § 17:2.2 : Eligible Brokerage17-8 § 17:3 : Mixed-Use Products17-9 § 17:4 : Third-Party Research17-11 § 17:5 : Types of Securities Transactions Falling Within the Safe Harbor17-11 § 17:5.1 : 2001 SEC Position Extending Section 28(e) to NASDAQ Trades17-12 § 17:6 : Special Considerations with Respect to Pension Plans17-12 § 17:7 : Special Considerations with Respect to Mutual Funds17-13 § 17:7.1 : Board Approval17-13 § 17:7.2 : Disclosure Obligations17-16 § 17:7.3 : Acquiring Items Outside Section 28(e)17-17 § 17:8 : Form ADV Disclosure17-17 § 17:9 : Compliance Obligations17-18 § 17:10 : Other SEC Initiatives17-19 § 17:10.1 : 1998 SEC Staff Report on Soft Dollar Practices17-19 § 17:10.2 : SEC Enforcement Activity17-19 [A] : Enforcement Cases Against Advisers17-19 [B] : Enforcement Cases Against Broker-Dealers17-20
	Chapter 18:	Affiliated Brokerage
§ 18:1 : Introduction18-1 § 18:2 : Regulation Under Investment Advisers Act18-2 § 18:3 : Regulation Under Other Statutes18-2
	Chapter 19:	Trading Conflicts
§ 19:1 : Introduction19-2 § 19:2 : The Regulation of Principal and Agency Cross-Transactions Under Section 206(3)19-3 § 19:2.1 : The Scope of Section 206(3)’s Coverage19-3 [A] : Whether Section 206(3) Reaches Affiliates of the Adviser?19-4 [B] : What Is the Meaning of Purchase or Sale of a Security?19-4 [C] : What Types of Principal Trades Are Subject to Section 206(3)?19-5 [D] : When Is an Entity Entitled to Rely on the Exception for a Broker-Dealer Not Acting As an Investment Adviser in Connection with a Transaction?19-6 [E] : When Is an Adviser Acting As a Broker in Effecting a Transaction?19-7 [E][1] : Cross-Trades Effected Through Independent Broker19-7 [E][2] : Cross-Trades Effected Through the Adviser19-7 § 19:2.2 : Effecting Principal and Agency Cross-Transactions Under Section 206(3): The Requirement of Informed Client Consent19-8 [A] : Required Disclosure19-8 [B] : Timing of Required Disclosure and Client Consent19-9 [C] : Frequency with Which Client Consent Must Be Obtained19-9 [D] : Ability of Client to Withhold Consent19-10 [E] : Means of Obtaining Consent19-10 § 19:3 : Requirements Under Other Regulations19-10 § 19:3.1 : Requirements Under the Investment Company Act19-10 [A] : Principal Trades19-10 [B] : Agency Trades19-11 § 19:3.2 : Requirements Under ERISA19-11 [A] : Principal Transactions19-11 [B] : Agency Cross-Transactions19-11 § 19:4 : Exemptive Rules Under the Advisers Act19-12 § 19:4.1 : Rule 206(3)-2: Agency Cross-Transactions19-12 § 19:4.2 : Rule 206(3)-1: Impersonal Advisory Services19-13 § 19:4.3 : Temporary Rule 206(3)-3T19-13 § 19:5 : Aggregating Client Trades19-15
	Chapter 20:	Investment Adviser Trading Desk Activities
§ 20:1 : Introduction20-2 § 20:2 : Identification and Monitoring of Conflicts20-3 § 20:3 : Managing the Conflicts20-4 § 20:3.1 : Allocation of Investment Opportunity20-4 [A] : Identifying the Conflicts20-4 [B] : Managing Trade Aggregation and Investment Opportunity Conflicts20-5 [C] : Side-By-Side Portfolio Management20-12 § 20:3.2 : Best Execution20-13 [A] : The Adviser’s Obligation20-13 [B] : Best Practices in Seeking Best Execution20-14 [C] : Choosing a Broker/Dealer20-15 [D] : Testing for Best Execution20-16 [E] : Use of Brokerage Committees20-17 § 20:3.3 : Soft Dollars20-17 [A] : Background20-18 [B] : The 2006 Release—The Analytical Framework for Applying Section 28(e)20-19 [B][1] : Test 1: Does the Product or Service Fall Within the Specific Statutory Limits of Section 28(e)(3)(A), (B), or (C)?20-19 [B][1][a] : Research Services—The “Advice, Analyses and Reports” Test20-19 [B][1][b] : Market Research20-21 [B][1][c] : Mass-Marketed Publications20-22 [B][1][d] : Brokerage Services—The Temporal Test20-22 [B][2] : Test 2—The Lawful and Appropriate Assistance Test20-24 [B][3] : Test 3—The Cost Test20-24 [B][3][a] : Mixed-Use Items20-24 [B][3][b] : Third-Party Research and Commission Sharing Arrangements20-25 [B][3][c] : Comparison with the United Kingdom FSA Soft Dollar Standards20-27
	Chapter 21:	Trading Errors
§ 21:1 : Introduction21-1 § 21:2 : What Is a Trade Error?21-2 § 21:3 : Error Correction Policies and Procedures21-3 § 21:3.1 : What Should Be Included in Trade Error Polices and Procedures?21-4 § 21:3.2 : Should Polices and Procedures Be Disclosed?21-5 § 21:3.3 : When Should Errors Be Corrected?21-6 § 21:4 : Who Should Bear the Cost of Trade Errors?21-7 § 21:4.1 : Can Clients Absorb Losses Resulting from Errors?21-7 § 21:4.2 : Can Advisers Retain Gains Resulting from Errors?21-8 § 21:4.3 : Error Accounts21-9 § 21:5 : Can an Adviser Use Soft Dollars to Correct Errors?21-11
	Chapter 22:	Compliance Policies and Procedures
§ 22:1 : Background22-2 § 22:1.1 : Text of Rule 206(4)-722-2 § 22:1.2 : Coverage22-3 § 22:2 : Adoption and Implementation of Written Policies and Procedures22-3 § 22:2.1 : Required Scope of Written Policies and Procedures22-3 § 22:2.2 : Format22-4 § 22:2.3 : Written Supervisory Procedures22-5 § 22:3 : Annual Review22-5 § 22:4 : Documenting the Annual Review22-5 § 22:4.1 : Documenting the Review’s Findings22-6 § 22:4.2 : Reporting22-7 § 22:5 : Chief Compliance Officer22-7 § 22:6 : Record Keeping22-8 § 22:7 : Requirements Under the Investment Company Act22-8 § 22:7.1 : Text of Rule 38a-122-8 § 22:7.2 : Adoption and Implementation of Written Policies and Procedures22-11 [A] : Required Scope of Written Policies and Procedures22-11 [B] : Oversight of Service Providers’ Policies and Procedures22-13 § 22:7.3 : Board Approval of Written Policies and Procedures22-14 § 22:7.4 : Annual Review22-14 § 22:7.5 : Chief Compliance Officer22-15 [A] : CCO Competency; Seniority in Organization22-15 [B] : CCO Independence from Fund Management22-15 [C] : CCO Report and Meeting with the Board22-15 [D] : Oversight of Service Providers22-16 § 22:7.6 : Record Keeping22-16 § 22:7.7 : Treatment of Unit Investment Trusts Under the Rule22-17
	Chapter 23:	The Role of the Investment Adviser Chief Compliance Officer	Domenick Pugliese ~ Paul, Hastings, Janofsky & Walker LLP
§ 23:1 : Introduction23-2 § 23:2 : Requirements of Rule 206(4)-723-3 § 23:3 : The CCO’s Responsibilities Under Rule 206(4)-723-3 § 23:3.1 : The Risk/Reward Equation23-3 § 23:3.2 : Contrasting the CCO’s Duties and Responsibilities with the Adviser’s Duties and Responsibilities23-4 § 23:4 : Structuring the CCO Position—Limiting Liability23-6 § 23:4.1 : CCO Qualifications and Competence23-7 § 23:4.2 : Resource Availability23-8 § 23:4.3 : CCO Indemnification and Insurance23-9 § 23:5 : The CCO and Risk Management23-9 § 23:6 : The Annual Review Process23-10 § 23:6.1 : Compliance Risk Assessment23-11 § 23:6.2 : Testing Methodologies23-12 [A] : Transactional Testing23-12 [B] : Periodic Testing (Retesting Data)23-13 [C] : Forensic Testing (Trend Analysis)23-13 § 23:7 : Post-Annual Review23-14
	Chapter 24:	Conducting an Investment Company/Adviser Compliance Review; And Appendices 24A-24B
§ 24:1 : Introduction24-2 § 24:2 : Defining the Content of an Annual Compliance Review24-5 § 24:2.1 : Guidance from Auditing Standards24-5 § 24:3 : A Plan for an Annual Compliance Review24-8 § 24:3.1 : Assess the Culture of Compliance24-8 § 24:3.2 : Perform a “Gap” Analysis of the Compliance Procedures24-9 § 24:3.3 : Interviews of Key Personnel and Certifications24-9 § 24:3.4 : Testing24-10 § 24:3.5 : Follow Existing Procedures24-16 § 24:3.6 : Email Review24-16 § 24:3.7 : Testing the Compliance Procedures of Third Parties24-16 § 24:3.8 : The Haunting Challenge of the Market Timing Scandal24-17 § 24:4 : Documenting the Annual Review24-19 § 24:5 : Preserving Confidentiality24-21 § 24:5.1 : The Attorney-Client Privilege24-21 § 24:5.2 : Work Product Doctrine24-22 § 24:5.3 : Self-Evaluative Privilege24-22 § 24:5.4 : Limitations of Possible Confidentiality24-23 § 24:6 : What Compliance Deficiencies Can Be Deemed Immaterial24-24 § 24:7 : Appropriate Remedial Measures When Problems Are Detected24-24 § 24:7.1 : Properly Investigate the Alleged Violation24-25 § 24:7.2 : Stop All Violative Conduct24-26 § 24:7.3 : Disclosing Violations24-26 [A] : Disclosure to the Regulators24-26 [B] : Disclosure to Clients24-27 § 24:7.4 : Compensating Clients for Injury24-28 § 24:7.5 : Disciplining Wrongdoers24-28 § 24:7.6 : Learning from Mistakes: Improving the Compliance System24-30 § 24:8 : Ethical Issues in Conducting Compliance Reviews24-30 § 24:8.1 : Code of Ethics of the Institute of Internal Auditors24-30 § 24:8.2 : CFA Institute24-31 § 24:8.3 : The AICPA24-32 § 24:8.4 : Difficult Issues in Developing a Code of Ethics for Compliance Professionals24-33 § 24:9 : Liability for a Defective Annual Review24-39 § 24:9.1 : Statutory Obligation to Supervise24-40 § 24:9.2 : Special Statutory Obligations to Supervise24-41 § 24:9.3 : Supervision As a Defense to Liability24-42 [A] : Control Person Liability and Liability in SEC Actions24-42 [B] : Directors’ Duty of Care24-44 [C] : Federal Sentencing Guidelines24-45 § 24:9.4 : Business Considerations24-45 Appendix 24A : Guidance on the Elements of a Successful Compliance ProgramApp. 24A-1 Appendix 24B : Detailed Descriptions of Possible Compliance TestsApp. 24B-1
	Chapter 25:	Business Continuity Planning
§ 25:1 : Introduction25-1 § 25:2 : Text of FINRA Rule 437025-2 § 25:3 : Business Continuity Plan Requirements25-4 § 25:3.1 : Coverage and Required Elements25-4 [A] : Reliance on a Parent Corporation’s Plan25-5 [B] : Reliance on Others25-6 § 25:3.2 : Approval, Updating, and Annual Review25-6 § 25:3.3 : Customer Disclosure Requirements25-6 [A] : Plan Modifications25-7 § 25:4 : Emergency Contact Information25-7
	Chapter 26:	Anti-Money Laundering Requirements for Investment Advisers
§ 26:1 : Introduction26-2 § 26:2 : Overview of Money Laundering26-3 § 26:2.1 : The Money Laundering Process26-3 § 26:2.2 : Use of Investment Advisers in the Money Laundering Process26-3 § 26:3 : Legal Requirements for Investment Advisers26-4 § 26:3.1 : Criminal Money Laundering Laws26-4 § 26:3.2 : The Bank Secrecy Act26-5 § 26:3.3 : Reporting Requirements26-6 [A] : Currency Transaction Reports (CTRs)26-6 [B] : International Transportation of Currency or Monetary Instruments (CMIRs)26-6 [C] : Foreign Bank and Financial Accounts Reports (FBARs)26-7 [D] : Suspicious Activity Reports (SARs)26-7 [E] : BSA Record Keeping26-8 § 26:3.4 : OFAC Sanction Programs26-8 [A] : Specially Designated Nationals (SDNs)26-9 [B] : Country Sanctions Programs26-10 § 26:4 : Withdrawn Proposed AML Program Rules for Investment Advisers26-10 § 26:5 : Compliance Measures26-11 § 26:5.1 : Required Measures26-11 § 26:5.2 : Additional Measures Worthy of Consideration26-11 § 26:5.3 : OFAC Compliance Programs26-12 [A] : OFAC Compliance Guidance26-12 [A][1] : 2004 Guidance26-12 [A][2] : 2008 Guidance26-13 [A][2][a] : Screening Focus26-13 [A][2][b] : Identity Verification26-13 [A][2][c] : Risk Factors26-14 [A][2][d] : Organizational Factors26-14 [B] : BSA/AML Examination Manual26-14
	Chapter 27:	Code of Ethics, Personal Trading, and Insider Trading Policies and Procedures
§ 27:1 : Introduction27-3 § 27:2 : Text of Act and Rules27-4 § 27:3 : Code of Ethics27-9 § 27:3.1 : Standards of Conduct27-10 § 27:3.2 : Reporting and Pre-Approval of Personal Securities Transaction27-10 [A] : Who Needs to Report27-11 [B] : Transaction Reports27-11 [C] : Holdings Reports27-12 [D] : Exceptions from Reporting27-12 [E] : Pre-Approval of Certain Investments27-13 [F] : Review of Personal Securities Holdings and Transaction Reports27-13 [G] : Procedures to Address Personal Trading27-13 § 27:3.3 : Compliance Considerations27-14 [A] : Reporting of Violations27-14 [B] : Distribution of the Code27-14 [C] : Integrating the Code Within the Advisory Organization27-15 § 27:3.4 : Record-Keeping Requirements27-15 § 27:4 : Insider Trading Policies and Procedures27-16 § 27:5 : Sarbanes-Oxley Code of Ethics Requirements27-18 § 27:6 : Mutual Fund Codes of Ethics27-18 § 27:6.1 : Adoption of Rule 17j-1 in 198027-18 § 27:6.2 : 1994 Industry Best Practices Report and Subsequent SEC Amendments27-19 § 27:6.3 : Overview of Investment Company Act Rule 17j-1 Requirements27-19 [A] : Adoption of Written Code of Ethics27-19 [B] : Board Oversight27-19 [C] : Annual Report27-20 [D] : Access Person Reports27-20 [E] : Preapproval Requests27-20 [F] : Public Disclosure27-20 § 27:6.4 : Interplay with Advisers Act Rule 204A-127-20 § 27:7 : SEC Enforcement27-21 § 27:7.1 : Personal Trading27-21 § 27:7.2 : Implementation of Code of Ethics27-23
	Chapter 28:	Gifts and Entertainment
§ 28:1 : Introduction28-2 § 28:2 : Investment Advisers Act28-2 § 28:2.1 : SEC Staff Guidance28-3 § 28:3 : Other Regulatory Guidance28-3 § 28:3.1 : NASD28-4 [A] : NASD Conduct Rule 3060 and Notice to Members 06-6928-4 [B] : NASD Report on Examination Findings Regarding Gifts and Gratuities28-4 [C] : NASD Notice to Members 06-0628-5 § 28:3.2 : NYSE28-6 § 28:3.3 : Department of Labor28-6 § 28:4 : Industry Guidance28-7 § 28:4.1 : Investment Adviser Association28-7 § 28:4.2 : CFA Institute28-8 § 28:4.3 : Other Professional Organizations28-8 § 28:5 : Items to Consider in Developing Gifts and Entertainment Policies28-9 § 28:5.1 : Gifts: Value Limits28-9 § 28:5.2 : Valuation of Gifts28-9 § 28:5.3 : Aggregation of Gifts28-10 § 28:5.4 : De Minimis and Promotional Items28-10 § 28:5.5 : Personal Gifts/Exclusions28-10 § 28:5.6 : Entertainment28-11 § 28:5.7 : Gifts Incidental to Business Entertainment28-11 § 28:5.8 : Travel28-11 § 28:5.9 : Political Contributions/Government Officials28-11 § 28:5.10 : Books and Records28-12 § 28:5.11 : Pre-Clearance and Reporting28-12 § 28:5.12 : Role of Chief Compliance Officer28-13 § 28:5.13 : Gift Policy: “What To Do”28-14 § 28:6 : Regulatory Proceedings28-14 § 28:6.1 : Jefferies & Co.28-14 § 28:6.2 : Suncoast Capital Group, Ltd.28-15 § 28:7 : Conclusion28-15
	Chapter 29:	Insider Trading by Advisory Personnel
§ 29:1 : Introduction29-2 § 29:2 : Insider Trading Basics29-5 § 29:3 : Special Rules Applicable to Investment Advisers29-7 § 29:4 : Structuring an Effective Compliance Program29-11 § 29:4.1 : First Steps29-11 § 29:4.2 : Required Elements29-15 § 29:4.3 : Testing of Program29-17 § 29:4.4 : Other Recommended Practices29-18 § 29:4.5 : Potential Pitfalls Drawn from Enforcement Cases29-20 § 29:5 : Conclusion29-22
	Chapter 30:	Outsourcing by Financial Services Firms
§ 30:1 : Overview30-3 § 30:1.1 : Benefits of Outsourcing Financial Services30-4 § 30:1.2 : Risks of Outsourcing Financial Services30-4 § 30:2 : Drafting Considerations30-5 § 30:2.1 : Compliance with the Law30-5 § 30:2.2 : Compliance with Policies and Procedures30-6 § 30:2.3 : Subcontracting30-6 § 30:2.4 : Key Staff30-6 § 30:2.5 : Termination30-7 § 30:2.6 : Security30-7 § 30:2.7 : Indemnification30-7 § 30:2.8 : Audits30-8 § 30:2.9 : Data Protection30-8 § 30:3 : U.S. Regulatory Framework30-8 § 30:3.1 : Federal Reserve Board30-9 [A] : Overview30-9 [B] : Risk Mitigation in Financial Services Outsourcing30-10 [B][1] : Identifying Challenges and Risks30-11 [B][2] : Best Practices for Mitigating Risk30-12 [C] : FRB Supervisory Letter: Outsourcing of Information and Transaction Processing30-14 § 30:3.2 : Office of Comptroller of Currency30-16 [A] : Overview30-16 [B] : Foreign-Based Third-Party Service Providers30-17 [C] : Risk Management for Banks30-18 [D] : Standards for Safeguarding Customer Information30-19 [E] : Country Risk30-20 [F] : Third-Party Relationships30-21 [F][1] : Categories of Risk30-21 [F][2] : Risk Management30-22 [F][3] : Oversight30-23 § 30:3.3 : Federal Deposit Insurance Corporation30-24 [A] : Overview30-24 [B] : Foreign-Based Third-Party Service Providers30-24 [B][1] : Categories of Risk30-25 [B][2] : Risk Assessment30-25 [C] : Offshoring of Data Services30-27 [C][1] : Identifying Risks30-27 [C][2] : Recommendations and Best Practices30-29 [D] : Country Risk Management30-32 [E] : Outsourcing Technology Products and Services30-32 [E][1] : Effective Practices for Selecting a Service Provider30-33 [E][2] : Tools to Manage Technology Providers’ Performance Risk: Service Level Agreements30-34 [E][3] : Techniques for Managing Multiple Service Providers30-35 [F] : Compliance with Bank Service Company Act30-37 § 30:3.4 : Office of Thrift Supervision30-38 [A] : Overview30-38 [B] : Information Technology and Risk Controls30-38 [C] : Third-Party Arrangements30-40 [C][1] : Regulation and Examination Requirements30-40 [C][2] : Management Responsibilities30-41 [C][3] : OTS Supervision30-43 [D] : Internal Controls and Outsourcing30-43 § 30:3.5 : National Credit Union Administration30-44 [A] : Overview30-44 [B] : Due Diligence Over Third-Party Service Providers30-45 § 30:3.6 : Federal Financial Institutions Examination Council30-45 [A] : Overview30-45 [B] : Evaluating a Financial Institution’s Risk Management Processes30-46 [B][1] : Risk Management30-46 [B][2] : Board and Management Responsibilities30-46 [B][3] : Risk Assessment and Requirements30-47 [B][4] : Service Provider Selection30-47 [B][5] : Contract Issues30-48 [B][6] : Ongoing Monitoring30-51 [B][7] : Business Continuity Plans30-51 [B][8] : Information Security/Safeguarding30-52 [B][9] : Multiple Service Provider Relationships30-52 [B][10] : Outsourcing to Foreign Service Providers30-52 § 30:3.7 : Financial Industry Regulatory Authority30-55 [A] : Overview30-55 [B] : A Member’s Responsibilities Regarding Outsourcing30-55 [B][1] : Accountability and Supervisory Responsibility30-56 [B][2] : Prohibited Outsourcing Activity30-57 § 30:3.8 : New York Stock Exchange30-57 [A] : Overview30-57 [B] : Proposed Rules Regarding Outsourcing30-58 [B][1] : Prohibited Activities30-58 [B][2] : Prior Written Notice30-59 [B][3] : Due Diligence30-59 [B][4] : Oversight30-60 [B][5] : Disclosure30-61 [B][6] : Renewals30-61 § 30:4 : Foreign and International Regulation30-61 § 30:4.1 : EU’s Markets in Financial Instruments Directive30-61 [A] : Overview30-61 [B] : Applicability30-62 [C] : Requirements30-62 [C][1] : Level 1 Directive30-62 [C][2] : Level 2 Directive30-63 [C][3] : Obligations on Investment Firms30-63 [C][4] : Obligations of Member States30-65 [C][5] : Exceptions30-65 [C][6] : Application to Existing Outsourcing Arrangements30-65 § 30:4.2 : Joint Forum Outsourcing Principles30-66 § 30:4.3 : IOSCO Outsourcing Principles30-68
	Chapter 31:	SEC and CFTC Whistleblower Rules and Anti-Retaliation Protections
§ 31:1 : Introduction31-3 § 31:2 : Affected Entities31-4 § 31:3 : Essential Elements of Whistleblower Award Eligibility31-4 § 31:3.1 : Definition of a Whistleblower31-4 § 31:3.2 : Voluntary Submission of Original Information31-5 [A] : Voluntary31-5 [B] : Original Information31-6 [C] : 120-Day Look Back Provisions31-7 § 31:3.3 : Successful Enforcement Action31-8 [A] : Calculating Amount Recovered31-9 § 31:4 : Exclusions from Award Eligibility31-10 § 31:4.1 : Principals31-10 § 31:4.2 : Attorneys31-10 § 31:4.3 : Compliance Personnel31-11 § 31:4.4 : Individuals Retained to Conduct Inquiry31-12 § 31:4.5 : Accountants31-12 § 31:4.6 : Other Exclusions31-12 § 31:5 : Exceptions to Exclusion from Award Eligibility31-12 § 31:6 : Factors Considered in Determining the Amount of Award31-13 § 31:6.1 : Factors That May Increase an Award31-14 [A] : Significance of Information31-14 [B] : Degree of Assistance Provided31-14 [C] : Programmatic Interest of SEC or CFTC31-15 [D] : Participation in Internal Compliance Programs31-15 § 31:6.2 : Factors That May Decrease an Award31-16 [A] : Whistleblower Culpability31-16 [B] : Delay in Reporting Violation31-16 [C] : Interference with Internal Compliance Programs31-17 [D] : Potential Adverse Incentives31-17 § 31:7 : Treatment of Culpable Individuals31-17 § 31:8 : Whistleblower Confidentiality and Anonymity31-18 § 31:9 : Whistleblower Protections: The Anti-Retaliation Provisions31-18 § 31:9.1 : Relationship Between New Dodd-Frank and SOX Retaliation Claims31-20 § 31:9.2 : SEC Authority to Enforce Anti-Retaliation Provisions31-21 § 31:9.3 : Non-Waivability of Anti-Retaliation Protections31-21 § 31:9.4 : Extraterritorial Application31-21 § 31:10 : SEC Communications with Whistleblowers and Attorney-Client Privilege31-22 § 31:11 : Confidentiality Agreements31-22 § 31:12 : Arbitration and Alternative Dispute Resolution31-22 § 31:13 : Practical Considerations for Responding to the Whistleblower Rules31-23 § 31:13.1 : Culture of Compliance31-23 [A] : Promote Compliance31-24 [B] : Codes of Conduct and Training31-25 [C] : Mandatory Reporting of Potential Violations31-25 § 31:13.2 : Internal Reporting Procedures31-26 [A] : Accessible Internal Reporting Systems31-26 [B] : Communicating Importance of Internal Reporting31-26 § 31:13.3 : Human Resources31-27 [A] : Screening New Employees31-27 [B] : Employee Evaluations31-27 [C] : Manager Training31-27 [D] : Documentating of Whistleblower Employment Actions31-27 [E] : Exit Forms and Separation Releases31-28 § 31:13.4 : Internal Investigations31-28 [A] : Investigative Plans31-28 [B] : Keeping Whistleblower Apprised31-29 [C] : Employee Interviews31-29 [D] : Use of Counsel31-29 [E] : Policies Regarding Privileged and Confidential Information31-30 § 31:14 : Implications of the Whistleblower Rules for Enforcement Practice31-30 § 31:14.1 : Self-Reporting31-31 § 31:14.2 : Protect the Company’s Privileges31-31 § 31:14.3 : Assess Public Disclosure Issues31-32
	Chapter 32:	SEC Record-Keeping Requirements
§ 32:1 : Introduction32-2 § 32:2 : Required Records Under the Investment Advisers Act32-3 § 32:2.1 : Financial Records—Rule 204-2(a)(1); (2); (4); (5); (6)32-3 § 32:2.2 : Corporate Records—Rule 204-2(a)(10)32-3 § 32:2.3 : Order Memoranda—Rule 204-2(a)(3)32-3 § 32:2.4 : Written Communications—Rule 204-2(a)(7)32-3 § 32:2.5 : Advertisements/Performance Information32-4 [A] : Copies of Advertisements—Rule 204-2(a)(11)32-4 [B] : Demonstrating the Calculation of Performance—Rule 204-2(a)(16)32-4 [B][1] : Historical Note—The 2004 Hedge Fund Rule32-6 § 32:2.6 : Client Disclosures—Rule 204-2(a)(14)32-6 § 32:2.7 : Records Relating to Discretionary Authority—Rule 204-2(a)(8); (9)32-7 § 32:2.8 : Records Relating to Referral Fees—Rule 204-2(a)(15)32-7 § 32:2.9 : Records Relating to Portfolio Management Services—Rule 204-2(c)(1)–(2)32-7 § 32:2.10 : Code of Ethics; Access Person Reports of Transactions and Holdings— Rule 204-2(a)(12); (13)32-8 [A] : Framework Prior to 200432-8 [B] : Current Framework32-9 § 32:2.11 : Records Relating to Custody Accounts— Rule 204(b)(1)–(5); (a)(17)(iii)32-10 § 32:2.12 : Records Relating to Political Contributions to Government Officials—Rule 204(a)(18)32-11 § 32:2.13 : Records Relating to Proxy Voting—Rule 204-2(c)32-11 § 32:2.14 : Records Relating to Compliance Policies and Procedures32-12 § 32:2.15 : Emails32-12 § 32:3 : Time, Place, and Mode of Storing Records Under the Advisers Act32-13 § 32:3.1 : Reliance on Third-Party Record Keepers32-14 § 32:3.2 : Electronic Storage32-14 § 32:4 : Record Keeping Under the Investment Company Act32-16 § 32:5 : Record Keeping Under ERISA32-16
	Chapter 33:	SEC Inspections
§ 33:1 : Overview33-2 § 33:2 : SEC Authority33-2 § 33:3 : The SEC Adviser’s Exam Program: Types and Scopes of Examinations33-4 § 33:3.1 : Routine Inspections33-4 § 33:3.2 : Cause Inspections33-4 § 33:3.3 : Risk/Sweep Inspections33-5 § 33:3.4 : Coordination and Outreach Efforts33-6 § 33:3.5 : Current Focus Areas33-7 § 33:3.6 : The Financial Crisis and Madoff Aftermath33-11 [A] : Background33-12 [B] : User Fees33-13 [C] : SRO33-13 [D] : Authorize FINRA to Examine Dual Registrants for Compliance with the Advisers Act33-14 § 33:4 : Mechanics of an Inspection33-14 § 33:4.1 : Preparation33-14 [A] : SEC Preparation33-14 [B] : Preparation by the Firm33-15 [C] : Role of the CCO33-16 § 33:4.2 : The SEC’s Request for Information33-16 § 33:4.3 : “Culture of Compliance”33-17 § 33:4.4 : Issues Related to Document Production33-19 [A] : Privilege Issues33-21 [B] : Seeking Confidential Treatment33-25 § 33:4.5 : SEC’s Activity on the Premises33-26 § 33:4.6 : Notification of Findings33-26 § 33:4.7 : Responding to Deficiency Letters33-27 § 33:4.8 : Confidentiality of Findings33-28
	Chapter 34:	Enforcement of the Advisers Act
§ 34:1 : Introduction34-1 § 34:2 : SEC Enforcement Actions34-3 § 34:3 : Failure to Supervise34-4 § 34:3.1 : Who Is Subject to Sanctions for Failing to Supervise?34-5 [A] : Who Is a Supervisor?34-6 [A][1] : Personnel in the Management Chain34-6 [A][2] : Compliance and Legal Personnel34-6 § 34:3.2 : Discharging Supervisory Responsibility34-7 [A] : Designing and Implementing Adequate Procedures34-7 [B] : Meaningful Follow-Up34-8 § 34:4 : Reporting Violations to the SEC Staff34-10 § 34:5 : Injunctions and Other Court Remedies34-13 § 34:6 : Private Actions34-13
	Chapter 35:	State Adviser Regulation
§ 35:1 : Overview of State Securities Regulation35-2 § 35:1.1 : Initiatives Seeking Uniformity35-2 [A] : Uniform Securities Acts35-3 [B] : North American Securities Administrators Association, Inc.’s Model Laws35-3 [C] : National Securities Markets Improvements Act35-3 § 35:2 : State Regulation of State-Registered Advisers and Their Personnel35-4 § 35:2.1 : Jurisdictional Issues35-4 [A] : Definition of an Adviser Under State Law35-4 [B] : Which State’s Law Applies35-4 [B][1] : Sorting Out Multiple State Regulation35-5 [B][1][a] : Relief for Advisers Registered in Multiple States—Section 222 of the Investment Advisers Act35-5 [B][1][b] : NASAA’s Initiative to Provide Relief to Advisers Registered in Multiple States35-5 § 35:2.2 : Registration Issues35-6 [A] : Registering the Adviser35-6 [A][1] : De Minimis Exception from Registration35-6 [B] : Registration of Advisory Personnel35-7 [C] : Registration of Branch Offices35-7 § 35:2.3 : Substantive Regulation35-7 [A] : Conduct Regulation35-7 [B] : Net Capital Requirements35-8 [C] : Safekeeping of Assets35-8 [C][1] : Custody35-8 [C][2] : Bonding Requirements35-8 § 35:2.4 : Record-Keeping Requirements and Inspections35-8 [A] : Record Keeping35-8 [B] : Inspections35-9 § 35:3 : State Regulation of SEC-Registered Advisers and Their Personnel35-9 § 35:3.1 : Notice Filings by SEC-Registered Advisers35-10 § 35:3.2 : Registration of Advisory Personnel35-10 [A] : Exam Requirement35-10 [A][1] : State Uniformity35-11 [B] : Application Process35-12 § 35:4 : Investment Adviser Registration Depository35-12
	Chapter 36:	State Law Issues Relevant to SEC-Registered Advisers
§ 36:1 : Introduction36-2 § 36:2 : State Law Definition of Investment Adviser36-2 § 36:3 : Notice Filing Obligation36-2 § 36:3.1 : Text of Relevant Provision36-4 § 36:4 : Applicability of State Law to SEC-Registered Advisers36-5 § 36:4.1 : Text of Relevant Provision36-6 § 36:5 : Investment Adviser Representatives36-8 § 36:5.1 : Text of Relevant Provisions36-9 § 36:5.2 : State Registration Flowchart36-11 § 36:6 : Solicitors36-11
	Chapter 37:	State Investment Adviser Examinations and Enforcement; And Appendix 37A: NASAA Statement of Policy
§ 37:1 : Overview of State Adviser Regulation37-2 § 37:1.1 : State Model Rules37-3 § 37:1.2 : Limitations on State Authority37-3 [A] : Examinations of SEC-Registered Investment Advisers37-6 [B] : Examinations of Investment Adviser Representatives of SEC-Registered Investment Advisers37-7 § 37:2 : Preparing for and Responding to State Securities Regulatory Examinations37-7 § 37:3 : NASAA 2011 Investment Adviser Sweep37-8 § 37:4 : State Enforcement Authority over Investment Advisers37-11 § 37:4.1 : General Remedies Available37-11 § 37:4.2 : General Principal Considerations for Regulatory Actions37-12 § 37:4.3 : Application and Limitations on State-Registered Advisers37-15 § 37:4.4 : Application and Limitations on SEC-Registered Advisers37-15 Appendix 37A : NASAA Statement of PolicyApp. 37A-1
	Chapter 38:	Status of Financial Planning Under the Advisers Act
§ 38:1 : Introduction38-2 § 38:2 : Origins of Financial Planning Services38-3 § 38:2.1 : Financial Planning by Broker-Dealers38-3 § 38:2.2 : Financial Planning by Insurance Producers38-5 § 38:2.3 : Legal, Accounting and Banking Services38-7 § 38:2.4 : Emergence of Financial Planning As a Stand-Alone Profession38-8 § 38:2.5 : Technological Considerations38-9 § 38:3 : Evolution of the SEC Regulatory Approach38-10 § 38:3.1 : Relevant Investment Advisers Act Provisions38-10 [A] : Investment Adviser Definition38-10 [B] : Exclusions from the Investment Adviser Definition38-11 [C] : Fiduciary Duty38-12 § 38:3.2 : Evolution of SEC Views on Financial Planning38-12 [A] : Early No-Action Letters Addressing Financial Planning38-12 [B] : Interpretive Releases Issued in the 1980s38-13 [B][1] : SEC Release 77038-13 [B][1][a] : In the Business38-14 [B][1][b] : Advice Given38-15 [B][1][c] : For Compensation38-15 [B][1][d] : Conflicts and Disclosure Considerations38-15 [B][2] : SEC Release 109238-16 [B][2][a] : In the Business Clarified38-16 [B][2][b] : Advice Given Clarified38-17 [B][2][c] : Conflicts and Disclosure Considerations Expanded38-17 [C] : Scope of Broker-Dealer Exclusion38-18 [C][1] : Solely Incidental Services38-18 [C][2] : Applicability to Associated Persons38-19 [C][3] : Designations38-20 [C][4] : Associated Person Registered As Investment Adviser38-21 [C][5] : Insurance Advice38-21 [C][6] : Changing Hats38-21 § 38:3.3 : Exclusions for Other Professionals38-23 § 38:3.4 : 1996 Amendments to the Investment Advisers Act38-23 § 38:3.5 : Fee-Based Brokerage Account Rule38-24 [A] : Rulemaking History of the FBA Rule38-25 [B] : Implications for Financial Planning Services38-27 [C] : Subsequent Guidance38-29 [D] : Vacating of FBA Rule38-30 [E] : New Proposed Rule 202(a)(11)-138-30 [F] : Financial Planning After Vacating of Rule38-31 [F][1] : Implications for Broker-Dealers38-31 [F][2] : Implications for Insurance Agents38-31 [F][3] : Implications for Other Planning Services38-32 § 38:4 : Dodd-Frank Act Implications for Financial Planning38-32
	Chapter 39:	Regulation and Supervision of Financial Planning Business
§ 39:1 : Overview39-3 § 39:2 : Sources of Regulation39-4 § 39:2.1 : Fiduciary Obligations of Investment Advisers39-4 § 39:2.2 : The Dodd-Frank Act and Fiduciary Issues39-6 § 39:2.3 : Evolution of Federal and State Regulation of Financial Planners39-8 [A] : Generally39-8 [B] : Investment Advisers Act Release No. 109239-8 [C] : State Law39-9 [D] : NASAA Model Rules and Amendment to the Uniform Securities Act of 195639-10 § 39:2.4 : State Investment Adviser Representative Licensing and Qualification39-12 § 39:2.5 : Reallocation of Federal and State Investment Adviser Authority Under NSMIA39-14 § 39:3 : Advisers Act Rule 202(a)(11)-1, Subsequent Litigation Overturning It, and Financial Planning39-15 § 39:3.1 : Generally39-15 § 39:3.2 : 2005 SIFMA (then SIA) No-Action Letter39-16 [A] : Generally39-16 [B] : Dual Registrants “Holding Out” Investment Advisory Services39-17 [C] : “Financial Plans” Offered by Advisers and “Financial Tools” Offered by Broker-Dealers39-17 [D] : Is “Hat Switching” by Dual Registrants Between Advisory and Broker-Dealer Activity Still Permitted?39-18 [E] : Is Listing a CFP Designation on a Business Card “Holding Out”?39-19 § 39:3.3 : Effect of FPA Litigation on Financial Planning Regulation39-19 [A] : Generally39-19 [B] : Transfer to Traditional, Commission-Based Brokerage Accounts39-20 [C] : Transfer to Non-Discretionary Wrap-Fee Accounts39-22 § 39:3.4 : SEC Guidance Regarding the Limitations of the Broker-Dealer Exclusion of Section 202(a)(11)(C)39-22 [A] : Generally39-22 [B] : Separate Contract or Fee for Investment Advisory Services39-22 [C] : Exercise of Investment Discretion39-23 [D] : Price Differential39-23 § 39:4 : Financial Planning—What Is It?39-24 § 39:4.1 : Generally39-24 § 39:4.2 : Establishing and Defining the Client-Planner Relationship39-25 § 39:4.3 : Gathering Client Data, Including Goals39-25 § 39:4.4 : Analyzing and Evaluating Clients’ Financial Status39-26 § 39:4.5 : Developing and Presenting Financial Planning Recommendations and/or Alternatives39-26 § 39:4.6 : Implementing the Financial Planning Recommendations39-26 § 39:4.7 : Monitoring the Financial Planning Recommendations39-27 § 39:5 : Compliance Issues39-27 § 39:5.1 : The Financial Planning Agreement39-27 § 39:5.2 : Financial Planning Fees39-29 [A] : Generally39-29 [B] : What Is a Reasonable Fee?39-29 [C] : Supervising the Reasonableness of Financial Planning Fees39-30 [D] : Relationship of Financial Planning Fees to Other Fees Charged by the Adviser39-30 § 39:5.3 : Supervisory Issues Unique to Planning39-32 § 39:6 : Obligations Imposed by the Certified Financial Planners Board of Standards on CFPs39-32 § 39:6.1 : A Brief History of the CFP Board of Standards39-33 § 39:6.2 : CFP Certification Process39-33 [A] : Generally39-33 [B] : Education Requirements39-34 [C] : Examination Requirements39-34 [D] : Candidate Fitness Standards39-35 [E] : Experience39-36 [F] : Ethics39-36 § 39:6.3 : Code of Ethics and Professional Responsibility39-37 § 39:6.4 : Rules of Conduct39-38 § 39:6.5 : Financial Planning Practice Standards39-39 § 39:6.6 : Disciplinary Rules and Procedures39-41 § 39:7 : Conclusion39-42
	Chapter 40:	Broker-Dealer Advisory Services
§ 40:1 : Introduction40-2 § 40:2 : Coverage Under the Investment Advisers Act40-3 § 40:2.1 : The Twists and Turns of the Broker-Dealer Exception Rule40-3 § 40:3 : Trading Restrictions on Dual-Registered Firms40-4 § 40:3.1 : Section 206(3) of the Investment Advisers Act40-4 [A] : No-Action Relief Given Under Section 206(3)40-5 [A][1] : Investments in Affiliated Mutual Funds40-5 [A][2] : Extension of Margin Credit and Facilitating Short Sales As Part of Providing Prime Brokerage40-6 [A][3] : Plan Sponsor of a Wrap-Fee Program40-6 [A][4] : Trades Effected As Part of a Quantitative, Model-Driven Management Program40-7 [B] : Temporary Rule Regarding Principal Trades40-7 § 40:3.2 : Investment Advisers Act Antifraud Provisions40-10 § 40:3.3 : ERISA40-10 § 40:3.4 : Investment Company Act40-11 § 40:3.5 : Securities Exchange Act40-11 § 40:4 : Advertising Restrictions Applying to Dual-Registered Firms40-12 § 40:4.1 : The Investment Advisers Act40-12 § 40:4.2 : FINRA Rule Governing Broker-Dealer Advertising40-13 § 40:4.3 : Comparing the Two Rules40-13 § 40:5 : Referral Fees40-14 § 40:5.1 : FINRA Rule 322040-14 § 40:5.2 : FINRA Rule 3270 (Formerly NASD Rule 3030)40-15 § 40:5.3 : State Registration40-15 § 40:6 : Supervision40-15 § 40:6.1 : General Supervisory Requirements40-15 § 40:6.2 : Special Supervisory Requirements Applying to Registered Representative Advisory Activity Conducted Through an Independent Adviser40-16 [A] : FINRA Rule 3270 and FINRA/NASD Rule 304040-17 [B] : FINRA/NASD Rule 305040-18 § 40:7 : Regulation of Research Analysts40-19 § 40:7.1 : The SRO Analyst Rules40-19 § 40:7.2 : Regulation AC40-20 § 40:8 : Disclosure Issues—Form ADV40-21 § 40:9 : Record-Keeping Requirements40-22 § 40:9.1 : General Requirements40-22 § 40:9.2 : Living with Two Sets of Rules40-23 § 40:10 : Custody Issues40-23 § 40:11 : The Dodd-Frank Act Weighs In40-25
	Chapter 41:	Insurance Company Agent Advisory Activity
§ 41:1 : Introduction41-2 § 41:1.1 : Types of Investment Advisory Services Conducted by Insurance Agents41-2 [A] : Financial Planning41-2 [B] : Managing Investment Portfolios41-3 § 41:1.2 : Structural Models for Conducting Agent Advisory Activity41-3 § 41:2 : The Advisers Act41-4 § 41:2.1 : What Activity Is Covered by the Advisers Act?41-4 [A] : Availability of the Broker-Dealer Exclusion41-4 [A][1] : Insurance Services/Needs Analysis Provided in Connection with Traditional Products (i.e., Outside of the Broker-Dealer Capacity)41-5 [A][2] : Insurance Services/Needs Analysis Provided in Connection with Variable Insurance Products (i.e., Within the Broker-Dealer Capacity)41-6 [A][3] : Holding Out As a Financial Planner/Use of Professional Designations41-6 [A][4] : Fee-Based Financial Planning41-7 [A][5] : Wrap-Fee Products41-7 § 41:2.2 : Practical Application of the Advisers Act to Insurance Company Agent Advisory Services41-7 § 41:3 : State Securities Laws41-10 § 41:4 : State Insurance Law41-10 § 41:4.1 : Agent Title Regulation41-10 § 41:4.2 : Disclosures Related to Dual Role As Financial Planner/Insurance Agent41-10 § 41:4.3 : Insurance Consulting Laws41-11 § 41:4.4 : Anti-Rebate Statutes41-11 § 41:5 : FINRA41-11
	Chapter 42:	An Introduction to Mutual Funds
§ 42:1 : A Brief History of the Mutual Fund Industry42-2 § 42:2 : The Players42-10 § 42:2.1 : Mutual Funds42-10 § 42:2.2 : Investment Adviser42-11 § 42:2.3 : Board of Directors42-12 § 42:2.4 : Administrator42-13 § 42:2.5 : Underwriter or Distributor42-13 § 42:2.6 : Custodian42-13 § 42:2.7 : Transfer Agent42-13 § 42:2.8 : Independent Auditors42-13 § 42:2.9 : Legal Counsel42-14 § 42:2.10 : Chief Compliance Officer42-14 § 42:2.11 : Shareholders42-14 § 42:3 : Organizational Structure42-14 § 42:3.1 : The Mutual Fund Complex42-14 § 42:3.2 : The Adviser and the Board42-15 § 42:3.3 : The Fund’s Distribution Structure42-16 § 42:3.4 : Portfolio Management Structure42-17 § 42:3.5 : Marketing Structures42-18 § 42:4 : Regulatory Framework42-20 § 42:4.1 : Overview of the Investment Company Act42-20 § 42:4.2 : Restrictions on Advisory Services42-21 [A] : Prospectus Disclosure42-21 [B] : Controls Over the Advisory Contract42-22 [C] : Corporate Structure42-22 [D] : Private Right of Action42-23 [E] : Affiliated Transactions42-23 [F] : Restrictions on Investments42-24 § 42:4.3 : Restrictions on Capital Structure42-25 [A] : Prohibition on Debt Issuance42-25 [B] : Issuance of Redeemable Shares42-25 [C] : Pricing of Shares42-25 § 42:4.4 : Restrictions on Sales of Fund Shares42-26 [A] : Limits on Sales Load42-26 [B] : Financing Distribution Through Fund Assets42-26 [C] : Advertising Regulations42-26 § 42:4.5 : Administration of the Investment Company Act: The Role of the SEC42-28 [A] : SEC Inspections42-28 [B] : Enforcement42-29 § 42:5 : Application of the Advisers Act42-29
	Chapter 43:	Wrap Fee Programs
§ 43:1 : Introduction43-2 § 43:1.1 : The Players43-2 [A] : The Sponsor43-2 [B] : The Role of the Manager43-4 [C] : Investment Adviser Representative43-5 [D] : Platform Provider43-5 § 43:1.2 : The Various Types of Programs43-5 § 43:1.3 : Overview of Legal Issues43-6 § 43:2 : Disclosure43-6 § 43:3 : Client Account Issues43-7 § 43:4 : Status Questions43-7 § 43:4.1 : Status of the Sponsor and Any Registered Representatives Under the Advisers Act43-8 [A] : Sponsor Registration43-8 [B] : Registered Representative Registration43-8 § 43:4.2 : Status of the Manager and Its Implications43-8 § 43:4.3 : Status of the Wrap Fee Program Under the Investment Company Act and the Securities Act43-9 § 43:5 : Issues Related to Trading43-10 § 43:5.1 : Trade Confirmations43-12 § 43:6 : Suitability43-13 § 43:7 : Compensation Arrangements43-14 § 43:8 : Marketing Issues43-15 § 43:8.1 : Generally43-15 § 43:8.2 : Performance Presentation43-15 § 43:9 : Bank Sponsored Programs43-16 § 43:10 : ERISA Considerations43-18 § 43:11 : Conclusion43-18
	Chapter 44:	Mutual Fund Asset Allocation Programs
§ 44:1 : Background44-1 § 44:2 : Mutual Fund Wrap Programs Versus Investment Advisory Wrap Fee Programs Generally44-2 § 44:2.1 : Wrap Fee Programs Generally44-2 § 44:2.2 : Mutual Fund Wrap Programs44-3 § 44:3 : An Adviser’s Obligations When Sponsoring Wrap Fee Programs44-5 § 44:3.1 : Background44-5 § 44:3.2 : Potential Conflicts44-6 § 44:4 : Special Disclosure Considerations—Use of the Form ADV Part 2A Appendix 144-7 § 44:5 : Recent Enforcement Activity44-8 § 44:6 : Conclusion44-11
	Chapter 45:	Model-Based Wrap Fee Programs; And Chapter 45A: Private Fund Reporting by Investment Advisers
§ 45:1 : Introduction45-1 § 45:2 : Exemption from the Company Act45-3 § 45:3 : Relationships and General Duties to Clients45-3 § 45:4 : Disclosures45-5 § 45:5 : Best Execution45-7 § 45:6 : Aggregation and Allocation of Trades45-7 § 45:7 : Principal Trading45-8 § 45:8 : Suitability45-8 § 45:9 : Performance Presentation45-9 § 45A:1 : Introduction45A-2 § 45A:2 : Private Fund Reporting on Form ADV45A-3 § 45A:2.1 : Investment Advisers That Must Report on Private Funds on Form ADV45A-3 § 45A:2.2 : “Private Funds”45A-3 [A] : Definition of “Private Funds”45A-3 [B] : Certain Interpretive Issues45A-3 § 45A:2.3 : Content of Private Fund Reports on Form ADV45A-4 [A] : Item 7.B. of Part 1 of Form ADV45A-4 [B] : Item 7.B.(1) of Schedule D of Form ADV45A-5 [C] : Item 7.B.(2) of Schedule D of Form ADV45A-7 § 45A:3 : Private Fund Reporting on Form PF45A-7 § 45A:3.1 : Form PF Generally45A-7 § 45A:3.2 : Dodd-Frank Act’s Requirements for the Content of Private Fund Reports45A-8 § 45A:3.3 : Investment Advisers That Must Report on Form PF45A-9 [A] : Registered with the SEC45A-9 [B] : $150 Million in Regulatory AUM45A-9 [B][1] : Aggregation45A-9 [B][1][a] : Parallel Managed Accounts45A-9 [B][1][b] : Related Persons That Advise Private Funds45A-10 [B][2] : Calculation of Regulatory AUM45A-11 § 45A:3.4 : Funds to Which Form PF Applies45A-11 [A] : Hedge Funds45A-11 [B] : Liquidity Funds45A-11 [C] : Private Equity Funds45A-12 [D] : Real Estate Funds45A-12 [E] : Securitized Asset Funds45A-12 [F] : Venture Capital Funds45A-12 [F][1] : “Grandfathering”45A-12 [F][2] : “Venture Capital Funds”45A-13 [G] : Other Funds45A-13 § 45A:3.5 : Categories of Form PF Filers45A-13 [A] : Large Private Fund Advisers45A-14 [B] : Smaller Private Fund Advisers45A-14 § 45A:3.6 : Content of Form PF Reports45A-14 [A] : Section 1 of Form PF: Identifying Information45A-14 [B] : Section 2 of Form PF: Hedge Funds45A-16 [C] : Section 3 of Form PF: Liquidity Funds45A-18 [D] : Section 4 of Form PF: Private Equity Funds45A-19 § 45A:3.7 : Special Situations45A-20 § 45A:3.8 : Form PF Reporting Deadlines45A-20 [A] : Initial Filing45A-20 [B] : Periodic Filings45A-21 § 45A:3.9 : Recordkeeping45A-21 [A] : Recordkeeping Rules to Come45A-21 [B] : Maintaining Special Client Designations in Adviser’s Records45A-21 § 45A:3.10 : Filing Details45A-22 [A] : Private Fund Reporting Depository (PFRD)45A-22 [B] : Filing Fees45A-22 § 45A:3.11 : Confidentiality45A-22
	Chapter 46:	Hedge Funds; And Chapter 46A: The Hedge Fund Manager--Practical Compliance Considerations
§ 46:1 : Introduction46-4 § 46:2 : What Exactly Is a Hedge Fund?46-6 § 46:2.1 : Diverse Strategies46-6 § 46:2.2 : Common Characteristics46-8 § 46:3 : Raising Capital46-9 § 46:3.1 : Private Placement46-9 [A] : Regulation D46-9 [B] : Accredited Investors46-10 [B][1] : Adjustments and Review of the Accredited Investor Standard46-10 [B][2] : Proposed Amendments: “Accredited Natural Person”46-12 [B][3] : Proposed Amendments: Alternative “Investments-Owned” Standard and Exemption for “Large Accredited Investors”46-15 [C] : Non-Accredited Investors46-16 [D] : Disclosure Requirements46-17 [E] : Manner of the Offering46-19 [F] : Limits on Resales46-21 [G] : Disqualified Offerings46-22 [H] : Post-Sale Filing46-22 § 46:3.2 : State Law Preemption46-27 § 46:3.3 : Related Considerations Affecting the Size and Scope of the Private Placement46-29 § 46:3.4 : FINRA Considerations46-34 § 46:3.5 : Commodity Pools46-36 [A] : Disclosure Document46-37 [B] : Reporting and Record-Keeping46-42 [C] : Exemptions from Disclosure, Reporting, and Record-Keeping Requirements46-43 [C][1] : Rule 4.12(b)46-43 [C][2] : Rule 4.746-44 [C][3] : Offshore Commodity Pools46-49 [C][4] : Electronic Filing46-51 § 46:4 : Private Investment Company Exception46-51 § 46:4.1 : Hybrid Funds46-57 § 46:5 : Hedge Fund Manager46-58 § 46:5.1 : Bifurcated Regulation46-59 [A] : Federal Registration46-64 [B] : Implications of Federal Registration46-73 § 46:5.2 : Exemption from Registration46-80 [A] : Private Adviser Exemption46-80 [B] : Private Fund Exemptions46-81 [B][1] : The Private Fund46-81 [B][2] : Private Fund Adviser Exemption46-81 [B][3] : Venture Capital Funds46-83 [B][4] : Exempt Reporting Advisers46-85 Chart 46-1 : Registration Chart46-88 [B][5] : Foreign Private Advisers46-89 [B][6] : Other Exemptions from Registration46-91 [B][6][a] : Intra-State Exemption46-91 [B][6][b] : CTA Exemption46-92 [B][6][c] : Family Office46-92 [C] : Jurisdictional Reach of Advisory Regulators46-92 [C][1] : State Oversight46-92 [C][2] : Federal Anti-Fraud Rule46-93 § 46:5.3 : Performance-Based Compensation46-95 § 46:5.4 : Privacy Regulations46-97 § 46:5.5 : Anti-Money Laundering Regulations46-100 § 46:5.6 : Commodity Pool Operator46-102 § 46:5.7 : Commodity Trading Adviser46-103 § 46:5.8 : Registration of CPOs and CTAs46-103 § 46:5.9 : Exclusions and Exemptions from Registration of CPOs and CTAs46-104 [A] : Section 4.5 Exclusion from the Definition of Commodity Pool Operator46-104 [B] : Section 4.13 Exemptions from Registration As a Commodity Pool Operator46-106 [B][1] : Section 4.13(a)(1) No Compensation Exemption46-106 [B][2] : Section 4.13(a)(2) Small Operator Exemption46-107 [B][3] : Section 4.13(a)(3) Limited Futures Trading Exemption46-107 [B][4] : Section 4.13(a)(4) Sophisticated Investor Exemption46-108 [C] : Exemptions from Registration As a Commodity Trading Adviser46-110 [C][1] : Section 4.14(a)(4) and (a)(5) CPO Exemptions46-110 [C][2] : Section 4.14(a)(8) Registered Investment Adviser Exemption46-110 [C][3] : Section 4.14(a)(10) Private CTA Exemption46-111 [D] : Electronic Filing46-112 § 46:6 : Market Participation46-112 § 46:6.1 : Broker-Dealer Status46-113 § 46:6.2 : New Issues46-114 [A] : Rule 513046-114 [B] : Rule 513146-119 § 46:6.3 : Soft Dollars46-121 [A] : Goods or Services Provided by the Broker46-123 [B] : Investment Discretion46-124 [C] : Good-Faith Determination46-125 [D] : Brokerage and Research Services46-125 [D][1] : Research46-126 [D][2] : Brokerage46-127 [D][3] : Mixed-Use Items46-128 [D][4] : Lawful and Appropriate Assistance46-129 [E] : Operating Outside the Safe Harbor46-130 § 46:6.4 : Sections 13(d) and 13(g)46-130 § 46:6.5 : Section 13(f)46-133 § 46:6.6 : Section 13(h)46-133 § 46:6.7 : Section 1646-138 § 46:6.8 : Additional Reporting Considerations46-140 § 46:7 : Systemic Risk Regulation46-142 § 46:7.1 : Financial Stability Oversight Council46-142 § 46:7.2 : Nonbank Financial Company46-143 [A] : Supervision and Regulation of Certain Nonbank Financial Companies46-144 [B] : Prudential Regulation46-145 [C] : Reporting46-148 [D] : Orderly Liquidation46-150 [E] : Systemic Risk Information46-152 Chart 46-2 : Filings for CPOs and CTAs46-158 § 46:8 : Derivatives Markets Participants46-159 § 46:8.1 : Regulatory Jurisdiction Over Swaps46-160 § 46:8.2 : Clearing and Exchange Trading46-162 § 46:8.3 : Swap Dealers and Major Swap Participants46-162 [A] : Definition of “Swap Dealer” and “Security-Based Swap Dealer”46-162 [B] : Definition of “Major Swap Participant” and “Major Security-Based Swap Participant”46-167 [C] : Registration46-172 [D] : Regulatory Capital and Margin46-173 [E] : Reporting and Record-Keeping46-174 [F] : Compliance Duties46-176 [F][1] : Risk Management46-177 [F][2] : Monitoring of Position Limits46-178 [F][3] : Diligent Supervision46-179 [F][4] : Business Continuity and Disaster Recovery46-179 [F][5] : Disclosure and Ability to Obtain Information46-179 [F][6] : Antitrust Considerations46-179 [F][7] : Chief Compliance Officer46-179 [G] : Business Conduct Standards46-182 [G][1] : Anti-Fraud and Anti-Manipulation Regulations46-183 [G][1][a] : Swaps46-183 [G][1][b] : Security-Based Swaps46-185 [G][2] : Verification of Counterparty Eligibility46-187 [G][3] : Disclosure of Material Risks, Characteristics, Material Incentives and Conflicts of Interest Regarding a Swap46-188 [G][4] : Daily Mark46-189 [G][5] : Clearing46-190 [G][6] : Communications—Fair Dealing46-190 [G][7] : Recommendations to Counterparties— Institutional Suitability46-190 [G][8] : Execution Standards46-191 [G][9] : Swap Documentation Standards46-192 [G][10] : Portfolio Confirmation, Reconciliation and Compression46-193 [G][10][a] : Portfolio Confirmation46-193 [G][10][b] : Portfolio Reconciliation46-195 [G][10][c] : Portfolio Compression46-196 [G][11] : Conflicts of Interest46-196 [H] : Special Obligations Regarding Special Entity46-198 § 46:9 : Rationale for Regulation46-198 § 46A:1 : Introduction46A-4 § 46A:2 : Bifurcated Regulation46A-4 § 46A:2.1 : Eligibility for Federal Registration46A-6 [A] : Assets Under Management46A-7 [B] : Mid-Sized Advisers46A-9 [C] : Switching Between Federal and State Registration46A-10 § 46A:2.2 : Eligibility for State Registration46A-11 § 46A:2.3 : Exemption from Federal Registration46A-12 [A] : Private Adviser Exemption46A-12 [B] : Private Fund Exemptions46A-13 [B][1] : The Private Fund46A-13 [B][2] : Private Fund Adviser Exemption46A-13 [B][2][a] : U.S. Advisers46A-14 [B][2][b] : Non-U.S. Advisers46A-15 [B][2][c] : Private Fund Assets46A-15 [B][3] : Venture Capital Funds46A-16 [B][3][a] : Qualifying Investments46A-17 [B][3][b] : Limitation on Leverage46A-19 [B][3][c] : Redemption Rights46A-19 [B][3][d] : Venture Capital Strategy Representation46A-19 [B][3][e] : Private Fund Status46A-20 [B][3][f] : Grandfathered Funds46A-20 [B][4] : Exempt Reporting Advisers46A-21 [C] : Other Exemptions46A-25 [C][1] : Intra-State Exemption46A-25 [C][2] : CTA Exemption46A-25 [C][3] : Family Office46A-25 [C][3][a] : Family Clients46A-27 [C][3][b] : Family Member46A-27 [C][3][c] : Key Employees46A-28 [C][3][d] : Ownership and Control46A-29 [C][3][e] : Grandfather Provision46A-29 § 46A:2.4 : Exemption from State Registration46A-29 § 46A:2.5 : Jurisdictional Reach of Advisory Regulations46A-30 [A] : State Oversight46A-30 [B] : Federal Anti-Fraud Rule46A-31 § 46A:3 : Offshore Managers46A-34 § 46A:3.1 : Foreign Private Advisers46A-34 [A] : Clients46A-35 [B] : Private Fund Investors46A-37 [C] : In the United States46A-37 [D] : Assets Under Management46A-38 [E] : Holding Out46A-38 [F] : Adviser Lite46A-39 § 46A:3.2 : Affiliation with Domestic Managers46A-40 § 46A:4 : Registration Process46A-44 § 46A:5 : Compliance Manuals and Codes of Ethics46A-53 § 46A:5.1 : Compliance Policies46A-53 § 46A:5.2 : Chief Compliance Officer46A-54 § 46A:5.3 : Code of Ethics46A-57 § 46A:5.4 : Whistleblowers46A-62 [A] : Definition of Whistleblower46A-63 [B] : Payment of Award46A-63 [B][1] : Voluntary Provision of Information46A-64 [B][2] : Original Information46A-65 [B][3] : Information That Leads to a Successful Enforcement46A-67 [B][4] : SEC Action46A-68 [C] : Interplay Between Whistleblower Regime and Compliance Policies and Procedures46A-68 § 46A:6 : Books and Records46A-69 § 46A:6.1 : General Requirements46A-69 § 46A:6.2 : Systemic Risk Information46A-74 [A] : Records and Reports46A-74 [B] : Form PF46A-75 [B][1] : Form PF Filers46A-76 [B][1][a] : Hedge Funds46A-77 [B][1][b] : Large Private Fund Advisers46A-78 [B][1][c] : Exempt Reporting Advisers46A-78 [B][1][d] : Aggregation of Assets Under Management46A-79 [B][2] : Frequency of Reporting46A-79 [B][3] : Information Required on Form PF46A-80 [B][3][a] : Section 146A-80 [B][3][b] : Section 246A-81 [B][4] : Forms CPO-PQR and CTA-PR46A-82 [B][4][a] : Form CPO-PQR46A-82 [B][4][a][i] : Form CPO-PQR Schedule A46A-84 [B][4][a][ii] : Form CPO-PQR Schedule B46A-84 [B][4][a][iii] : Form CPO-PQR Schedule C46A-85 [B][4][b] : Form CTA-PR46A-86 [C] : Confidentiality of Records and Reports46A-86 § 46A:7 : Custody46A-88 § 46A:7.1 : Custody Defined46A-88 § 46A:7.2 : Qualified Custodian46A-89 § 46A:7.3 : Notices and Account Statements46A-89 § 46A:7.4 : Surprise Examinations and Annual Audit Exception46A-91 § 46A:7.5 : Internal Control Report46A-93 § 46A:7.6 : Privately Offered Securities46A-94 § 46A:7.7 : Special Purpose Vehicles46A-95 § 46A:7.8 : Custody-Related Compliance Policies and Procedures46A-95 § 46A:7.9 : Section 22346A-96 § 46A:8 : Proxy Voting46A-96 § 46A:9 : Privacy Regulations46A-99 § 46A:10 : Business Continuity46A-107 § 46A:11 : Performance Fees46A-110 § 46A:11.1 : Securities Law Considerations46A-110 § 46A:11.2 : Tax Considerations46A-112 § 46A:12 : State Advisory Regulation46A-119 § 46A:13 : Commodity Pool Operators and Commodity Trading Advisers46A-119 § 46A:13.1 : Commodity Pool Operator46A-119 § 46A:13.2 : Commodity Trading Adviser46A-120 § 46A:13.3 : Registration46A-120 § 46A:13.4 : Exclusions and Exemptions from Registration46A-123 [A] : Section 4.5 Exclusion from the Definition of Commodity Pool Operator46A-123 [B] : Section 4.13 Exemptions from Registration As a Commodity Pool Operator46A-126 [B][1] : Section 4.13(a)(1) No Compensation Exemption46A-126 [B][2] : Section 4.13(a)(2) Small Operator Exemption46A-127 [B][3] : Section 4.13(a)(3) Limited Futures Trading Exemption46A-127 [B][4] : Section 4.13(a)(4) Sophisticated Investor Exemption46A-128 [C] : Exemptions from Registration As a Commodity Trading Adviser46A-130 [C][1] : Section 4.14(a)(4) and (a)(5) CPO Exemptions46A-130 [C][2] : Section 4.14(a)(8) Registered Investment Adviser Exemption46A-130 [C][3] : Section 4.14(a)(10) Private CTA Exemption46A-132 [D] : Electronic Filing46A-133
	Chapter 47:	Private Equity Funds: Legal Analysis of Structural, ERISA, Securities and Other Regulatory Issues
§ 47:1 : Introduction47-3 § 47:1.1 : What Is a Private Equity Fund?47-3 § 47:2 : A Typical Private Equity Fund47-4 § 47:2.1 : Fund Structure47-4 § 47:2.2 : Management of the Fund47-4 § 47:2.3 : Allocation of Profits47-6 § 47:2.4 : Other Common Provisions47-8 § 47:3 : Form of the Private Equity Fund (Tax and Liability Issues)47-9 § 47:3.1 : Partnership47-10 [A] : Tax Considerations of the Partnership Form47-10 [A][1] : No Federal Income Tax at the Fund Level47-10 [A][2] : Tax Considerations for Tax-Exempt Organizations47-11 [A][3] : Tax Considerations for Foreign Persons47-14 [A][4] : Special Tax Issues for Sovereign Wealth Investors47-15 [A][5] : Pass-Through of Losses to Equity Owners47-15 [A][6] : Tax-Free Distribution of Property to Equity Owners47-15 [A][6][a] : Cash47-16 [A][6][b] : Property47-16 [A][6][c] : Marketable Securities47-17 [A][7] : Tax-Favored Treatment of General Partner Carry47-17 [A][8] : Utility of Foreign-Situs Partnerships in Foreign Investments47-18 [B] : Other Advantages of the Partnership Form47-18 [B][1] : Limited Liability47-18 § 47:3.2 : Limited Liability Company (LLC)47-19 [A] : Tax Issues47-20 [B] : Liability Issues47-20 [C] : Partnerships Still Predominate47-21 § 47:4 : ERISA Issues47-21 § 47:5 : Securities Law Issues47-25 § 47:5.1 : Statutory Exemption: § 4(a)(2)47-27 § 47:5.2 : Regulation D47-28 [A] : Rule 50647-28 [B] : Look-Through47-31 [C] : Integration47-32 § 47:5.3 : Other Exemptions47-33 § 47:6 : Investment Company Act of 194047-35 § 47:6.1 : Private Investment Fund Exemption47-36 [A] : One Hundred Beneficial Owners Limitation47-36 [B] : Look-Through Provisions47-37 [B][1] : Automatic Statutory Look-Through47-37 [B][2] : Secondary Look-Through Rules47-38 [C] : Knowledgeable Employees47-39 § 47:6.2 : Qualified Purchaser Fund Exemption47-39 § 47:7 : Investment Advisers Act of 194047-42 § 47:7.1 : New Jurisdictional Provisions and Exemptions Under Dodd-Frank47-43 [A] : Jurisdictional Provisions47-43 [B] : Exemptions from Registration47-44 [B][1] : Venture Capital Fund Exemption47-45 [B][2] : Private Fund Exemption47-46 [B][3] : Foreign Private Adviser Exemption47-47 [B][4] : Exempt Reporting Advisers47-47 § 47:7.2 : Consequences of Registration47-48 § 47:7.3 : Carried Interest Exemptions47-55 [A] : Qualified Purchaser Funds47-55 [B] : Rule 205-3: “Qualified Client” Exemption47-55 § 47:8 : Additional Regulations47-56 § 47:8.1 : Gramm-Leach-Bliley Act Privacy Rule47-56 § 47:8.2 : Gramm-Leach-Bliley Act Safeguards Rule47-58 § 47:8.3 : PATRIOT Act Anti-Money Laundering Programs47-60 § 47:8.4 : “Pay-to-Play” and Placement Agent Regulations47-61 § 47:8.5 : EU AIFM Directive47-64 § 47:8.6 : Foreign Corrupt Practices Act47-65 § 47:9 : Change in Control of Fund Sponsors47-66
	Chapter 48:	Advisers to Private Equity Funds--Practical Compliance Considerations
§ 48:1 : Overview48-2 § 48:2 : Advisers Act Registration48-4 § 48:2.1 : In General (Investment Adviser Registration Requirements)48-4 § 48:2.2 : Registration of Investment Advisory Affiliates48-5 [A] : Fund General Partners, Managing Members and Similar SPVs48-5 [B] : Investment Advisory Affiliates—Single Registration48-6 § 48:2.3 : Registration Process—Form ADV48-7 § 48:2.4 : Consequences of Investment Advisers Act Registration48-9 [A] : Required Policies and Procedures48-9 [B] : SEC Examinations and Enforcement48-10 [C] : Performance-Based Compensation48-11 [D] : Section 207 of the Advisers Act48-14 [E] : Section 208 of the Advisers Act48-15 [F] : Form PF48-15 § 48:3 : Exemptions from Investment Advisers Act Registration48-17 § 48:3.1 : Exemption for Investment Advisers with Less Than $150 Million Regulatory AUM in the United States48-18 [A] : Determination of Regulatory AUM in the United States48-19 [B] : Frequency of Calculation of Private Fund Assets48-21 § 48:3.2 : Exemption for Advisers to Venture Capital Funds48-21 [A] : “Grandfather” Provision48-24 [B] : Application to Non-U.S. Advisers48-24 § 48:3.3 : Exemption for Foreign Private Advisers48-25 [A] : Counting Clients48-25 [B] : Counting Investors48-26 [C] : Meaning of “in the United States”48-27 [D] : Meaning of “Place of Business”48-28 § 48:4 : Exempt Reporting Advisers48-29 § 48:4.1 : Reporting Requirements48-29 § 48:5 : Substantive Provisions of the Advisers Act48-30 § 48:5.1 : Section 206: Antifraud Provisions48-30 § 48:5.2 : Code of Ethics48-36 [A] : Rule 204A-148-36 [B] : Personal Trading48-38 [C] : Gifts and Entertainment48-40 [D] : Outside Business Activities48-40 § 48:5.3 : Insider Trading48-41 [A] : General Overview48-41 [B] : Adopting Insider Trading Policies48-43 § 48:5.4 : Principal Transactions48-45 [A] : Cross Trading48-46 § 48:5.5 : Advertising Practices48-47 [A] : Testimonials48-48 [B] : Past Specific Recommendations48-49 § 48:5.6 : Performance Advertising48-51 [A] : Clover Capital No-Action Letter48-52 [B] : Model Performance48-53 [C] : Performance “Net of Fees” Requirement48-54 [D] : Performance Advertising Record-Keeping Requirement48-56 [E] : Performance Presentation Considerations for Private Equity Firms48-56 [F] : FINRA Rules Concerning Performance Advertising48-58 [F][1] : Related Performance48-58 [F][2] : Target Returns48-59 [F][3] : Projected Returns48-59 [F][4] : Hypothetical and Backtested Performance48-60 [F][5] : Risk Factors48-60 [G] : Track Record Portability48-61 [G][1] : Employee Track Record Portability48-61 [G][2] : Adviser Track Record Portability48-62 [H] : Proxy Voting Procedures48-63 § 48:5.7 : Adviser Compliance Policies and Procedures48-65 § 48:5.8 : Business Continuity Planning48-65 § 48:6 : Offshore Advisers48-66
	Chapter 49:	Investment Advice for Employee Benefit Plans and IRAs; And Chapters 49A-49E
§ 49:1 : ERISA and Investment Advice49-3 § 49:2 : ERISA Regulatory Structure49-3 § 49:2.1 : Scope of ERISA49-3 § 49:2.2 : General Fiduciary Standards49-5 [A] : Definition of a “Fiduciary”49-6 [B] : Investment Advisers As Fiduciaries49-8 § 49:2.3 : Prohibited Transaction Rules49-12 § 49:3 : ERISA Objectives of Retaining an Investment Adviser49-17 § 49:3.1 : Satisfying the Plan Fiduciary’s Own Duty49-17 § 49:3.2 : Delegating Investment Accountability to an Investment Manager49-18 § 49:3.3 : Obtaining Broad Section 406(a) Relief for Investment Transactions49-19 § 49:3.4 : Obtaining Relief for Default Investments49-20 § 49:3.5 : Obtaining Relief for Investment Advice Programs49-20 § 49:4 : Acting As an Investment Fiduciary49-20 § 49:4.1 : Fiduciary Accountability49-20 § 49:4.2 : Necessary Services Exemption49-22 § 49:4.3 : Exclusive Benefit Rule49-25 § 49:4.4 : Prudence Rule49-26 § 49:4.5 : Diversification49-27 § 49:4.6 : Compliance with Plan Documents49-27 § 49:4.7 : Trust Requirement49-27 § 49:4.8 : Indicia of Ownership49-28 § 49:4.9 : Bonding49-29 § 49:4.10 : Reporting and Disclosure49-29 § 49:4.11 : Disqualification for Criminal Convictions49-30 § 49:4.12 : Best Execution49-30 § 49:4.13 : Fee Sharing and Indirect Compensation49-31 § 49:4.14 : Gifts to and Entertainment of Plan Fiduciaries49-38 § 49:5 : Specific Transactions49-40 § 49:5.1 : Affiliated Brokerage49-40 § 49:5.2 : Affiliated Investment Options49-44 § 49:5.3 : Alternative Execution Systems49-45 § 49:5.4 : Automatic Rollovers49-46 § 49:5.5 : Bank Products and Services49-46 § 49:5.6 : Blackout Periods and Mapping49-48 § 49:5.7 : Block Trades49-48 § 49:5.8 : Co-Investing49-48 § 49:5.9 : Cross-Collateralization Agreements49-49 § 49:5.10 : Cross-Trades49-50 § 49:5.11 : Customer Notes of Employer49-51 § 49:5.12 : Default Investment Options49-52 § 49:5.13 : Dual-Registered Firms49-56 § 49:5.14 : Economically Targeted Investments49-56 § 49:5.15 : Foreign Exchange Transactions49-56 § 49:5.16 : Inadvertent Securities Purchase or Sale with Party in Interest49-58 § 49:5.17 : Insurance and Annuity Products49-58 § 49:5.18 : Interest-Free Loans49-60 § 49:5.19 : IPOs49-61 § 49:5.20 : Margin Accounts49-61 § 49:5.21 : Mortgage Pool Investment Trusts and Other Asset-Backed Securities49-62 § 49:5.22 : Mutual Funds49-63 § 49:5.23 : Participant Investment Advice49-64 § 49:5.24 : Performance Fees49-68 § 49:5.25 : Proxy Voting49-70 § 49:5.26 : Record-Keeping49-71 § 49:5.27 : Relationship Brokerage49-72 § 49:5.28 : Securities Lending49-72 § 49:5.29 : Service Provider Transactions49-73 § 49:5.30 : Short-Term Investments49-73 § 49:5.31 : Soft Dollars and Directed Brokerage49-73 § 49:5.32 : Trading Conflicts49-74 § 49:5.33 : Wrap-Fee Programs49-76 § 49A:1 : Introduction49A-2 § 49A:2 : New Rules and Potential Impact49A-2 § 49A:2.1 : Amendments to ERISA § 408(b)(2)49A-2 § 49A:2.2 : ERISA § 404(a)(5)49A-3 § 49A:2.3 : Impact of the New Rules49A-5 § 49A:3 : DOL Enforcement and ERISA Litigation49A-5 § 49A:4 : Application of ERISA49A-7 § 49A:4.1 : Fiduciary Status49A-7 § 49A:4.2 : Investment Advice49A-8 § 49A:4.3 : Investment Education49A-9 § 49A:4.4 : Proposal to Redefine “Fiduciary” Under ERISA49A-9 § 49A:4.5 : Prohibited Transactions49A-10 § 49A:4.6 : Co-Fiduciary Liability49A-11 § 49A:5 : Action Items49A-12 § 49A:6 : Conclusion49A-18 § 49B:1 : Introduction49B-2 § 49B:2 : Regulatory Framework Applying to Collective Trusts49B-4 § 49B:2.1 : Overview49B-4 § 49B:2.2 : Federal and State Banking Laws49B-4 [A] : OCC49B-4 [A][1] : Overview49B-4 [A][2] : OCC Bulletins and Banking Circulars49B-5 [A][3] : Interpretive Letters (IL)49B-5 [A][4] : Collective Investment Funds Handbook49B-5 § 49B:2.3 : DOL49B-6 § 49B:2.4 : IRS49B-6 § 49B:2.5 : Securities Laws49B-6 § 49B:2.6 : FINRA49B-7 § 49B:2.7 : CFTC49B-7 § 49B:3 : Collective Trust Funds—An Overview of Their Essential Features49B-7 § 49B:3.1 : Organizational Issues49B-7 [A] : Sponsor49B-7 [B] : Form of Organization49B-7 [C] : Governing Documents/Declaration of Trust49B-7 [D] : Other Documents49B-8 § 49B:3.2 : Investment Management49B-8 [A] : Structuring the Advisory Relationship49B-8 [B] : Permissible Investment Objectives49B-8 [C] : Valuation49B-8 [D] : Management Fees49B-9 § 49B:3.3 : Distribution49B-9 [A] : NSCC Trading Platform49B-9 [B] : Purchases into the Fund49B-9 [C] : Investor Eligibility Restrictions49B-9 [D] : Pricing Flexibility and Share Classes49B-9 [E] : Sales through Broker-Dealers49B-9 [F] : Performance Information49B-10 [G] : Controls Over Frequent Trading49B-10 § 49B:3.4 : Marketing Material49B-10 § 49B:3.5 : Compliance Programs and Regulatory Examinations49B-11 [A] : Compliance Programs49B-11 [B] : Regulatory Examinations49B-11 § 49B:4 : Externally-Managed CTFs49B-11 § 49B:5 : Practical Compliance Considerations49B-15 § 49B:6 : Conclusion49B-16 § 49C:1 : Introduction49C-2 § 49C:2 : Scope of the Investment Advisers Act49C-3 § 49C:2.1 : Definition of Investment Adviser49C-3 § 49C:2.2 : Statutory Reach to Non-U.S. Clients49C-4 [A] : Overview49C-4 [B] : Regulation of Registered Non-U.S. Advisers49C-5 [C] : Regulation of Registered U.S. Advisers49C-5 § 49C:3 : Key Investment Advisers Act Considerations for U.S. Based Advisers When Dealing with Non-U.S. Clients49C-6 § 49C:3.1 : Overview49C-6 § 49C:3.2 : General Anti-Fraud Considerations49C-7 [A] : Direct Advisory Services49C-7 [B] : Considerations for Pooled Vehicles49C-8 § 49C:3.3 : Fiduciary Duty Owed to All Clients49C-8 § 49C:3.4 : Disclosure Obligations49C-9 § 49C:3.5 : Brochure Rule49C-11 [A] : Overview49C-11 [B] : Form ADV Filing Requirements49C-12 [C] : Annual Delivery Requirements49C-12 § 49C:3.6 : Fees49C-13 § 49C:3.7 : Cash Solicitation Rule49C-14 § 49C:3.8 : Advertising49C-15 § 49C:3.9 : Suitability49C-17 § 49C:3.10 : Custody49C-17 [A] : Overview49C-17 [B] : Definition of Custody49C-18 [C] : Attribution to Adviser of Custody of a Related Person49C-19 [D] : Implications for Having Custody49C-20 [E] : Special Provision for Pooled Investment Vehicles49C-20 [F] : Operationally Independent Advisers49C-21 § 49C:3.11 : Books and Records49C-21 § 49C:3.12 : Wrap Fee Programs49C-22 § 49C:3.13 : Use of Adviser Performance Record49C-22 § 49C:3.14 : Contract Issues49C-23 § 49C:4 : Navigating Global Regulatory Requirements49C-23 § 49C:4.1 : Overview49C-23 § 49C:4.2 : Non-U.S. Considerations in Offering Advisory Services49C-24 [A] : Licensing Considerations49C-24 [A][1] : Managed Accounts49C-25 [A][2] : Commingled Funds49C-25 [B] : Marketing Considerations49C-26 [C] : Client Servicing Considerations49C-27 [D] : Other Considerations49C-28 § 49C:5 : Other Material Considerations49C-29 § 49C:5.1 : Know-Your-Customer Obligations49C-29 [A] : Application of U.S. Bank Secrecy Laws49C-29 [B] : Application of Foreign Law49C-30 § 49C:5.2 : Data Privacy49C-31 [A] : Application of Regulation S-P49C-31 [B] : Application of EU Law49C-32 § 49C:5.3 : Shareholder Reporting Obligations49C-32 [A] : U.S. Reporting Obligations49C-32 [A][1] : Section 13(d) and Section 13(g) of the Exchange Act49C-33 [A][2] : Section 13(f) of the Exchange Act49C-33 [A][3] : Section 13(h) of the Exchange Act49C-34 [A][4] : Section 16 of the Exchange Act49C-35 § 49C:5.4 : Anti-Bribery Legislation49C-35 [A] : The Foreign Corrupt Practices Act49C-35 [B] : UK Bribery Act of 201049C-38 § 49C:5.5 : Use of Affiliates49C-39 [A] : Taxation Considerations49C-39 [B] : Non-U.S. Regulatory Considerations49C-40 § 49D:1 : Introduction49D-3 § 49D:1.1 : European Dimension49D-3 § 49D:1.2 : Financial Services and Markets Act and Other UK Laws49D-5 § 49D:1.3 : Measures Made by Regulators, Exchanges and Clearing Houses, and Industry Bodies49D-6 § 49D:2 : Financial Services Authority49D-7 § 49D:2.1 : Establishment, Objectives and Powers49D-7 § 49D:2.2 : FSA Handbook49D-8 § 49D:3 : General Prohibition and the Requirement to Be Authorized49D-9 § 49D:3.1 : Authorization and Exemption49D-9 § 49D:3.2 : Consequences of Breaching the General Prohibition49D-10 § 49D:3.3 : Determining Whether Activities Breach the General Prohibition49D-11 § 49D:4 : Regulated Activities and Specified Investments49D-13 § 49D:4.1 : MiFID and the RAO49D-13 § 49D:4.2 : Regulated Activities and Exclusions49D-14 [A] : Dealing in Investments As Principal49D-14 [B] : Dealing in Investments As Agent49D-16 [C] : Arranging Deals in Investments49D-16 [D] : Managing Investments49D-17 [E] : Safeguarding and Administering Investments49D-18 [F] : Advising on Investments49D-18 [G] : Agreeing to Carry On Activities49D-18 § 49D:4.3 : General Exemptions49D-19 [A] : Activities Carried On in the Course of a Profession or Non-Investment Business49D-19 [B] : Groups and Joint Enterprises49D-19 [C] : Activities Carried On in Connection with the Sale of a Body Corporate49D-20 [D] : Overseas Person Exemption49D-20 § 49D:4.4 : Specified Investments49D-21 § 49D:5 : Financial Promotion and Marketing49D-22 § 49D:6 : Authorization Process49D-24 § 49D:6.1 : FSA Application Pack49D-24 § 49D:6.2 : Application Complexity and Fees49D-25 § 49D:6.3 : Timeframe for Granting Authorization49D-26 § 49D:7 : Threshold Conditions for Authorization49D-26 § 49D:7.1 : Requirements on Permission49D-26 § 49D:7.2 : Threshold Conditions49D-27 § 49D:8 : Approved Persons and Controlled Functions49D-29 § 49D:8.1 : Fitness and Properness49D-30 [A] : Honesty, Integrity, and Reputation49D-30 [B] : Competence and Capability49D-30 [C] : Financial Soundness49D-31 § 49D:8.2 : Key Categories of Controlled Functions49D-31 [A] : Significant Influence Functions49D-31 § 49D:9 : Appointed Representatives and Tied Agents49D-33 § 49D:10 : Providing Cross-Border Services and Branch Arrangements in Other EEA States49D-34 § 49D:11 : Principles for Business As the Primary Source of a Regulated Firm’s Obligations49D-36 § 49D:12 : Senior Management Arrangements, Systems, and Controls49D-38 § 49D:13 : Financial Resources and Prudential Obligations49D-41 § 49D:14 : Market Conduct Obligations49D-43 § 49D:14.1 : Market Abuse49D-43 § 49D:14.2 : Insider Dealing49D-46 § 49D:14.3 : Misleading Statements and Practices49D-47 § 49D:14.4 : Transparency Obligations49D-48 § 49D:14.5 : Short Selling Restrictions and Disclosure Requirements49D-48 § 49D:15 : Conduct of Business and Other Obligations to Clients49D-49 § 49D:15.1 : General Conduct of Business Obligations49D-49 § 49D:15.2 : Conflicts of Interest49D-50 § 49D:15.3 : Treating Customers Fairly49D-51 § 49D:15.4 : Categorizing Clients49D-52 [A] : Retail Clients49D-52 [B] : Professional Clients49D-52 [C] : Eligible Counterparties49D-53 § 49D:15.5 : Communicating with Clients49D-54 § 49D:15.6 : Client Agreements, Appropriateness, and Suitability49D-56 § 49D:15.7 : Dealing and Managing49D-58 [A] : Best Execution49D-58 [B] : Other Requirements on Dealing and Managing49D-59 § 49D:15.8 : Investment Research49D-59 § 49D:15.9 : Reporting to the Client49D-60 § 49D:15.10 : Protection of Client Assets and Client Money49D-62 § 49D:16 : Reporting Obligations to the FSA49D-64 § 49D:16.1 : Notifications to the FSA49D-64 § 49D:16.2 : Transaction Reporting49D-65 § 49E:1 : Introduction49E-2 § 49E:2 : Application of U.S. Regulation49E-3 § 49E:3 : Offering Mutual Funds to Latin American Clients49E-4 § 49E:3.1 : Tax Considerations49E-4 [A] : U.S. Mutual Funds49E-5 [B] : Foreign Mutual Funds49E-5 § 49E:3.2 : Application of the Exchange Act49E-6 [A] : Direct Sales49E-6 [B] : Wholesaling49E-8 § 49E:3.3 : Application of FINRA Licensing Provisions49E-9 § 49E:3.4 : Applicability of FINRA Sales Literature Rules49E-10 [A] : Institutional Sales Material49E-11 [B] : Interpretive Guidance49E-12 § 49E:3.5 : Application of the Securities Act49E-13 [A] : Scope of Regulation S49E-13 [A][1] : “Offshore Transactions”49E-16 [A][2] : “Directed Selling Efforts”49E-16 [B] : Regulation S Compliance Considerations49E-18 § 49E:3.6 : Application of the Investment Company Act49E-19 § 49E:3.7 : Compliance with Local Law49E-19 § 49E:3.8 : Other Material Considerations49E-20 [A] : Anti-Fraud Provisions49E-20 [B] : Duty of Fair Dealing49E-20 [C] : Suitability Requirements49E-21 [D] : Anti-Money Laundering Considerations49E-21 [E] : Data Protection/Regulation S-P49E-22 § 49E:4 : Offering Advisory Services to Latin American Clients49E-22 § 49E:4.1 : Application of the Investment Advisers Act49E-22 § 49E:4.2 : Investment Advisers Act Client Relationship Rules49E-24 [A] : General Anti-Fraud Considerations49E-24 [B] : Fiduciary Duty Owed to All Clients49E-26 [C] : Disclosure Obligations49E-27 [D] : Fees49E-29 [E] : Cash Solicitation Rule49E-30 [F] : Advertising49E-31 [G] : Suitability49E-33 [H] : Wrap Fee Programs49E-33 [I] : Contract Issues49E-34 [J] : Know-Your-Customer Obligations49E-34 § 49E:5 : Navigating Local Latin American Regulatory Requirements49E-36 § 49E:5.1 : Brokerage Services49E-36 § 49E:5.2 : Offering Advisory Services49E-37 [A] : Licensing Considerations49E-37 [B] : Marketing Considerations49E-38 [C] : Client Servicing Considerations49E-40 [D] : Other Considerations49E-40 § 49E:5.3 : Offering Pooled Products Directly49E-41 § 49E:6 : Foreign Corrupt Practices Act49E-41 § 49E:7 : Foreign Account Tax Compliance Act (FATCA)49E-44
	Chapter 50:	Overview of Institutional and Offshore/Foreign Advisory Activity
§ 50:1 : Changes in Investment Management and Regulation50-1 § 50:2 : Hedge Funds50-3 § 50:2.1 : Diversity Among Hedge Funds50-3 § 50:2.2 : Hedge Funds Versus Private Equity Funds50-4 § 50:2.3 : “Convergence” or “Cross-Over” of Hedge Funds and Private Equity Funds50-4 § 50:3 : Offshore Investment Advisers50-6 § 50:4 : ERISA50-6 § 50:5 : 2003 Staff Report to the Securities and Exchange Commission50-7
	Chapter 51:	Offshore/Foreign Investment Advisers
§ 51:1 : Extraterritorial Application of the Advisers Act51-1 § 51:2 : Offshore Investment Advisers51-4 § 51:2.1 : U.S. and Non-U.S. Clients51-5 § 51:3 : Conduct and Effects Analysis Supplants an Entity Approach51-8 § 51:3.1 : The Unibanco No-Action Letter: Implementing the Conduct and Effects Test51-13 § 51:3.2 : The Aftermath of the Unibanco Letter51-17 § 51:4 : Regulation of Offshore Investment Advisers51-20 § 51:4.1 : Registered Offshore Investment Advisers with U.S. Clients51-20 § 51:4.2 : Registered Offshore Investment Advisers with Non-U.S. Clients51-20 § 51:4.3 : Unregistered Offshore Investment Advisers with Non-U.S. Clients51-22 § 51:4.4 : Offshore Investment Advisers to Offshore Funds51-23 [A] : Counting Clients for Purposes of Section 203(b)(3) of the Advisers Act51-23 [B] : Regulation of the Registered Offshore Investment Adviser to the Offshore Private Fund51-26
	Chapter 52:	Pay to Play
§ 52:1 : Overview52-3 § 52:1.1 : Generally52-3 § 52:1.2 : SEC Statement Regarding Need for the Rule52-3 § 52:1.3 : Constitutional Analysis52-3 § 52:2 : Pay to Play Rule Provisions—An Overview52-4 § 52:2.1 : Generally52-4 § 52:2.2 : Two-Year Compensation “Time Out”52-5 § 52:2.3 : Solicitor Ban52-5 § 52:2.4 : Restriction on Coordinating Contributions52-6 § 52:2.5 : Covered Investment Pools and Indirect Violations52-6 § 52:3 : Advisers Subject to the Rule52-6 § 52:4 : Pay to Play Rule—Specifics52-7 § 52:4.1 : Two-Year Time Out (Rule 206(4)-5(a)(1))52-7 [A] : Generally52-7 [B] : Contribution, Official, and Government Entity52-7 [B][1] : Government Entity52-7 [B][2] : Official52-8 [B][3] : Contribution52-8 [C] : Covered Associate52-9 [C][1] : Generally52-9 [C][2] : Owners52-9 [C][3] : Executive Officers52-10 [C][4] : Solicit52-10 § 52:4.2 : Look Back Provision: Rule 206(4)-(5)(a)(1)52-10 § 52:4.3 : De Minimis Contribution Exception: Rule 206(4)-(5)(b)(1)52-11 § 52:4.4 : Returned Contribution Exception: Rule 206(4)-(5)(b)(3)52-11 § 52:4.5 : Ban on the Use of Solicitors: Rule 206(4)-(5)(a)(2)(i)52-12 [A] : Generally52-12 [B] : Regulated Persons52-12 [B][1] : Generally52-12 [B][2] : Review of Regulated Persons52-12 [B][3] : No Time Out on Compensation52-12 [B][4] : Permissible Regulated Person Solicitors52-13 [B][4][a] : Generally52-13 [B][4][b] : Investment Adviser Solicitors52-13 [B][4][c] : Broker-Dealer Solicitors52-13 [B][4][d] : Municipal Advisor Solicitors52-14 [B][4][e] : Dual Registrants52-14 [B][5] : Payments to Solicitors52-14 § 52:4.6 : Restrictions on Coordinating Contributions: Rule 206(4)-(5)(a)(2)(ii)52-14 [A] : Generally52-14 [B] : Solicit52-15 [C] : Solicitation52-15 [D] : Payment52-15 § 52:4.7 : Covered Investment Pools (Rule 206(4)-(5)(c))52-16 [A] : Generally52-16 [B] : Covered Investment Pool52-16 [C] : Advisers to Pooled Vehicles52-16 [D] : Sub-Advisers to Pooled Vehicles52-17 [E] : Broker-Dealers Selling Fund Shares52-17 § 52:4.8 : Indirect Violations of the Rule: Rule 206(4)-(5)(d)52-18 § 52:4.9 : Exemption Requests: Rule 206(4)-(5)(e)52-18 [A] : Generally52-18 [B] : SEC Exemptive Application Review52-18 § 52:5 : Recordkeeping52-19 § 52:6 : Effective and Compliance Dates52-20 [A] : Generally52-20 [B] : Time Out52-20 [C] : Solicitors52-20 [D] : Recordkeeping52-20 [E] : Covered Mutual Fund Advisers52-20
	Chapter 53:	Designing a Political Law Compliance Program for Broker-Dealers and Advisers
§ 53:1 : Introduction to Political Law Compliance53-2 § 53:1.1 : Political Law and Why Broker-Dealers Should Care53-2 § 53:1.2 : Political Law and Its Implications for Broker-Dealers53-4 § 53:2 : Lobby Laws and How They May Apply to Broker-Dealers and Advisers53-5 § 53:2.1 : Is Your Employee a Lobbyist Under the Law?53-5 § 53:3 : Gift and Ethics Laws and How They May Apply to Broker-Dealers and Advisers53-6 § 53:3.1 : Be Careful When Providing Anything of Value to a Public Official53-6 § 53:3.2 : Ethics Regulations Also Include Various Conflict of Interest Rules53-6 § 53:4 : Campaign Laws and How They May Apply to Broker-Dealers and Advisers53-7 § 53:4.1 : Campaign Finance: No Two Laws Are the Same53-7 § 53:4.2 : Monitor Employee Reimbursement Requests53-8 § 53:5 : The Special Case of “Pay-To-Play”53-8 § 53:5.1 : Who Do Pay-to-Play Laws Affect?53-9 § 53:5.2 : Where Do Pay-to-Play Laws Exist?53-10 § 53:5.3 : Why Do Pay-to-Play Laws Exist?53-10 § 53:5.4 : Types of Pay-to-Play Rules53-10 § 53:5.5 : Scope of Pay-to-Play Laws53-11 § 53:6 : Developing a Political Law Compliance Program: Tips and Recommendations53-12 § 53:6.1 : Adopt a Company-Wide Political Law Compliance Policy53-12 § 53:6.2 : Identifying the Stakeholders53-12 § 53:6.3 : Creating Systems for Compliance53-13 § 53:6.4 : Education and Training53-13 § 53:6.5 : Designate Internal Management and Responsibility53-13
	Chapter 54:	Municipal Advisor Regulation
§ 54:1 : The Reach of Dodd-Frank Act Jurisdiction over Municipal Advisors54-2 § 54:2 : Key Statutory Terms and SEC Interpretation54-3 § 54:2.1 : Municipal Advisors and Municipal Advisory Activities54-3 § 54:2.2 : Municipal Entity and Obligated Person54-7 § 54:2.3 : Municipal Financial Products54-9 [A] : Municipal Derivatives54-9 [B] : Guaranteed Investment Contracts54-10 [C] : Investment Strategies54-11 § 54:2.4 : Exclusions from the Definition of Municipal Advisor54-13 [A] : Broker, Dealer, or Municipal Securities Dealer Serving As an Underwriter54-13 [A][1] : MSRB Rule G-2354-14 [A][2] : Differentiating Underwriters from Financial Advisors; Union County, Iowa v. Piper Jaffray & Co.54-14 [B] : Investment Advisers Registered Under the Advisers Act54-18 [C] : Commodity Trading Advisors54-19 [D] : Attorneys, Engineers, and Other Professionals54-20 [E] : Municipal Entities and Employees of Municipal Entities54-23 § 54:3 : Registration of Municipal Advisors54-23 § 54:3.1 : Registration with the SEC54-23 [A] : Form MA54-24 [B] : Form MA-I54-25 § 54:3.2 : Registration with MSRB54-26 § 54:4 : The Fiduciary Duty of Municipal Advisors to Their Municipal Entity Clients54-27 § 54:4.1 : Dodd-Frank Act Standard54-27 § 54:4.2 : The Dodd-Frank Act Delegation of Authority to the MSRB; Draft Rule G-36 and Draft Interpretive Guidance54-29 § 54:5 : The Fair Dealing Obligation of Municipal Advisors54-30 § 54:5.1 : Rule G-1754-30 § 54:5.2 : Draft Interpretive Notice on the Application of Rule G-17 to Municipal Advisors54-31 [A] : Municipal Advisors Providing Advice to Obligated Persons54-31 [B] : Solicitors of Municipal Entities54-32 § 54:6 : The Proposed Municipal Advisor Pay-to-Play Rules54-33 § 54:6.1 : Political Contributions54-33 [A] : Gifts and Gratuities54-33
	Chapter 55:	Investment Adviser Regulation of Public Finance Activity
§ 55:1 : Introduction: The Difference Between Broker-Dealer Regulation and Investment Adviser Regulation55-2 § 55:2 : Overview of the Dodd-Frank Act Changes to the Advisers Act55-5 § 55:2.1 : Repeal of Exemption for Private Advisers55-5 § 55:2.2 : New Exemptions55-7 [A] : Private Fund Advisers55-7 [B] : Venture Capital Funds55-8 § 55:2.3 : Reallocation of SEC-State Authority55-9 § 55:3 : Jurisdictional Treatment of Investment Advisers and Municipal Advisors Under the 1934 Act and the Advisers Act55-10 § 55:3.1 : Conceptual and Definitional Overlap of Investment Advisers and Municipal Advisors55-10 § 55:3.2 : Investment Advisers Who Are Not Municipal Advisors55-12 § 55:3.3 : Financial Advisors Who Are Municipal Advisors but Not Investment Advisers55-13 § 55:4 : The SEC’s Investment Adviser Pay-to-Play Rule55-19 § 55:4.1 : Investment Advisers Subject to Rule 206(4)-555-21 § 55:4.2 : The Two-Year Ban55-22 § 55:4.3 : Conditional Ban on Use of Third-Party Solicitors or Placement Agents to Solicit Investment Advisory Business55-23 [A] : Possible Incorporation of MSRB Proposed Rule G-42 into SEC Rule 206(4)-555-25 [B] : State Law Bans: The Nationwide Reform Code Initiated by New York55-26 § 55:4.4 : Covered Investment Pools55-29 § 55:5 : Restrictions on Cash Payments by Investment Advisers to Solicitors55-31 § 55:5.1 : Status of the Solicitor Under the Advisers Act55-32 § 55:5.2 : Status of Solicitor As a Municipal Advisor Under the 1934 Act55-32 § 55:6 : Sorting Out the Differences Among Solicitors, Placement Agents, and Pension Consultants55-33 § 55:7 : Investment Advisers in Public Finance55-35 § 55:7.1 : Advisers to Investment Vehicles for Municipal Securities55-35 [A] : Municipal Bond Funds55-36 [B] : SEC v. Heartland Advisors55-37 § 55:7.2 : Advisers to Government Entities55-40 [A] : Public Pension Funds55-40 [B] : SEC v. Henry Morris55-42 [C] : Local Government Investment Pools55-45 [D] : Is the Pool Itself an Investment Adviser?55-48 [E] : Section 529 College Savings Plans55-52 Figure 55-1 : Investment Advisers in Section 529 College Savings Plans55-53 § 55:8 : Registration Requirements and Exemptions55-55 § 55:8.1 : SEC or State Registration55-55 § 55:8.2 : Form ADV55-57 [A] : Form ADV, Part I55-57 [B] : Form ADV, Part 255-58 [C] : Updates55-59 § 55:8.3 : Exclusions and Exemptions55-59 [A] : Lawyers55-60 [B] : Broker-Dealers55-61 [C] : Vendors of Information on Municipal Securities55-62 [D] : Advisers of Investment in Government Securities55-64 § 55:9 : Fiduciary Duties of Investment Advisers55-65 § 55:9.1 : Duty of Loyalty: Disclosing Conflicts of Interest55-68 [A] : Adviser Fees: Performance, Fulcrum, and Wrap Account Fees55-68 [B] : In re O’Brien Partners55-72 [C] : Trading Practices: Allocation, Principal Transactions, Agency Cross Transactions, Personal Trading55-73 [D] : Reciprocal Arrangements: Soft Dollar Transactions55-77 § 55:9.2 : Duty of Care55-82
	Chapter 56:	SEC Reporting Requirements Under Section 13 of the Exchange Act
§ 56:1 : Introduction56-2 § 56:2 : Section 13(d)—Beneficial Ownership Reporting Requirements56-3 § 56:2.1 : Overview of Beneficial Ownership Reporting Pursuant to Section 13(d)56-3 [A] : Equity Securities56-3 [B] : Definition of “Beneficial Owner”56-4 [C] : Aggregation and Disaggregation of Beneficial Ownership56-5 [C][1] : Parent-Subsidiary56-5 [C][2] : Adviser-Fund56-6 [D] : Calculation of Beneficial Ownership56-7 [E] : Group Status56-8 § 56:2.2 : Section 13(d) Reporting Obligations56-10 [A] : Schedule 13D56-10 [A][1] : Overview56-10 [A][2] : Filing Deadlines56-11 [B] : Schedule 13G56-13 [B][1] : Qualified Institutional Investors56-13 [B][1][a] : Overview56-13 [B][1][b] : Filing Deadlines56-15 [B][1][c] : Loss of Eligibility to File on Schedule 13G56-16 [B][2] : Passive Investors That Own Less Than 20% of the Security56-16 [B][2][a] : Overview56-16 [B][2][b] : Filing Deadlines56-16 [B][2][c] : Loss of Eligibility to File on Schedule 13G56-17 [B][3] : Exempt Investors56-17 [B][3][a] : Overview56-17 [B][3][b] : Filing Deadlines56-17 [B][3][c] : Loss of Eligibility to File on Schedule 13G56-18 [C] : Control Purpose or Effect56-18 § 56:3 : Section 13(f)—Reports by Institutional Investment Managers56-20 § 56:3.1 : Overview of Section 13(f) Reporting Requirements56-20 [A] : Overview56-20 [B] : Institutional Investment Managers56-21 [C] : Section 13(f) Securities56-21 [D] : Possession of Investment Discretion56-22 [E] : Filing Deadlines56-23 § 56:4 : Section 13(h)—Large Trader Reporting56-23 § 56:4.1 : Overview of Section 13(f) Reporting Requirements56-23 § 56:4.2 : Large Traders56-25 [A] : Focus on Parent/Control Entities56-25 [B] : Identifying Activity Level56-27 [C] : Voluntary Registration56-28 § 56:4.3 : Form 13H56-28 [A] : Form 13H Filing Types56-28 [B] : What Information Is Required on Form 13H?56-29 § 56:4.4 : Confidentiality56-30
	Chapter 57:	Exempt Reporting Advisers
§ 57:1 : Introduction57-2 § 57:2 : Background57-3 § 57:3 : Obligations of Exempt Reporting Advisers57-5 § 57:3.1 : Reporting Obligations57-5 § 57:3.2 : Recordkeeping Requirements57-6 § 57:4 : Substantive Provisions of the Investment Advisers Act That Apply to All “Investment Advisers”57-6 § 57:4.1 : Fiduciary Duty57-6 [A] : Overview57-6 [B] : Full Disclosure of Conflicts of Interest57-7 [C] : Suitable Advice57-8 [D] : Reasonable Basis for Recommendations57-8 [E] : Best Execution57-8 [F] : Soft Dollars57-9 § 57:4.2 : Substantive Statutory Requirements57-10 [A] : Principal Transactions57-10 [B] : Agency Cross-Transactions57-10 [C] : Cross-Trades57-11 [D] : Aggregation of Client Orders57-11 [E] : Supervision57-12 [F] : Political Contributions by Investment Advisers57-12 [G] : Advisers to Pooled Investment Vehicles57-13 [H] : SEC Rules Applying to Advisers Registered or Required to Register Do Not Apply to Exempt Reporting Advisers57-13 [H][1] : Overview57-13 [H][2] : Advertising57-14 [H][3] : Custody of Client Assets57-14 [H][4] : Disclosure Requiring the Use of Solicitors57-14 [H][5] : Proxy Voting57-14 [H][6] : Compliance Program57-15 [H][7] : Code of Ethics/Insider Trading57-15 § 57:5 : Conclusion57-16
	Chapter 58:	Commodity Trading Advisor Status and Regulation
§ 58:1 : Introduction58-3 § 58:2 : Bifurcated Regulatory System58-4 § 58:2.1 : Overview58-4 § 58:2.2 : Exclusive CFTC Jurisdiction58-4 § 58:2.3 : Shared CFTC/SEC Jurisdiction58-5 § 58:2.4 : Exclusive SEC Jurisdiction58-6 § 58:3 : Commodity Trading Advisor Definition58-7 § 58:3.1 : Overview58-7 § 58:3.2 : Commodity Interests58-8 [A] : Futures58-8 [B] : Commodity Options58-9 [C] : Swaps58-9 [C][1] : Overview58-9 [C][2] : Foreign Exchange Swaps and Forwards58-10 [D] : Retail Forex58-12 [E] : Leverage Contracts58-13 [F] : Commodity Pools58-13 § 58:3.3 : Engages in the Business of Advising Others58-14 § 58:3.4 : For Compensation or Profit58-14 § 58:3.5 : Referrals to Other CTAs58-15 § 58:3.6 : Extraterritoriality58-15 § 58:4 : Exclusions and Exemptions58-16 § 58:4.1 : Overview58-16 § 58:4.2 : Statutory Exclusions from the CTA Definition for Certain Entities58-16 [A] : Overview58-16 [B] : Solely Incidental58-17 [B][1] : Banks and Trust Companies58-17 [B][2] : Publishers and Producers58-18 § 58:4.3 : Statutory Exemptions from CTA Registration58-19 [A] : Overview58-19 [B] : Section 4m(1)—No More Than Fifteen Clients58-19 [B][1] : Holding Out58-20 [C] : Section 4m(3)—SEC-Registered Advisers Not Primarily Engaged in CTA Activities58-21 [C][1] : Holding Out58-22 [C][2] : Broader Commodity Interest Definition58-22 § 58:4.4 : CFTC Exclusions and Exemptions from CTA Regulation58-23 [A] : Overview58-23 [B] : Rule 4.14(a)(8)—Investment Advisers Not Primarily Engaged in CTA Activities58-23 [B][1] : Advisers Eligible for Rule 4.14(a)(8)58-23 [B][2] : Eligible Clients58-24 [B][3] : Solely Incidental58-26 [B][4] : Holding Out58-26 [B][5] : Notice Filings58-28 [B][6] : Combining Rule 4.14(a)(8) with Other CTA Exemptions58-28 [B][7] : Combining CTA Registration with Reliance on Rule 4.14(a)(8)58-29 [C] : Other CFTC Exclusions and Exemptions from CTA Regulation58-29 [C][1] : Rule 4.6 Exclusions58-30 [C][1][a] : Insurance Companies58-30 [C][1][b] : Swap Dealers58-30 [C][1][c] : CPOs Excluded Under Rule 4.558-31 [C][2] : Rules 4.14(a)(4) and 4.14(a)(5) for Registered and Exempt CPOs58-31 § 58:5 : CTA Regulation58-31 § 58:5.1 : Overview58-31 § 58:5.2 : CFTC Requirements58-32 [A] : Disclosure Document58-32 [A][1] : Filings and Amendments58-32 [A][2] : Delivery and Acknowledgment58-33 [A][3] : Substantive Disclosure58-33 [B] : Performance Information Disclosure58-34 [C] : Advertising58-35 [D] : Recordkeeping58-35 [E] : Custody58-36 [F] : Reporting (Form CTA-PR)58-36 § 58:5.3 : Rule 4.7—Limited Regulation for CTAs to “Qualified Eligible Persons”58-36 [A] : QEP Definition58-37 [B] : Disclosure58-39 [C] : Recordkeeping58-40 [D] : Notice Filing58-40 § 58:5.4 : NFA Regulation58-40 [A] : Overview58-40 [B] : CTA Registration58-40 [B][1] : Firm Application58-40 [B][2] : Principal and Associated Person Applications58-42 [B][3] : Identifying Principals58-42 [B][4] : Identifying Associated Persons58-43 [C] : CTA Compliance Policies and Procedures58-45 [D] : Prohibition from Doing Business with Non-NFA Members58-46 [E] : Annual Compliance Review58-47
	Chapter 59:	Appendices A1-A7: Statutes and Regulations
	Chapter 60:	Appendices B1-B6: Form ADV
	Chapter 61:	Appendices C1-C11: SEC Releases
	Chapter 62:	Appendices D1-D6: No-Action Letters
	Chapter 63:	Appendix E1: SEC Enforcement Cases
	Chapter 64:	Appendices F1-F3: Department of Labor Releases
	Chapter 65:	Table of Cases
	Chapter 66:	Index to Investment Adviser Regulation

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