TreatiseTreatise

Financial Product Fundamentals: Law, Business, Compliance (2nd Edition)

 by Clifford E Kirsch
 
 Copyright: 2012-2017
 Last Updated: November 2017

 Product Details >> 

Product Details

  • ISBN Number: 9781402418983
  • Page Count: 1222
  • Number of Volumes: 2
  •  

Financial Product Fundamentals is a comprehensive reference on the regulations, benefits, advantages, pricing, distribution, marketing, and current and future viability of registered offerings. It includes expert analysis of private placements, mutual funds, hedge funds, money market funds, exchange traded funds, real estate investment trusts, international investment funds, variable insurance products, and other instruments.

Now in a second edition, Financial Product Fundamentals has been completely revised to reflect the Dodd-Frank Act, SEC actions, and other regulatory changes made to spur the economy and reform the financial markets. It includes coverage of foreign broker-dealers; Rule 483 advertising, or advertising that can be done prior to delivery of a statutory or summary prospectus and includes information that may be different from or in addition to that contained in the prospectus, so long as it does not conflict; insurance-linked securities; and life settlements. It includes many helpful charts, tables, and other graphics.

Updated at least once a year, Financial Product Fundamentals: Law • Business • Compliance is an important reference for securities professionals and attorneys, general practitioners, compliance and risk officers, federal and state regulators, and investors, helping them to stay current on the laws applicable to each of the types of financial instruments.
  Table of Contents
Chapter 1: The Registered Offering
  • § 1:1 : Introduction1-3
  • § 1:2 : Pre-IPO Financing1-3
  • § 1:3 : Advantages of Going Public1-5
    • § 1:3.1 : Raising Capital1-5
    • § 1:3.2 : Venture Capital or Private Equity Exits1-5
    • § 1:3.3 : Founder Liquidity1-5
    • § 1:3.4 : Employee Compensation1-5
    • § 1:3.5 : Acquisition Currency1-6
    • § 1:3.6 : Branding and Prestige1-6
  • § 1:4 : Disadvantages of Going Public1-6
    • § 1:4.1 : Increased Expenses1-6
    • § 1:4.2 : Increased Liability Exposure1-7
    • § 1:4.3 : Loss of Privacy and Flexibility1-7
    • § 1:4.4 : Management Distraction1-8
    • § 1:4.5 : Loss of Control1-8
    • § 1:4.6 : Exposure to Governance Scrutiny and Shareholder Activism1-9
    • § 1:4.7 : Valuation Fluctuation1-9
  • § 1:5 : The Working Group1-9
  • § 1:6 : EGC Status1-11
  • § 1:7 : Terms of the Offering1-12
  • § 1:8 : Accounting and Auditing Issues1-13
  • § 1:9 : Listing Venue1-14
  • § 1:10 : Pre-IPO Corporate Clean-Up1-15
    • § 1:10.1 : Corporate Governance—Board Matters1-15
    • § 1:10.2 : Anti-Takeover Protections1-15
      • [A] : Other Clean-Up Matters—Management, Related-Party Matters, Consents, Corporate Policies, and More1-16
  • § 1:11 : Communications During an IPO1-18
    • § 1:11.1 : Generally1-18
  • § Figure 1-1 : IPO Phases and Publicity1-18
    • § § 1:11:2 : Pre-Filing (or Quiet) Period1-19
    • § § 1:11:3 : Post-Filing (or Waiting) Period1-20
    • § § 1:11:4 : Post-Effectiveness Period1-20
  • § 1:12 : Securities Liabilty and Due Diligence1-21
  • § 1:13 : Key Documentation1-23
    • § 1:13.1 : Prospectus and Registration Statement1-23
    • § 1:13.2 : Underwriting Agreement1-24
    • § 1:13.3 : Lock-Up Agreements1-26
    • § 1:13.4 : Road Show Presentation1-26
    • § 1:13.5 : Auditor Comfort Letters1-26
    • § 1:13.6 : Legal Opinions and Disclosure Letters1-27
  • § 1:14 : Timeline1-27
  • § Figure 1-2 : Timeline1-28
    • § § 1:14:1 : Pre-Filing: Drafting the Registration Statement and Due Diligence1-30
    • § § 1:14:2 : Filing and the SEC Comment Process1-30
    • § § 1:14:3 : Road Show: Rules of the Road1-30
    • § § 1:14:4 : Effectiveness, Pricing and Closing1-31
  • § 1:15 : Life As a Public Company1-32
    • § 1:15.1 : Form 10-K/Form 20-F1-32
    • § 1:15.2 : Form 10-Q1-32
    • § 1:15.3 : Form 8-K/Form 6-K1-32
    • § 1:15.4 : Proxy Regime1-33
    • § 1:15.5 : Schedule 13D/G1-33
    • § 1:15.6 : Tender Offer Regime1-34
    • § 1:15.7 : Section 161-35
    • § 1:15.8 : Other Large Holder Considerations1-35
    • § 1:15.9 : Earnings Reports1-36
    • § 1:15.10 : Non-GAAP Financial Measures1-36
    • § 1:15.11 : Regulation FD1-37
    • § 1:15.12 : Sarbanes-Oxley Act1-37
    • § 1:15.13 : Conflict Minerals1-38
    • § 1:15.14 : Iran Notice1-38
    • § 1:15.15 : XBRL1-38
  • § 1:16 : Company and Selling Security Holder Financing Options Post-IPO1-39
  • § 1:17 : Conclusion1-41
Chapter 2: Limited Offerings and Private Placements; and Appendix 2A
  • § 2:1 : Overview2-2
  • § 2:2 : Securities Act of 1933 and State Blue Sky Laws2-2
  • § 2:3 : Securities Act Exemptions for Limited Offerings and Private Placements2-4
    • § 2:3.1 : Section 3(b) of the Securities Act—Limited Offerings2-4
    • § 2:3.2 : Section 4(a)(2) of the Securities Act—Private Placements2-5
  • § 2:4 : Regulation A in Detail2-8
  • § 2:5 : Regulation A+ in Detail2-9
  • § 2:6 : Regulation E in Detail2-12
  • § 2:7 : Regulation D in Detail2-12
    • § 2:7.1 : Rule 504 Offerings2-13
    • § 2:7.2 : Rule 505 Offerings2-14
    • § 2:7.3 : Rule 506 Offerings2-14
    • § 2:7.4 : No General Advertising or Solicitation in Certain Regulation D Offerings2-15
    • § 2:7.5 : Counting Investors2-17
    • § 2:7.6 : Accredited Investors2-19
    • § 2:7.7 : Disclosure Obligations2-21
    • § 2:7.8 : “Bad Actor” Disqualification Provisions2-23
    • § 2:7.9 : Form D2-24
    • § 2:7.10 : Recent Amendments to Form D2-25
    • § 2:7.11 : Substantial Compliance2-26
    • § 2:7.12 : Limitations on Resale2-27
    • § 2:7.13 : Integration2-28
    • § 2:7.14 : Integration of Exempt Offerings and the Regulation D Safe Harbor2-28
    • § 2:7.15 : Integration of Exempt Offering and Subsequent Public Offering—“Gun Jumping”2-29
    • § 2:7.16 : Securities Offerings Available Under Regulation D2-30
  • § 2:8 : Proposed Revisions to Regulation D2-30
  • § 2:9 : Interaction of Regulation S with Regulation D2-32
  • § 2:10 : Rule 144A Transactions2-33
  • § 2:11 : Rule 147 and Rule 147A Intrastate Offerings2-35
  • § 2:12 : Crowdfunding Exempt Offerings2-38
  • § 2:13 : State Blue Sky Requirements2-40
  • Appendix 2A : Limited Offering and Private Placement Quick Reference ChartApp. 2A-1
Chapter 3: International Securities Offerings; and Appendix 3A
  • § 3:1 : Introduction3-3
    • § 3:1.1 : Foreign Private Issuer3-3
  • § 3:2 : Public Offerings in the United States3-5
    • § 3:2.1 : Registration on Form F-13-5
    • § 3:2.2 : Short-Form and Shelf Registration3-9
    • § 3:2.3 : Accounting and Financial Disclosure3-11
    • § 3:2.4 : Trust Indentures3-15
    • § 3:2.5 : Procedures and Mechanics3-15
      • [A] : “Due Diligence” Investigations3-17
      • [B] : Underwriting3-18
  • § 3:3 : Global Offerings3-18
    • § 3:3.1 : Combined Regulation S and Rule 144A Offerings3-19
    • § 3:3.2 : Rule 144A3-20
    • § 3:3.3 : Regulation S3-20
      • [A] : Most Offerings by Non-U.S. Issuers; Some U.S. Issuers (Category 1)3-22
      • [B] : Debt Offerings by Reporting U.S. and Non-U.S. Issuers and Non-Reporting Non-U.S. Issuers with SUSMI; Equity Offerings by Reporting Non-U.S. Issuers with SUSMI (Category 2)3-23
      • [C] : All Other Offerings (Category 3)3-25
      • [D] : Resales of Securities Under Regulation S3-26
    • § 3:3.4 : Procedures and Mechanics3-27
      • [A] : Equity Securities3-29
      • [B] : Debt Securities3-30
  • § 3:4 : American Depositary Receipts (or ADRs)3-30
  • § 3:5 : State “Blue Sky” Laws3-32
  • § 3:6 : Investment Company Act Considerations3-33
  • § 3:7 : Legal Consequences to a Non-U.S. Company of Having a Public U.S. Market3-33
    • § 3:7.1 : The Securities Exchange Act of 19343-33
    • § 3:7.2 : Registration and Annual Reports3-34
    • § 3:7.3 : Periodic Reports on Form 6-K3-39
    • § 3:7.4 : Rule 12g3-2(b) Exemption3-39
    • § 3:7.5 : Exemptions from the Exchange Act3-40
    • § 3:7.6 : Exemption from Regulation FD3-40
  • § 3:8 : Sarbanes-Oxley Act3-41
    • § 3:8.1 : Internal Control over Financial Reporting3-41
    • § 3:8.2 : Disclosure Controls and Procedures3-42
    • § 3:8.3 : Certification Requirements3-43
    • § 3:8.4 : Regulation G and Non-GAAP Financial Measures3-43
    • § 3:8.5 : Audit Committees3-44
    • § 3:8.6 : Audit Committee Financial Expert3-46
    • § 3:8.7 : Auditor Independence3-46
    • § 3:8.8 : Loans to Executives3-46
    • § 3:8.9 : Trading During Pension Fund Blackout Period3-47
    • § 3:8.10 : Code of Ethics3-47
    • § 3:8.11 : Off-Balance Sheet and Other MD&A Disclosure3-48
  • § 3:9 : Listing on a U.S. Stock Exchange3-49
  • § 3:10 : Foreign Private Issuer Deregistration3-50
  • § 3:11 : Dodd-Frank Act3-52
    • § 3:11.1 : Conflict Minerals3-52
    • § 3:11.2 : Mine Safety and Health3-53
    • § 3:11.3 : Compensation Committee and Compensation Committee Advisor Independence3-53
    • § 3:11.4 : Whistleblowers3-53
  • § 3:12 : JOBS Act3-53
    • § 3:12.1 : Emerging Growth Companies3-54
    • § 3:12.2 : General Solicitation3-54
    • § 3:12.3 : Regulation A+3-55
    • § 3:12.4 : Exchange Act Registration Thresholds3-56
  • Appendix 3A : Form F-1: Registration Statement Under the Securities Act of 1933App. 3A-1
Chapter 4: Securitization (Asset-Backed Securities and Structured Financing)
  • § 4:1 : Introduction4-2
    • § 4:1.1 : The Current Crisis Involving Mortgage-Backed Securities4-4
  • § 4:2 : Pooling4-6
  • § 4:3 : Highlights of Securitization4-8
    • § 4:3.1 : Securitization As a Converter; from Illiquid Loans to Liquid Securities; from Institutions to Markets; from Traditional Systems to a New System4-8
      • [A] : Main Feature of Securitization4-8
      • [B] : Conditions for the Development of Markets4-9
      • [C] : Two Traditional Channels of Intermediation4-9
      • [D] : Securitization As a Tool for Liquidity4-11
      • [E] : Securitization As a New System of Intermediation4-11
    • § 4:3.2 : Securitization As a Method of Selling Loans4-11
    • § 4:3.3 : Securitization As a Mechanism for Unbundling Functions4-12
      • [A] : Separating Lending from Other Functions4-12
      • [B] : Separating the Servicing Function4-14
    • § 4:3.4 : Securitization As a Tool for Flexible Creation of Securities4-14
      • [A] : Flexibility in Allocating Risk Among Various Classes of Securities4-15
      • [B] : Flexibility in Designing the Risk Level of SPV Securities: Diversification and Credit Enhancement4-17
  • § 4:4 : Legal Issues Concerning Securitization4-18
    • § 4:4.1 : Interdisciplinary Aspect of Securitization Law4-18
    • § 4:4.2 : Legal Problems and Guides to Solutions4-19
  • § 4:5 : Where Is Securitization Heading?4-22
    • § 4:5.1 : The Reach of Securitization Today4-22
    • § 4:5.2 : Can All Loans Be Securitized?4-24
    • § 4:5.3 : Is Securitization Here to Stay?4-28
  • § Graph 4-1 : The Securitization Process4-32
  • § Graph 4-2 : Channels of Intermediation4-33
  • § Graph 4-3 : Traditional Role of Banks4-33
Chapter 5: Introduction to Collective Investment Vehicles
  • § 5:1 : Background5-1
  • § 5:2 : Regulatory Structure5-2
  • § Chart 5-1 : Private Money Managers vs. Mutual Funds5-3
    • § § 5:2.1 : The Retail Marketplace5-3
  • § Chart 5-2 : Retail Investment Vehicles5-4
    • § § 5:2.2 : The Private Marketplace5-5
    • § § 5:2.3 : The Offshore Marketplace5-5
  • § Chart 5-3 : Collective Investment Vehicles5-6
Chapter 6: Mutual Funds
  • § 6:1 : A Brief History of the Mutual Fund Industry6-2
  • § 6:2 : The Players6-11
    • § 6:2.1 : Mutual Funds6-12
    • § 6:2.2 : Investment Adviser6-13
    • § 6:2.3 : Board of Directors6-13
    • § 6:2.4 : Administrator6-14
    • § 6:2.5 : Underwriter or Distributor6-14
    • § 6:2.6 : Custodian6-14
    • § 6:2.7 : Transfer Agent6-15
    • § 6:2.8 : Independent Auditors6-15
    • § 6:2.9 : Legal Counsel6-15
    • § 6:2.10 : Chief Compliance Officer6-15
    • § 6:2.11 : Shareholders6-16
  • § 6:3 : Organizational Structure6-16
    • § 6:3.1 : The Mutual Fund Complex6-16
  • § Figure 6-1 : The Mutual Fund Complex6-16
    • § § 6:3.2 : The Adviser and the Board6-17
  • § Figure 6-2 : The Adviser and the Board6-17
    • § § 6:3.3 : The Fund’s Distribution Structure6-17
  • § Figure 6-3 : Distribution Structure 1: Fund/Principal Underwriter/Broker-Dealer/Investors6-18
  • § Figure 6-4 : Distribution Structure 2: Fund/Principal Underwriter/Investors6-18
  • § Figure 6-5 : Distribution Structure 3: Fund/Broker-Dealers6-19
    • § § 6:3.4 : Portfolio Management Structure6-19
  • § Figure 6-6 : Traditional Portfolio Management Structure6-19
  • § Figure 6-7 : Manager of Managers Structure6-20
    • § § 6:3.5 : Marketing Structures6-20
  • § Figure 6-8 : Master-Feeder Structure6-20
  • § Figure 6-9 : Multi-Class Structure6-21
  • § Figure 6-10 : Fund of Funds Structure6-22
  • § § 6:4 : Regulatory Framework6-22
    • § § 6:4.1 : Overview of the Investment Company Act6-22
    • § § 6:4.2 : Restrictions on Advisory Services6-23
      • § [A] : Prospectus Disclosure6-23
      • § [B] : Controls Over the Advisory Contract6-24
      • § [C] : Corporate Structure6-24
      • § [D] : Private Right of Action6-25
      • § [E] : Affiliated Transactions6-25
      • § [F] : Restrictions on Investments6-26
    • § § 6:4.3 : Restrictions on Capital Structure6-27
      • § [A] : Prohibition on Debt Issuance6-27
      • § [B] : Issuance of Redeemable Shares6-27
      • § [C] : Pricing of Shares6-28
    • § § 6:4.4 : Restrictions on Sales of Fund Shares6-28
      • § [A] : Limits on Sales Load6-28
      • § [B] : Financing Distribution Through Fund Assets6-28
      • § [C] : Advertising Regulations6-28
    • § § 6:4.5 : Administration of the Investment Company Act: The Role of the SEC6-30
      • § [A] : SEC Inspections6-30
      • § [B] : Enforcement6-31
  • § § 6:5 : Application of the Investment Advisers Act6-31
Chapter 7: Closed-End Investment Companies; and Appendix 7A
  • § 7:1 : Introduction7-2
  • § 7:2 : What Is a Closed-End Investment Company?7-3
  • § 7:3 : Reasons for Relative Unpopularity of Closed-End Companies7-7
    • § 7:3.1 : High-Cost Exit Strategies for Investors7-7
    • § 7:3.2 : The Discount Phenomenon7-8
  • § 7:4 : Reasons for Choosing to Operate As a Closed-End Company7-11
  • § 7:5 : Regulation of the Offer and Sale of Closed-End Company Shares7-13
  • § 7:6 : Financing Distribution Costs of Closed-End Companies7-16
  • § 7:7 : Registration Procedures for Closed-End Companies7-17
  • § 7:8 : Periodic Reporting Under the Investment Company Act7-17
  • § 7:9 : Regulation of Share Repurchases by Closed-End Companies7-18
    • § 7:9.1 : Requirements of the Exchange Act7-18
    • § 7:9.2 : Repurchases in the Course of a Distribution: Rule 102 of Regulation M7-19
    • § 7:9.3 : Requirements of the Investment Company Act7-20
      • [A] : Rule 23c-17-20
      • [B] : Rule 23c-27-21
      • [C] : Rule 23c-37-21
  • § 7:10 : Regulation of the Operations of the Closed-End Company7-24
    • § 7:10.1 : The Capital Structure of Closed-End Companies7-24
    • § 7:10.2 : Restrictions on Investments by Closed-End Companies7-26
  • Appendix 7A : Form N-2: Registration Statement for Closed-End Management Investment CompaniesApp. 7A-1
Chapter 8: Unit Investment Trusts; and Appendix 8A
  • § 8:1 : Introduction8-2
  • § 8:2 : History8-6
  • § 8:3 : How UITS Compare to Mutual Funds8-8
  • § 8:4 : UIT Structure8-9
    • § 8:4.1 : Trust Indenture8-9
    • § 8:4.2 : Key Participants8-10
      • [A] : The Sponsor8-10
      • [B] : The Trustee8-11
      • [C] : The Evaluator8-12
      • [D] : The Underwriters8-12
  • § 8:5 : Creation, Offering and Sale of Units8-12
    • § 8:5.1 : Trust Documents8-12
    • § 8:5.2 : Accumulation and Deposit8-13
    • § 8:5.3 : Offering and Sale of Units8-13
      • [A] : Front-End Sales Charges8-13
      • [B] : Deferred Sales Charges8-14
    • § 8:5.4 : Liquidity of Units8-15
  • § 8:6 : Registration Process8-16
    • § 8:6.1 : Registration Under the Securities Act and the Investment Company Act8-16
    • § 8:6.2 : Calculation of Filing Fees8-17
    • § 8:6.3 : Disclosure Forms8-18
      • [A] : Form N-8B-28-18
      • [B] : Form S-68-19
      • [C] : Form N-4 and Form N-68-19
      • [D] : Proposed Form N-78-20
      • [E] : Reports to the SEC and to Unitholders8-21
  • § 8:7 : Selected Regulatory and Disclosure Issues8-22
    • § 8:7.1 : Advertising8-22
    • § 8:7.2 : Codes of Ethics8-22
    • § 8:7.3 : Compliance Programs and Compliance Officers8-23
    • § 8:7.4 : Point of Sale and Confirmation Disclosure8-23
    • § 8:7.5 : Anti-Money Laundering Legislation8-23
    • § 8:7.6 : Impact on UITs of the Sarbanes-Oxley Act of 20028-25
      • [A] : Improper Influence on Conduct of Audits8-25
      • [B] : Section 302 Certification Requirements8-25
      • [C] : Other Provisions Not Applicable to UITs8-26
      • [D] : Listing Standards8-26
    • § 8:7.7 : Disclosure Issues8-26
      • [A] : Return Information8-26
      • [B] : Fees8-28
      • [C] : Plain English Requirement8-28
      • [D] : Disclosure Document Delivery8-28
      • [E] : Investment Company Names8-29
  • § 8:8 : The Evolving Definition of “Fixed Portfolio of Securities”8-29
  • § 8:9 : Innovative Uses of the UIT8-33
    • § 8:9.1 : Asset Allocation Vehicles8-33
    • § 8:9.2 : Exchange Traded UITs8-35
  • § 8:10 : Conclusion8-40
  • Appendix 8A : Differences Between UITs and Mutual FundsApp. 8A-1
Chapter 9: Money Market Funds
  • § 9:1 : Introduction9-3
  • § 9:2 : What Is a Money Market Fund?9-5
  • § 9:3 : Rule 2a-79-9
    • § 9:3.1 : Exemption from Standard Valuation Procedures and Types of Money Market Funds Under Rule 2a-79-9
      • [A] : Exemption Under Rule 2a-7 for Government and Retail Money Market Funds9-9
      • [B] : Floating NAV Requirement for “Institutional” Non-Government Money Market Funds9-11
      • [C] : Government Money Market Funds9-12
      • [D] : Retail Money Market Funds9-13
      • [E] : Reorganization of Institutional and Retail Money Market Funds and Mandatory Redemptions9-16
      • [F] : Tax and Accounting Implications of the Floating NAV Requirement9-18
    • § 9:3.2 : Liquidity Fees and Redemption Gates9-19
      • [A] : Duration and Lifting of Fees and Redemption Gates9-22
      • [B] : Board Considerations9-22
    • § 9:3.3 : Holding Out and Use of Names and Titles9-25
    • § 9:3.4 : Board Findings and Procedures Under Rule 2a-79-26
      • [A] : Required Board Findings for Use of Amortized Cost or Penny-Rounding Methods9-26
      • [B] : Required Procedures: Government or Retail Money Market Funds Using the Amortized Cost Method9-27
        • [B][1] : Shadow Pricing and Related Board Actions9-27
          • [B][1][a] : Required Board Action9-28
          • [B][1][b] : Disclosure of Shadow Pricing and Deviation9-28
      • [C] : Required Procedures: Government or Retail Money Market Funds Using the Penny-Rounding Pricing Method9-29
      • [D] : Specific Procedures: All Funds9-29
        • [D][1] : Stress Testing9-29
        • [D][2] : Other Required Procedures9-33
    • § 9:3.5 : The Risk-Limiting Provisions9-34
      • [A] : Maturity9-35
        • [A][1] : Portfolio Maturity9-35
          • [A][1][a] : In General9-35
          • [A][1][b] : Calculating Weighted Average Life9-36
        • [A][2] : Maturity of Portfolio Securities9-36
          • [A][2][a] : Adjustable Rate Government Securities9-37
          • [A][2][b] : Variable Rate Securities9-38
          • [A][2][c] : Floating Rate Securities9-38
          • [A][2][d] : Repurchase Agreements9-39
          • [A][2][e] : Portfolio Lending Agreements9-40
          • [A][2][f] : Money Market Fund Shares9-40
      • [B] : Portfolio Quality9-40
        • [B][1] : Eligible Securities9-42
        • [B][2] : U.S. Dollar Denominated Securities9-44
        • [B][3] : Eligible Security—Securities Subject to Guarantees or Demand Features9-45
      • [C] : Portfolio Diversification9-47
        • [C][1] : Issuer Diversification9-48
          • [C][1][a] : General Diversification Requirements9-48
            • [C][1][a][i] : Taxable and National Funds9-48
            • [C][1][a][ii] : Single State Funds9-50
          • [C][1][b] : Guidelines for Calculating Issuer Diversification9-50
            • [C][1][b][i] : Repurchase Agreements9-51
            • [C][1][b][ii] : Refunded Securities and Conduit Securities9-52
            • [C][1][b][iii] : Asset-Backed Securities9-52
            • [C][1][b][iv] : Shares of Money Market Funds9-54
            • [C][1][b][v] : Treatment of Certain Affiliated Entities9-55
        • [C][2] : Demand Feature and Guarantee Diversification9-56
          • [C][2][a] : Diversification Requirements for Demand Features and Guarantees9-56
          • [C][2][b] : Guidelines for Calculating Demand Feature and Guarantee Diversification9-57
      • [D] : Portfolio Liquidity9-58
        • [D][1] : Background9-58
        • [D][2] : Portfolio Liquidity Requirements9-59
          • [D][2][a] : General Liquidity Requirement/Know Your Customer Procedures9-60
          • [D][2][b] : Limitation on the Acquisition of Illiquid Securities9-62
          • [D][2][c] : Minimum Daily and Weekly Liquidity Requirements9-62
    • § 9:3.6 : Defaults and Other Events Related to Portfolio Securities9-63
      • [A] : Defaults and Other Events Requiring Disposition9-64
      • [B] : Responding to Issues in Less Liquid Markets9-65
      • [C] : Notice to the SEC—Form N-CR9-69
    • § 9:3.7 : Disclosure of Portfolio Information and Other Fund Information on Public Website9-72
    • § 9:3.8 : Recordkeeping9-75
    • § 9:3.9 : Delegation of Board Responsibilities9-76
  • § 9:4 : Affiliated Buyouts of Fund Portfolio Securities9-78
  • § 9:5 : Industry Concentration9-80
  • § 9:6 : Disclosure and Advertising Standards9-81
    • § 9:6.1 : Disclosure9-81
      • [A] : Form N-1A9-81
      • [B] : Form N-MFP9-85
    • § 9:6.2 : Advertising9-90
  • § 9:7 : Suspension of Redemptions9-92
  • § 9:8 : Processing of Purchases and Redemptions9-93
  • § 9:9 : Conclusion9-93
Chapter 10: Wrap Fee Programs; and Appendix 10A
  • § 10:1 : Background10-1
    • § 10:1.1 : The Classic Wrap Fee Program10-2
    • § 10:1.2 : The Mutual Fund Wrap Program10-3
  • § 10:2 : The Legal Issues10-3
    • § 10:2.1 : Wrap Fee Programs As Investment Companies10-3
    • § 10:2.2 : Other Substantive Issues10-6
      • [A] : Suitability10-6
      • [B] : Best Execution10-7
      • [C] : Principal Transactions10-8
    • § 10:2.3 : Disclosure Requirements10-9
  • Appendix 10A : Part 2A Appendix 1 of Form ADVApp. 10A-1
Chapter 11: Hedge Funds
  • § 11:1 : Introduction11-4
  • § 11:2 : What Exactly Is a Hedge Fund?11-6
    • § 11:2.1 : Diverse Strategies11-6
    • § 11:2.2 : Common Characteristics11-8
  • § 11:3 : Raising Capital11-9
    • § 11:3.1 : Private Placement11-9
      • [A] : Regulation D11-9
      • [B] : Accredited Investors11-10
        • [B][1] : Adjustments and Review of the Accredited Investor Standard11-10
        • [B][2] : Proposed Amendments: “Accredited Natural Person”11-12
        • [B][3] : Proposed Amendments: Alternative “Investments-Owned” Standard and Exemption for “Large Accredited Investors”11-15
      • [C] : Non-Accredited Investors11-16
      • [D] : Disclosure Requirements11-17
      • [E] : Manner of the Offering11-19
      • [F] : Limits on Resales11-21
      • [G] : Disqualified Offerings11-22
      • [H] : Post-Sale Filing11-22
    • § 11:3.2 : State Law Preemption11-27
    • § 11:3.3 : Related Considerations Affecting the Size and Scope of the Private Placement11-29
    • § 11:3.4 : FINRA Considerations11-34
    • § 11:3.5 : Commodity Pools11-36
      • [A] : Disclosure Document11-37
      • [B] : Reporting and Record-Keeping11-42
      • [C] : Exemptions from Disclosure, Reporting, and Record-Keeping Requirements11-43
        • [C][1] : Rule 4.12(b)11-43
        • [C][2] : Rule 4.711-44
        • [C][3] : Offshore Commodity Pools11-49
        • [C][4] : Electronic Filing11-51
  • § 11:4 : Private Investment Company Exception11-51
    • § 11:4.1 : Hybrid Funds11-57
  • § 11:5 : Hedge Fund Manager11-58
    • § 11:5.1 : Bifurcated Regulation11-59
      • [A] : Federal Registration11-64
      • [B] : Implications of Federal Registration11-73
    • § 11:5.2 : Exemption from Registration11-80
      • [A] : Private Adviser Exemption11-80
      • [B] : Private Fund Exemptions11-81
        • [B][1] : The Private Fund11-81
        • [B][2] : Private Fund Adviser Exemption11-81
        • [B][3] : Venture Capital Funds11-83
        • [B][4] : Exempt Reporting Advisers11-85
  • § Chart 11-1 : Registration Chart11-88
    • [B][5] : Foreign Private Advisers11-89
    • [B][6] : Other Exemptions from Registration11-91
      • [B][6][a] : Intra-State Exemption11-91
      • [B][5][b] : CTA Exemption11-92
      • [B][5][c] : Family Office11-92
    • [B][5][C] : Jurisdictional Reach of Advisory Regulators11-92
      • [B][5][C][1] : State Oversight11-92
      • [B][5][C][2] : Federal Anti-Fraud Rule11-93
  • § § 11:5.3 : Performance-Based Compensation11-95
  • § § 11:5.4 : Privacy Regulations11-97
  • § § 11:5.5 : Anti-Money Laundering Regulations11-100
  • § § 11:5.6 : Commodity Pool Operator11-102
  • § § 11:5.7 : Commodity Trading Adviser11-103
  • § § 11:5.8 : Registration of CPOs and CTAs11-103
  • § § 11:5.9 : Exclusions and Exemptions from Registration of CPOs and CTAs11-104
    • [A] : Section 4.5 Exclusion from the Definition of Commodity Pool Operator11-104
    • [B] : Section 4.13 Exemptions from Registration As a Commodity Pool Operator11-106
      • [B][1] : Section 4.13(a)(1) No Compensation Exemption11-106
      • [B][2] : Section 4.13(a)(2) Small Operator Exemption11-107
      • [B][3] : Section 4.13(a)(3) Limited Futures Trading Exemption11-107
      • [B][4] : Section 4.13(a)(4) Sophisticated Investor Exemption11-108
    • [C] : Exemptions from Registration As a Commodity Trading Adviser11-110
      • [C][1] : Section 4.14(a)(4) and (a)(5) CPO Exemptions11-110
      • [C][2] : Section 4.14(a)(8) Registered Investment Adviser Exemption11-110
      • [C][3] : Section 4.14(a)(10) Private CTA Exemption11-111
    • [D] : Electronic Filing11-112
  • § § 11:6 : Market Participation11-112
    • § § 11:6.1 : Broker-Dealer Status11-113
    • § § 11:6.2 : New Issues11-114
      • [A] : Rule 513011-114
      • [B] : Rule 513111-119
    • § § 11:6.3 : Soft Dollars11-121
      • [A] : Goods or Services Provided by the Broker11-123
      • [B] : Investment Discretion11-124
      • [C] : Good-Faith Determination11-125
      • [D] : Brokerage and Research Services11-125
        • [D][1] : Research11-126
        • [D][2] : Brokerage11-127
        • [D][3] : Mixed-Use Items11-128
        • [D][4] : Lawful and Appropriate Assistance11-129
      • [E] : Operating Outside the Safe Harbor11-130
    • § § 11:6.4 : Sections 13(d) and 13(g)11-130
    • § § 11:6.5 : Section 13(f)11-133
    • § § 11:6.6 : Section 13(h)11-133
    • § § 11:6.7 : Section 1611-138
    • § § 11:6.8 : Additional Reporting Considerations11-140
  • § § 11:7 : Systemic Risk Regulation11-142
    • § § 11:7.1 : Financial Stability Oversight Council11-142
    • § § 11:7.2 : Nonbank Financial Company11-143
      • [A] : Supervision and Regulation of Certain Nonbank Financial Companies11-144
      • [B] : Prudential Regulation11-145
      • [C] : Reporting11-148
      • [D] : Orderly Liquidation11-150
      • [E] : Systemic Risk Information11-152
  • § Chart 11-2 : Filings for CPOs and CTAs (Dually Registered with the SEC or Solely Registered with the CFTC)11-158
  • § § 11:8 : Derivatives Markets Participants11-159
    • § § 11:8.1 : Regulatory Jurisdiction Over Swaps11-160
    • § § 11:8.2 : Clearing and Exchange Trading11-162
    • § § 11:8.3 : Swap Dealers and Major Swap Participants11-162
      • [A] : Definition of “Swap Dealer” and “Security-Based Swap Dealer”11-162
      • [B] : Definition of “Major Swap Participant” and “Major Security-Based Swap Participant”11-167
      • [C] : Registration11-172
      • [D] : Regulatory Capital and Margin11-173
      • [E] : Reporting and Record-Keeping11-174
      • [F] : Compliance Duties11-176
        • [F][1] : Risk Management11-177
        • [F][2] : Monitoring of Position Limits11-178
        • [F][3] : Diligent Supervision11-179
        • [F][4] : Business Continuity and Disaster Recovery11-179
        • [F][5] : Disclosure and Ability to Obtain Information11-179
        • [F][6] : Antitrust Considerations11-179
        • [F][7] : Chief Compliance Officer11-179
      • [G] : Business Conduct Standards11-182
        • [G][1] : Anti-Fraud and Anti-Manipulation Regulations11-183
          • [G][1][a] : Swaps11-183
          • [G][1][b] : Security-Based Swaps11-185
        • [G][2] : Verification of Counterparty Eligibility11-187
        • [G][3] : Disclosure of Material Risks, Characteristics, Material Incentives and Conflicts of Interest Regarding a Swap11-188
        • [G][4] : Daily Mark11-189
        • [G][5] : Clearing11-190
        • [G][6] : Communications—Fair Dealing11-190
        • [G][7] : Recommendations to Counterparties—Institutional Suitability11-190
        • [G][8] : Execution Standards11-191
        • [G][9] : Swap Documentation Standards11-192
        • [G][10] : Portfolio Confirmation, Reconciliation and Compression11-193
          • [G][10][a] : Portfolio Confirmation11-193
          • [G][10][b] : Portfolio Reconciliation11-195
          • [G][10][c] : Portfolio Compression11-196
        • [G][11] : Conflicts of Interest11-196
      • [H] : Special Obligations Regarding Special Entity11-198
  • § § 11:9 : Rationale for Regulation11-198
Chapter 12: International Investment Funds; and Appendix 12A
  • § 12:1 : Introduction12-5
  • § 12:2 : Offshore Funds12-6
    • § 12:2.1 : Offshore Fund Jurisdictions12-6
    • § 12:2.2 : Selecting an Offshore Fund Jurisdiction12-7
      • [A] : Type of Fund—Investment Policy12-8
      • [B] : Distribution Considerations12-8
      • [C] : Structural Considerations12-9
      • [D] : Servicing Considerations12-10
      • [E] : Tax Considerations12-10
      • [F] : Intangibles12-10
      • [G] : Listing Opportunities12-11
    • § 12:2.3 : Structuring Offshore Funds and Integrating Offshore Funds with Domestic Products12-11
      • [A] : “Mirror” Offshore Funds12-11
        • [A][1] : Integration12-11
        • [A][2] : Use of Adviser Performance Record12-12
      • [B] : Multiple Classes of Shares12-13
      • [C] : Fund of Funds Structure12-13
      • [D] : Master/Feeder Structure12-15
        • [D][1] : Master/Feeder Requirements12-15
        • [D][2] : Tax Considerations for Master/Feeder Arrangements12-16
        • [D][3] : Use of Master/Feeder Fund Structure for Offshore Markets12-17
        • [D][4] : Advantages of Master/Feeder Structure in Onshore/Offshore Context12-19
        • [D][5] : Disadvantages12-19
    • § 12:2.4 : Cloning12-19
  • § 12:3 : U.S. Securities Law Considerations Applicable to U.S. Sponsors of Offshore Funds12-21
    • § 12:3.1 : Section 7(d) of the Investment Company Act12-21
    • § 12:3.2 : Section 5 of the Securities Act12-22
    • § 12:3.3 : Section 3(c)(1) and Section 3(c)(7) Funds12-28
      • [A] : Section 3(c)(1)12-28
      • [B] : Section 3(c)(7)—Qualified Purchaser Fund Exception12-31
        • [B][1] : Qualified Purchaser Defined12-31
        • [B][2] : Pension Plans As Qualified Purchasers12-33
        • [B][3] : Other Qualified Purchaser Issues12-34
        • [B][4] : Conversion from a Section 3(c)(1) Fund to a Section 3(c)(7) Fund12-34
        • [B][5] : Coordination with CFTC Exemptive Rules12-34
      • [C] : Integration with Foreign Public Offerings12-35
      • [D] : Integration of Section 3(c)(1) and Section 3(c)(7) Funds12-37
      • [E] : Use of Section 3(c)(1) and Section 3(c)(7) Funds in Master/Feeder Structures12-37
      • [F] : Federal Income Tax Implications12-38
    • § 12:3.4 : Investment Adviser Registration and Reporting Requirements12-39
      • [A] : Investment Adviser Registration Requirements12-39
      • [B] : Registered Investment Adviser Reporting Requirements12-41
    • § 12:3.5 : Regulation S and Related Interpretations12-43
    • § 12:3.6 : Development of the Definition of “U.S. Person” Under U.S. Securities Laws12-47
    • § 12:3.7 : Rule 144A12-47
    • § 12:3.8 : Offshore Funds Conducting Various Administrative Operations in the United States12-48
    • § 12:3.9 : Extraterritorial Application of Anti-Fraud Provisions of the U.S. Securities Laws12-49
    • § 12:3.10 : Use of Electronic Means for Prospectus Delivery and Marketing of Investment Products12-50
      • [A] : E-Delivery of Form ADV12-51
    • § 12:3.11 : Anti-Money Laundering Programs12-52
    • § 12:3.12 : Commodities Law Issues Affecting Non-U.S. Funds with U.S. Contacts12-55
      • [A] : Exemption from CFTC Registration As a CPO: Limited Futures Trading Exemption12-56
      • [B] : CPO and CTA Registration Analysis and Process12-57
      • [C] : Available Alternative to Part 4 Requirements Under Rule 4.712-60
      • [D] : Exemptions from CFTC Registration As a CTA: Rules 4.14(a)(4), 4.14(a)(5), and 4.14(a)(8)12-61
      • [E] : Exemptions from CFTC Registration As a CTA: Rule 4.14(a)(10)12-61
      • [F] : “Foreign Intermediaries” Exemption12-62
      • [G] : “Foreign Futures” Exemption12-62
    • § 12:3.13 : Commodities and Securities Law Issues Affecting Non-U.S. Funds Engaged in the OTC Derivatives Markets with U.S. Contacts12-65
      • [A] : Scope of Products Covered by Title VII12-66
        • [A][1] : Covered OTC Derivatives12-66
        • [A][2] : OTC Derivatives That Are Not Covered12-66
      • [B] : Clearing Requirements for Swaps12-67
        • [B][1] : Swaps That Must Be Cleared12-67
        • [B][2] : Status of Non-Cleared Swaps; Margining12-68
      • [C] : Exchange Trading of Swaps12-68
      • [D] : Major Swap Participants12-69
      • [E] : Cross-Border Application of the U.S. Swaps Rules; U.S. Contacts12-70
        • [E][1] : CFTC U.S. Person Definition for Clearing and Reporting Swaps12-70
        • [E][2] : CFTC and Prudential Regulator U.S. Person Definition for Margining Uncleared Swaps and Uncleared Security-Based Swaps with a Counterparty Subject to Prudential Regulator Regulations12-72
    • § 12:3.14 : Broker-Dealer and Banking Law Issues12-73
      • [A] : Broker-Dealer Registration12-73
      • [B] : Banking Law12-74
        • [B][1] : The Gramm-Leach-Bliley Act12-74
        • [B][2] : Regulation R12-74
        • [B][3] : The Volcker Rule12-75
  • § 12:4 : U.S. Federal Income Tax Considerations Affecting Offshore Funds12-78
    • § 12:4.1 : U.S. Tax Law Issues Relating to the Marketing of Shares of Non-U.S. Funds in the U.S.12-78
      • [A] : U.S. Taxation of Non-U.S. Fund Treated As a Corporation for U.S. Tax Purposes12-78
      • [B] : U.S. Taxation of U.S. Shareholders of Non-U.S. Fund12-80
      • [C] : U.S. Taxation of Non-U.S. Fund Treated As a Partnership for U.S. Tax Purposes12-82
    • § 12:4.2 : U.S. Tax Law Issues Relating to the Creation and Offering by U.S. Firms of Non-U.S. Investment Funds12-82
      • [A] : Services Provided Through a U.S. Entity12-82
      • [B] : Services Provided Through a Non-U.S. Entity12-83
  • § 12:5 : Compliance with the Provisions of ERISA12-83
  • § 12:6 : Registration of a Foreign Fund in the United States12-85
    • § 12:6.1 : Exemptive Standard of Section 7(d)12-86
    • § 12:6.2 : Rule 7d-1 and Funds Organized in (Primarily) Common Law Jurisdictions12-86
    • § 12:6.3 : SEC Guidelines on Registration of Foreign Funds12-87
    • § 12:6.4 : Further SEC and Industry Initiatives12-89
    • § 12:6.5 : Foreign Funds Using American Depositary Receipts (ADRs)12-90
  • § 12:7 : Marketing Shares of U.S. Funds Abroad12-92
    • § 12:7.1 : Applicability of the Securities Act to the Offer and Sale of Fund Shares Outside the United States12-92
      • [A] : Rule 482 Advertisements12-94
      • [B] : Rule 482 Advertisements and the Foreign Broker-Dealer12-94
    • § 12:7.2 : Applicability of the Investment Company Act to the Offer and Sale of Investment Company Shares Outside the United States12-95
      • [A] : Supplemental Sales Literature12-95
  • § 12:8 : European Regulatory Issues12-96
    • § 12:8.1 : UCITS Directive12-96
      • [A] : Eligible Investments12-97
      • [B] : Diversification Requirements12-99
      • [C] : UCITS III—The Product and Management Directive12-100
        • [C][1] : The Product Directive12-100
        • [C][2] : The Management Directive12-102
        • [C][3] : UCITS IV12-103
        • [C][4] : UCITS V12-104
        • [C][5] : UCITS VI12-106
    • § 12:8.2 : Markets in Financial Instruments Directive12-106
    • § 12:8.3 : Directive on Alternative Investment Fund Managers12-110
      • [A] : Operational, Organizational and Leverage Requirements12-111
      • [B] : Disclosure Requirements12-111
      • [C] : Depositaries and Delegation12-112
      • [D] : Compensation Restrictions12-112
      • [E] : Third-Country Issues and Passporting12-113
      • [F] : Private Placements12-115
    • § 12:8.4 : Significance of EU Regulatory Initiatives12-116
  • Appendix 12A : Comparative Guide to Offshore Investment ProductsApp. 12A-1
Chapter 13: Commodity Pools
  • § 13:1 : Introduction13-2
  • § 13:2 : Background: Futures and Swaps Regulation in the United States13-3
    • § 13:2.1 : Definitions: Commodities, Derivatives, Swaps, and Futures13-4
    • § 13:2.2 : Key Parties in the Commodity Pool Marketplace13-5
      • [A] : Commodity Pools13-5
      • [B] : Commodity Pool Operators13-6
      • [C] : Commodity Trading Advisors13-7
      • [D] : Futures Commission Merchants and Introducing Brokers13-7
      • [E] : Floor Brokers and Floor Traders13-7
      • [F] : Swap Dealers13-7
      • [G] : Accessing the Markets13-8
  • § 13:3 : CFTC Regulation of Commodity Pools13-9
    • § 13:3.1 : Registration of the Commodity Pool Operator13-9
  • § Chart 13-1 : The Commodity Pool Marketplace13-10
    • § § 13:3.2 : Disclosure, Reporting and Recordkeeping13-11
    • § § 13:3.3 : Structural Requirements for Organization and Operation13-11
    • § § 13:3.4 : Potential Investors13-12
    • § § 13:3.5 : Commodity Trading Advisor Regulation13-12
  • § § 13:4 : Special Regulatory Treatment for Certain Funds13-13
    • § § 13:4.1 : Mutual Funds and Other Regulated Investment Vehicles13-13
      • § [A] : Generally13-13
      • § [B] : Special Rules for Registered Investment Companies13-15
    • § § 13:4.2 : Limited Commodity Interest Trading Exemption13-15
    • § § 13:4.3 : Rescinded Sophisticated Investor Exemption13-16
    • § § 13:4.4 : Pools Restricted to “Qualified Eligible Persons”13-17
    • § § 13:4.5 : Rule 4.12(b): Pools Primarily Engaged in Securities Transactions13-20
    • § § 13:4.6 : Rule 4.13: Non-Profit and Small Pools13-21
  • § § 13:5 : Offshore Commodity Funds13-22
  • § Chart 13-2 : U.S. Commodity Pool Regulation: When It Applies13-23
    • § § 13:5.1 : Non-U.S. Fund Manager; Non-U.S. Participants; Not Organized or Operated in the U.S.—Not Subject to Pool Regulation13-24
    • § § 13:5.2 : Offshore Fund Manager Marketing Offshore Fund to U.S. and Non-U.S. Participants—Full Commodity Pool Regulation Subject to “Foreign Futures” Exemption13-24
    • § § 13:5.3 : U.S. Fund Manager Offering Offshore Fund Only to Non-United States Persons—Partial Regulation13-26
    • § § 13:5.4 : U.S. Fund Manager Operating Fund with U.S. Participants—Full U.S. Commodity Pool Regulation13-28
  • § § 13:6 : Conclusion13-28
Chapter 14: Real Estate Investment Trusts; and Appendix 14A
  • § 14:1 : Introduction14-2
  • § 14:2 : What Is a REIT?14-3
  • § 14:3 : Background and Development of the REIT Industry14-4
    • § 14:3.1 : UPREITs14-6
    • § 14:3.2 : DownREITs14-8
  • § 14:4 : The Creation of a REIT and the Securities Laws14-9
    • § 14:4.1 : Avoidance of the Roll-Up Rules14-9
    • § 14:4.2 : Preparation of the Registration Statement14-10
      • [A] : Form S-11—For Registration Under the Securities Act of Certain Real Estate Companies14-11
      • [B] : SEC Release No. 33-690014-11
      • [C] : Selected Disclosure Requirements14-11
  • § 14:5 : REITs and the Sarbanes-Oxley Act of 200214-12
  • § 14:6 : REITs and Securities Act Reform14-13
  • § 14:7 : Mortgage REITs and the Investment Company Act14-14
  • § 14:8 : Qualification Under the Tax Code14-15
    • § 14:8.1 : Requirements for Qualification14-15
    • § 14:8.2 : Annual Gross Income Tests14-16
      • [A] : Rents from Real Property14-17
      • [B] : Interest on Obligations Secured by Real Property14-19
      • [C] : Income from Hedging14-20
      • [D] : Foreign Currency Exchange Gains14-21
    • § 14:8.3 : Failure to Meet Annual Income Tests14-22
    • § 14:8.4 : Quarterly Asset Tests14-22
      • [A] : In General14-22
      • [B] : Real Estate Assets14-23
    • § 14:8.5 : Failure to Meet Quarterly Asset Tests14-24
    • § 14:8.6 : Application of Annual Income Tests and Quarterly Asset Tests to Certain REIT Affiliates14-25
    • § 14:8.7 : Failure to Meet Other REIT Requirements14-26
    • § 14:8.8 : Distributions14-27
      • [A] : Annual Distribution Requirements14-27
      • [B] : Expiration of Special Temporary Rule for Stock Distributions14-28
      • [C] : FATCA and the “Medicare Tax” on Investment Income14-29
    • § 14:8.9 : Deficiency Dividends and Consent Dividends14-29
    • § 14:8.10 : Shareholder Tests14-30
    • § 14:8.11 : Excess Share Provisions14-31
    • § 14:8.12 : Qualification and Election14-31
    • § 14:8.13 : Limitations on Sale or Disposition of Assets14-32
    • § 14:8.14 : Mortgage REITs and Special Considerations Under the Tax Code14-33
  • § 14:9 : REITs and the Capital Markets14-34
  • § 14:10 : Conclusion14-34
  • Appendix 14A : Form S-11: Registration Statement Under the Securities Act for Certain Real Estate CompaniesApp. 14A-1
Chapter 15: Private Equity Funds and Advisers: Structural Features; Tax and Regulatory Considerations; and Other Issues, Trends, and Future Challenges
  • § 15:1 : Introduction15-3
    • § 15:1.1 : What Is a Private Equity Fund?15-3
  • § 15:2 : A Typical Private Equity Fund15-4
    • § 15:2.1 : Fund Structure15-4
    • § 15:2.2 : Management of the Fund15-5
    • § 15:2.3 : Allocation of Profits15-7
    • § 15:2.4 : Other Common Provisions15-8
  • § 15:3 : Form of the Private Equity Fund (Tax and Liability Issues)15-10
    • § 15:3.1 : Partnerships15-10
      • [A] : Tax Considerations of the Partnership Form15-10
        • [A][1] : No Federal Income Tax at the Fund Level15-10
        • [A][2] : Tax Considerations for Tax-Exempt Organizations15-12
        • [A][3] : Tax Considerations for Foreign Persons15-14
        • [A][4] : Special Tax Issues for Sovereign Wealth Investors15-16
        • [A][5] : Pass-Through of Losses to Equity Owners15-16
        • [A][6] : Tax-Free Distribution of Property to Equity Owners15-17
          • [A][6][a] : Cash15-17
          • [A][6][b] : Property15-17
          • [A][6][c] : Marketable Securities15-18
        • [A][7] : Tax-Favored Treatment for Fund Sponsors15-18
          • [A][7][a] : Tax-Favored Treatment of General Partner’s Carry15-18
          • [A][7][b] : Management Fee Waivers15-19
        • [A][8] : Utility of Foreign-Situs Partnerships in Foreign Investments15-19
      • [B] : Other Non-Tax Advantages of the Partnership Form15-20
        • [B][1] : Limited Liability15-20
    • § 15:3.2 : Limited Liability Company (LLC)15-21
      • [A] : Tax Issues15-22
      • [B] : Liability Issues15-22
      • [C] : Partnerships Still Predominate15-23
  • § 15:4 : ERISA Issues15-23
  • § 15:5 : Securities Law Issues15-28
    • § 15:5.1 : Statutory Exemption: Section 4(a)(2)15-29
    • § 15:5.2 : Regulation D15-30
      • [A] : Rule 50615-31
      • [B] : Look-Through15-35
      • [C] : Integration15-36
    • § 15:5.3 : Other Exemptions15-37
  • § 15:6 : Investment Company Act of 194015-38
    • § 15:6.1 : Private Investment Fund Exemption15-40
      • [A] : One Hundred Beneficial Owners Limitation15-40
      • [B] : Look-Through Provisions15-40
        • [B][1] : Automatic Statutory Look-Through15-41
        • [B][2] : Secondary Look-Through Rules15-41
      • [C] : Knowledgeable Employees15-42
    • § 15:6.2 : Qualified Purchaser Fund Exemption15-43
  • § 15:7 : Investment Advisers Act of 194015-46
    • § 15:7.1 : Consequences of Registration15-46
    • § 15:7.2 : Jurisdictional Provisions and Exemptions Under Dodd-Frank15-53
      • [A] : Jurisdictional Provisions15-53
      • [B] : Exemptions from Registration15-54
        • [B][1] : Venture Capital Fund Exemption15-54
        • [B][2] : Private Fund Adviser Exemption15-56
        • [B][3] : Foreign Private Adviser Exemption15-56
        • [B][4] : Exempt Reporting Advisers15-57
      • [C] : State Regulation15-57
    • § 15:7.3 : Carried Interest Exemptions15-58
      • [A] : Qualified Purchaser Funds15-58
      • [B] : Rule 205-3: “Qualified Client” Exemption15-58
  • § 15:8 : Additional Regulations15-59
    • § 15:8.1 : Gramm-Leach-Bliley Act Privacy Rule15-59
    • § 15:8.2 : Gramm-Leach-Bliley Act Safeguards Rule15-61
    • § 15:8.3 : “Pay-to-Play,” Placement Agent Regulations and Lobbying Laws15-62
    • § 15:8.4 : EU AIFM Directive15-65
    • § 15:8.5 : Foreign Corrupt Practices Act15-67
    • § 15:8.6 : Registration As a Broker-Dealer15-67
  • § 15:9 : Issues, Trends, and Future Challenges15-68
    • § 15:9.1 : SEC Enforcement Focus on the Private Equity Industry15-68
    • § 15:9.2 : PATRIOT Act Anti-Money Laundering Programs15-70
Chapter 16: An Overview of the Formation and Operation of Exchange-Traded Products
  • § 16:1 : Introduction16-2
  • § 16:2 : Product Description16-3
    • § 16:2.1 : Exchange-Traded Funds (ETFs)16-3
    • § 16:2.2 : Exchange-Traded Vehicles (ETVs)16-4
    • § 16:2.3 : Exchange-Traded Notes (ETNs)16-4
  • § 16:3 : ETP Registration16-5
    • § 16:3.1 : Registration of Securities16-5
      • [A] : ETFs16-5
      • [B] : ETVs and ETNs16-6
    • § 16:3.2 : Entity Registration16-6
    • § 16:3.3 : CFTC Registration16-6
  • § 16:4 : Tax Considerations16-7
    • § 16:4.1 : ETFs16-7
    • § 16:4.2 : ETVs16-7
    • § 16:4.3 : ETNs16-7
  • § 16:5 : Exemptive Relief16-7
    • § 16:5.1 : ETFs16-8
    • § 16:5.2 : ETVs and ETNs16-9
  • § 16:6 : Listing on an Exchange16-9
  • § 16:7 : Governance Standards16-10
    • § 16:7.1 : ETFs16-10
    • § 16:7.2 : ETVs and ETNs16-11
  • § 16:8 : Operational Issues16-11
    • § 16:8.1 : Capital16-11
      • [A] : ETFs16-11
      • [B] : ETVs and ETNs16-12
    • § 16:8.2 : Marketing16-12
    • § 16:8.3 : Create/Redeem Process16-13
      • [A] : ETFs and ETVs16-13
      • [B] : ETNs16-13
    • § 16:8.4 : Calculation of Net Asset Value16-13
      • [A] : ETFs16-13
      • [B] : ETVs16-14
      • [C] : ETNs16-14
    • § 16:8.5 : Fees16-15
      • [A] : ETFs16-15
      • [B] : ETVs16-15
      • [C] : ETNs16-15
  • § 16:9 : Domicile16-16
    • § 16:9.1 : ETFs16-16
    • § 16:9.2 : ETVs and ETNs16-16
  • § 16:10 : Conclusion16-16
Chapter 17: Exchange-Traded Funds
  • § 17:1 : Background17-2
  • § 17:2 : Organizational Issues17-3
    • § 17:2.1 : Form of Organization17-3
    • § 17:2.2 : Mechanics of Purchases and Sales17-4
      • [A] : Exchange Transactions17-4
      • [B] : Transactions17-4
        • [B][1] : Purchases17-4
        • [B][2] : Redemptions17-5
    • § 17:2.3 : The Arbitrage Process17-6
    • § 17:2.4 : Distribution and Fees17-6
    • § 17:2.5 : Authorized Participants and Authorized Participant Agreements17-7
    • § 17:2.6 : Marketing and Advertising17-7
    • § 17:2.7 : Tax Matters17-8
      • [A] : ETFs As Compared to Mutual Funds17-8
      • [B] : Tax Implications for Purchaser17-8
      • [C] : Tax Implications for Redeemer17-8
  • § 17:3 : Investment Company Act Issues17-8
    • § 17:3.1 : Registration As an Open-End Company or a Unit Investment Trust17-8
    • § 17:3.2 : Investment in ETFs by Fund of Funds17-9
    • § 17:3.3 : Section 17(a)17-10
    • § 17:3.4 : Section 1817-11
    • § 17:3.5 : Section 22(d) and Rule 22c-117-11
    • § 17:3.6 : Section 22(e)17-12
    • § 17:3.7 : Section 2617-13
  • § 17:4 : Exchange Act Issues17-13
    • § 17:4.1 : Regulation M—Purchases During an Underwriting17-13
    • § 17:4.2 : Tender Offers17-15
    • § 17:4.3 : Margin17-15
    • § 17:4.4 : Disclosure Requirements17-16
      • [A] : Confirmations17-16
      • [B] : Broker Relationship17-16
      • [C] : Advance Notice of Corporate Actions17-16
    • § 17:4.5 : Sections 13(d) and 16(a)17-17
    • § 17:4.6 : Exchange Listing17-17
      • [A] : Generic Listing Standards17-18
      • [B] : 19b-4 Process17-18
  • § 17:5 : New Products and Recent Developments17-18
    • § 17:5.1 : Development of ETFs17-18
      • [A] : Actively Managed ETFs17-18
      • [B] : Exchange-Traded Managed Funds17-19
      • [C] : Non-Transparent Actively Managed ETFs17-20
      • [D] : Global Distribution of U.S. ETFs17-21
      • [E] : ETFs on Alternative Asset Classes17-21
      • [F] : Investment in ETFs by Retirement Plans17-22
    • § 17:5.2 : Regulatory Developments Pertaining to ETFs17-22
      • [A] : Proposed Rule 6c-1117-22
      • [B] : Exemptive and No-Action Relief17-22
        • [B][1] : Leveraged and Inverse ETFs17-22
        • [B][2] : Self-Indexing ETFs17-23
        • [B][3] : Master-Feeder Structures17-23
      • [C] : Listing Standards17-24
      • [D] : Modernization of Reporting Requirements, with Particular Emphasis on Risk Disclosures17-25
      • [E] : Liquidity Rule and the “In-Kind ETF”17-25
Chapter 18: College Savings Plans
  • § 18:1 : Overview of 529 Plans18-3
    • § 18:1.1 : Prepaid Plans vs. Savings Plans18-3
      • [A] : Prepaid Plans18-3
        • [A][1] : Savings Plans18-5
    • § 18:1.2 : Investment Structure18-6
  • § Figure 18-1 : Investment Structure of a Typical Savings Plan18-7
  • § § 18:2 : Mechanics of Participation18-9
  • § § 18:3 : Tax Benefits18-10
    • § § 18:3.1 : Federal18-10
    • § § 18:3.2 : State18-11
  • § § 18:4 : The Cast of Characters18-11
  • § Figure 18-2 : Parties Involved in Providing Services to a Trust18-12
  • § § 18:5 : The Regulatory Framework18-13
    • § § 18:5.1 : Exemptions from the Federal Securities Laws18-13
    • § § 18:5.2 : The MSRB’s Rules Govern18-14
    • § § 18:5.3 : The MSRB and the Regulatory Structure for Municipal Securities18-14
    • § § 18:5.4 : Amending the MSRB’s Rules for Savings Plans18-17
  • § § 18:6 : Regulation Under the MSRB’s Rules18-17
    • § § 18:6.1 : Classifications of Principals and Representatives, Testing and Continuing Education: Rule G-318-17
    • § § 18:6.2 : Confirmations and Point-of-Sale Disclosure18-19
    • § § 18:6.3 : Conduct of Municipal Securities Activities: Rule G-1718-21
      • § [A] : General Requirements18-21
      • § [B] : Additional Responsibilities for Savings Plans18-23
        • § [B][1] : Established Industry Sources18-24
        • § [B][2] : Additional Disclosure Obligations18-25
        • § [B][3] : Use of the Official Statement to Satisfy Point-of-Sale Disclosure Obligations18-27
    • § § 18:6.4 : Suitability of Recommendations and Transactions: Rule G-1918-28
    • § § 18:6.5 : Gifts, Gratuities, and Non-Cash Compensation: Rule G-2018-30
    • § § 18:6.6 : Advertising: Rule G-2118-33
      • § [A] : Advertisements18-33
        • § [A][1] : General Disclosures18-33
        • § [A][2] : Performance Data Disclosures18-34
        • § [A][3] : Format18-35
        • § [A][4] : Calculation and Display of Performance Data18-36
        • § [A][5] : Nature of Issuer and Security18-38
        • § [A][6] : Capacity of the Broker-Dealer and Other Parties18-38
        • § [A][7] : Tax Consequences and Other Features18-38
        • § [A][8] : Underlying Registered Securities18-39
      • § [B] : Do-Not-Call Registry18-39
    • § § 18:6.7 : Supervision: Rule G-2718-40
    • § § 18:6.8 : Pricing and Commissions: Rule G-3018-41
    • § § 18:6.9 : Disclosure for Savings Plans: Rule G-3218-43
      • § [A] : Delivery by Primary Distributors18-44
      • § [B] : Proposed Centralized Electronic System to Collect Information on Savings Plans18-45
    • § § 18:6.10 : “Pay-to-Play”: Rule G-3718-45
      • [A] : Substantive Provisions18-45
      • § [B] : Persons Covered18-47
      • § [C] : Reporting Requirements18-48
      • § [D] : Application of Rule G-37 to Savings Plans18-49
        • § [D][1] : Status of Selling Broker-Dealers18-50
  • § Figure 18-3 : MSRB Distribution Structure18-50
    • § [D][2] : Status of Wholesalers18-51
    • § [D][3] : The Effect of a Ban on Municipal Securities Business Under Rule G-37 Arising During a Pre-Existing Engagement Relating to Municipal Fund Securities18-51
    • § [E] : Indirect Violations18-52
    • § [F] : Exemptions18-53
    • § § 18:6.11 : Solicitation of Municipal Securities Business: Rule G-3818-54
  • § § 18:7 : Rule 15c2-12 Under the Exchange Act18-55
    • § § 18:7.1 : Initial Disclosure18-55
    • § § 18:7.2 : Continuing Disclosure18-56
    • § § 18:7.3 : Financial Statements18-57
  • § § 18:8 : Official Statement Content18-57
  • § § 18:9 : Bank Distribution18-58
Chapter 19: A Primer on Derivative Contracts and Their Regulation; and Appendices 19A-19F
  • § 19:1 : Introduction19-2
  • § 19:2 : Derivatives Defined19-3
    • § 19:2.1 : Generally19-3
    • § 19:2.2 : Types of Derivative Contracts19-5
      • [A] : Forward Contracts19-5
      • [B] : Futures Contracts19-6
        • [B][1] : Generally19-6
        • [B][2] : Forwards Versus Futures19-7
      • [C] : Options19-9
        • [C][1] : Generally19-9
        • [C][2] : Over the Counter Options19-11
        • [C][3] : OTC Interest Rate Products19-11
      • [D] : Swaps19-12
      • [E] : Structured Notes19-14
  • § 19:3 : Size of the Market for Derivatives19-15
    • § 19:3.1 : Sources of Information and Data19-15
    • § 19:3.2 : Exchange-Traded Derivatives19-15
    • § 19:3.3 : Privately Negotiated Derivatives19-15
  • § 19:4 : How Are Derivatives Used?19-16
    • § 19:4.1 : Hedging19-16
    • § 19:4.2 : Lowering Funding Costs19-17
    • § 19:4.3 : Profit Opportunity19-17
    • § 19:4.4 : Efficient Portfolio Management19-18
  • § 19:5 : Regulation of Derivative Products19-18
    • § 19:5.1 : Generally19-18
    • § 19:5.2 : Legal Certainty for OTC Derivatives19-19
    • § 19:5.3 : Regulatory Reform for the Futures Industry19-22
    • § 19:5.4 : Security Futures Products19-23
    • § 19:5.5 : Legal Certainty for Exempt Commodities19-25
  • § 19:6 : Post-CFMA Efforts to Increase Oversight of OTC Derivatives19-26
  • § 19:7 : Pre-Dodd-Frank Act Efforts to Increase Regulation of OTC Derivatives19-28
  • § 19:8 : Wall Street Transparency and Accountability Act of 201019-30
  • Appendix 19A : 2016 Global Exchange-Traded Derivatives Contract Volume (Futures and Options)App. 19A-1
  • Appendix 19B : Total Exchange-Traded Derivatives by RegionApp. 19B-1
  • Appendix 19C : Top Ten Global Futures Contracts (by 2016 Volume)App. 19C-1
  • Appendix 19D : Top Ten Global Derivatives Exchanges (by 2016 Volume)App. 19D-1
  • Appendix 19E : Privately Negotiated Derivatives Outstanding (Notional Amounts in $ Billions)App. 19E-1
  • Appendix 19F : Global Futures and Options Traded by CategoryApp. 19F-1
Chapter 20: An Introduction to Variable Insurance Products
  • § 20:1 : Background—Variable Annuities and Variable Life Insurance20-3
  • § 20:2 : Variable Annuities in Today’s Marketplace20-3
    • § 20:2.1 : Generally20-3
    • § 20:2.2 : Variable Annuities in the Retail Marketplace20-4
      • [A] : Generally20-4
      • [B] : Insurance and Other Guarantee Features20-5
    • Table 20-1 : Variable Annuity Riders20-9
      • [C] : Current Product-Related Developments20-9
        • [C][1] : Recent Regulatory-Driven Product Developments20-10
      • [D] : Variable Annuity Share Classes20-11
      • [E] : Unique Investment Features20-13
    • § 20:2.3 : Annuities Sold in the Retirement Marketplace20-14
  • § 20:3 : Variable Life Insurance in Today’s Marketplace20-14
    • § 20:3.1 : Generally20-14
    • § 20:3.2 : Variable Life Insurance in the Retail Marketplace20-15
    • § 20:3.3 : Life Insurance Sold to Individuals Through Employers and Associations20-16
    • § 20:3.4 : Life Insurance Sold to Businesses (Corporate Owned Life Insurance)20-16
  • § 20:4 : Legal Structure and Changes20-17
  • Figure 20-1 : Contributions and Premium Payments20-18
  • § 20:5 : Regulatory Treatment of Variable Products20-19
    • § 20:5.1 : Generally20-19
    • § 20:5.2 : Product Design and Approval20-20
      • [A] : State Insurance Requirements Regarding Product Design and Approval20-20
      • [B] : Federal Securities Laws Regarding Product Design and Approval20-21
        • [B][1] : Background20-21
        • [B][2] : Private Offering Exception20-23
        • [B][3] : Retirement Plan Exemption20-23
      • [C] : State Securities Laws20-23
    • § 20:5.3 : Product Administration20-24
    • § 20:5.4 : Product Distribution20-26
      • [A] : Background20-26
      • [B] : FINRA Regulation20-27
        • [B][1] : Generally20-27
        • [B][2] : Requirements Governing the Suitability of Variable Annuity Transactions20-28
          • [B][2][a] : NASD’s Suitability Rule Applying to Recommended Transactions—FINRA Rule 211120-28
          • [B][2][b] : Guidance Concerning Variable Annuity Exchanges20-29
        • [B][3] : Controls Over Marketing Material: Review, Content, and Filing Requirements20-30
        • [B][4] : Requirement to Adopt and Implement a Supervisory System Over Sales Activity20-31
          • [B][4][a] : Written Supervisory Procedures20-31
          • [B][4][b] : Chain of Supervision20-31
          • [B][4][c] : Approval of Transactions20-31
          • [B][4][d] : Approval of Correspondence20-31
          • [B][4][e] : Annual Compliance Meetings with Representatives20-31
          • [B][4][f] : Office Designations20-32
          • [B][4][g] : Inspections20-32
          • [B][4][h] : “Outside” Activities of a Representative20-32
          • [B][4][i] : Continuing Education Requirements20-32
        • [B][5] : Requirement to Establish an Effective Compliance Program20-33
        • [B][6] : Controls Over Compensation20-33
        • [B][7] : Examinations and Enforcement20-33
      • [C] : Group Variable Annuities—Regulation Under FINRA Rules20-35
    • § 20:5.5 : Marketing20-35
      • [A] : Generally20-35
      • [B] : SEC Rules20-36
      • [C] : FINRA Rules20-37
Chapter 21: Organization of Private Investment Funds: Basic Structural and Legal Issues
  • § 21:1 : Introduction21-2
  • § 21:2 : Basic Investment Fund21-3
  • § 21:3 : Side-by-Side Funds21-4
  • § Figure 21-1 : Side-By-Side Structure21-6
  • § § 21:4 : Mini-Master-Feeder Model21-7
  • § Figure 21-2 : Mini-Master-Feeder Structure21-8
  • § § 21:5 : Legal Background21-8
    • § § 21:5.1 : Securities Act of 1933 (the “Securities Act”)21-9
    • § § 21:5.2 : Securities Exchange Act of 1934 (the “Exchange Act”)21-11
    • § § 21:5.3 : Investment Company Act of 194021-11
    • § § 21:5.4 : Investment Advisers Act of 194021-14
    • § § 21:5.5 : State Securities Regulation21-17
      • § [A] : Offering21-17
      • § [B] : Adviser Registration21-18
  • § § 21:6 : Tax Considerations21-19
    • § § 21:6.1 : “Carried Interest” Versus Performance Fee21-19
      • § [A] : Characterization21-19
        • § [A][1] : Carried Interest21-19
        • § [A][2] : Performance Fee21-19
      • § [B] : Tax Considerations21-20
        • § [B][1] : Carried Interest21-20
        • § [B][2] : Performance Fee21-22
          • § [B][2][a] : Investment Adviser’s Tax Treatment21-22
          • § [B][2][b] : Investors’ Tax Treatment21-22
        • § [B][3] : State Tax Considerations21-23
    • § § 21:6.2 : Partnership Interests As Employee Compensation21-23
      • § [A] : Business Issues21-23
      • § [B] : Tax Issues21-24
  • § § 21:7 : Legal Issues Under the Investment Company Act and the Investment Advisers Act21-24
    • § § 21:7.1 : Section 3(c)(1) of the Investment Company Act21-24
      • § [A] : Public Offering21-25
      • § [B] : Number of Beneficial Owners21-27
        • § [B][1] : Husband and Wife21-27
        • § [B][2] : Participant-Directed Investments by Benefit Plans21-28
        • § [B][3] : Integration21-30
        • § [B][4] : Concentration of Investment21-33
        • § [B][5] : Section 3(c)(1)(A) Attribution21-34
        • § [B][6] : Certain Transferees21-36
    • § § 21:7.2 : Section 3(c)(7) of the Investment Company Act21-36
    • § § 21:7.3 : Investment Advisers Act21-38
      • § [A] : Registration21-38
      • § [B] : Exemptions21-39
        • § [B][1] : Private Fund Adviser Exemption21-39
        • § [B][2] : Venture Capital Fund Adviser Exemption21-40
        • § [B][3] : Exemption for Foreign Private Advisers21-43
      • § [C] : Prohibition from Registration21-45
      • § [D] : Performance-Based Fees21-47
        • § [D][1] : Clients Qualifying21-48
        • § [D][2] : Additional Limitations21-49
        • § [D][3] : Other Limits on Performance Fees21-49
      • § [E] : Antifraud Provisions21-50
  • § § 21:8 : Fund Data on the Worldwide Web21-50
Chapter 22: Real Estate Mortgage Investment Conduits (REMICs); and Appendices 22A-22B
  • § 22:1 : Overview22-3
    • § 22:1.1 : Generally and Recent Developments22-3
      • [A] : Generally22-3
      • [B] : Recent Developments22-4
      • [C] : Bipartisan Budget Act of 201522-5
    • § 22:1.2 : Benefits of REMIC Qualification22-6
    • § 22:1.3 : Drawbacks of REMIC Qualification22-6
    • § 22:1.4 : Internal Revenue Code Compels Use of REMICs for Securitizing Mortgage Loans22-7
  • § 22:2 : Requirements for Qualification As a REMIC22-8
    • § 22:2.1 : Generally22-8
    • § 22:2.2 : Asset Test22-8
      • [A] : Generally22-8
      • [B] : Qualified Mortgages22-9
        • [B][1] : Generally22-9
        • [B][2] : Principally Secured22-9
        • [B][3] : Interests in Real Property22-10
        • [B][4] : Credit Enhancement Contracts22-11
        • [B][5] : Permitted Investments22-11
    • § 22:2.3 : REMIC Election22-12
    • § 22:2.4 : Interests Issued to Investors22-12
      • [A] : Regular Interests22-13
      • [B] : Residual Interests22-14
      • [C] : Certain Rights Not Treated As REMIC Interests22-14
    • § 22:2.5 : Arrangements Test22-15
  • § 22:3 : REMIC Formation22-15
  • § 22:4 : Federal Income Tax Treatment of a REMIC22-16
    • § 22:4.1 : Pass-Through Status22-16
    • § 22:4.2 : Determination of REMIC Taxable Income or Net Loss22-17
    • § 22:4.3 : Property Distributions22-17
    • § 22:4.4 : Prohibited Transactions22-18
  • § 22:5 : Federal Income Taxation of Regular Interest Holders22-19
    • § 22:5.1 : Overview22-19
      • [A] : Generally22-19
      • [B] : No Negative OID22-20
      • [C] : Basis22-20
    • § 22:5.2 : Regular Interests Received in Exchange for Property22-20
  • § 22:6 : Federal Income Taxation of Residual Interest Holders22-21
    • § 22:6.1 : Generally22-21
      • [A] : Income or Loss22-21
      • [B] : Distributions22-21
      • [C] : Limitations on Losses22-21
    • § 22:6.2 : Adjusted Basis of Residual Interests22-22
    • § 22:6.3 : Special Treatment of “Excess Inclusions”22-22
      • [A] : Generally22-22
      • [B] : Special Rules for Residual Interests Held by REITs22-23
    • § 22:6.4 : Restrictions on Transfers of Residual Interests22-23
      • [A] : Generally22-23
      • [B] : Stopping Transfers That Prevent Tax Being Imposed on Excess Inclusions22-23
      • [C] : Stopping Transfers to Foreign Persons Who Will Not Hold the Residual Interest in Connection with a U.S. Trade or Business22-25
    • § 22:6.5 : Wash Sale Rules and Dispositions of Residual Interests22-26
    • § 22:6.6 : Inducement Payments22-26
  • § 22:7 : Special Aspects of Commercial REMICs22-27
    • § 22:7.1 : Overview of Commercial Loan REMICs22-27
    • § 22:7.2 : Defeasance of REMIC-Held Commercial Loans22-28
    • § 22:7.3 : Modifications of Mortgage Loan Terms22-29
      • [A] : Overview22-29
      • [B] : Significant Modification Under Code Section 100122-30
        • [B][1] : Modification22-30
        • [B][2] : Significant22-31
      • [C] : Specific Exceptions for Modifications of REMIC-Held Mortgages22-31
        • [C][1] : General22-31
        • [C][2] : How Far in the Future Can a Default Be Anticipated and Still Be “Reasonably Foreseeable”22-32
      • [D] : Other REMIC-Specific Exceptions22-32
        • [D][1] : Satisfying the Post-Modification Principally Secured Test22-33
        • [D][2] : Satisfying the Post-Modification Principally Secured Test Where a Mortgage Loan Is Secured by Multiple Properties22-34
          • [D][2][a] : Grandfathered Transaction22-34
          • [D][2][b] : Qualified Pay-Down Transaction22-35
    • § 22:7.4 : Foreclosure Property22-36
      • [A] : Generally22-36
      • [B] : Net Income from Foreclosure Property22-36
      • [C] : Foreign Investor Real Property Tax Act (FIRPTA)22-37
      • [D] : Collateral Not Qualifying As Foreclosure Property—Swaps22-38
      • [E] : Credit Enhancement Contracts22-38
  • Appendix 22A : Application of OID Rules to REMIC Regular InterestsApp. 22A-1
  • Appendix 22B : Compliance with Specified Portion Rules22B-1
Chapter 23: Alternatives to Traditional Securities Offerings
  • § 23:1 : Introduction23-3
  • § 23:2 : At-the-Market Offerings23-3
    • § 23:2.1 : Overview23-3
    • § 23:2.2 : Key Considerations23-4
    • § 23:2.3 : Offering Process23-5
      • [A] : Shelf Registration Statement23-5
      • [B] : Prospectus23-6
      • [C] : Equity Distribution Agreement23-7
      • [D] : Ongoing Due Diligence23-8
      • [E] : Announcement and Execution of Sales23-9
    • § 23:2.4 : Legal and Regulatory Considerations23-9
      • [A] : Regulation M23-9
      • [B] : Publication and Dissemination of Research Reports23-11
      • [C] : Other23-12
  • § 23:3 : Block Trades23-12
    • § 23:3.1 : Overview23-12
    • § 23:3.2 : SEC-Registered Blocks23-13
      • [A] : Shelf Registration Statement23-14
      • [B] : Due Diligence23-15
      • [C] : Selling Securityholders and Disclosure23-15
      • [D] : Fixed Versus Variable Price Reoffer23-16
      • [E] : Limited Premarketing23-17
    • § 23:3.3 : Exempt Block Trades23-18
      • [A] : Rule 14423-20
      • [B] : Rule 144A23-22
      • [C] : Regulation S23-24
    • § 23:3.4 : Other Considerations23-25
      • [A] : Sections 13 and 16 of the Exchange Act23-25
      • [B] : FINRA23-26
      • [C] : Shareholder Approval23-26
      • [D] : Other23-27
  • § 23:4 : Private Investment in Public Equity (PIPE)23-27
    • § 23:4.1 : Overview23-27
    • § 23:4.2 : Key Considerations23-28
    • § 23:4.3 : Structure23-29
    • § 23:4.4 : Resale Registration Statement23-30
    • § 23:4.5 : Communications with Potential Investors23-31
      • [A] : Material Non-Public Information23-31
      • [B] : JOBS Act23-31
    • § 23:4.6 : Shareholder Approval—Stock Exchanges23-32
    • § 23:4.7 : Large Holder Considerations23-33
      • [A] : Sections 13 and 1623-33
      • [B] : HSR Act23-33
      • [C] : Banking Regulation23-34
      • [D] : CFIUS23-34
      • [E] : DGCL Section 20323-35
      • [F] : Net Operating Loss Carryforwards23-35
    • § 23:4.8 : Hedging-Related Considerations23-36
    • § 23:4.9 : Registered “PIPEs”—Registered Direct Offerings23-37
  • § 23:5 : Rights Offerings23-38
    • § 23:5.1 : Overview23-38
    • § 23:5.2 : Structure23-39
      • [A] : Exercise Price and Subscription Period23-40
      • [B] : Transferability23-41
      • [C] : Underwriting or Backstop Commitments23-41
    • § 23:5.3 : Legal and Regulatory Considerations23-42
      • [A] : Shareholder Approval and Large Holder Considerations23-42
      • [B] : SEC Registration23-43
      • [C] : Securities Exchanges23-44
  • § 23:6 : Structures Involving Public Investment Vehicles23-45
    • § 23:6.1 : Special Purpose Acquisition Company (SPAC)23-45
      • [A] : Overview and Structure23-45
      • [B] : Legal and Regulatory Considerations23-47
      • [C] : Challenges and Recent Structures23-48
    • § 23:6.2 : Business Development Company23-49
      • [A] : Overview23-49
      • [B] : Securities Law Considerations23-51
  • § 23:7 : Other Strategic Transaction Structures23-51
    • § 23:7.1 : Spin-offs23-51
      • [A] : Overview23-51
      • [B] : Process and Related Considerations23-52
    • § 23:7.2 : Reverse Mergers23-53
      • [A] : Overview23-53
      • [B] : Benefits and Risk23-53
Chapter 24: Exchange-Traded Notes and Similar Structured Notes
  • § 24:1 : Introduction24-2
  • § 24:2 : Product Description and Characteristics24-3
    • § 24:2.1 : Structured Investment24-3
    • § 24:2.2 : Redemption24-5
    • § 24:2.3 : Investor Fees24-6
    • § 24:2.4 : Listing24-6
    • § 24:2.5 : Comparison to ETFs and Structured Medium-Term Notes24-6
      • [A] : ETFs24-7
      • [B] : Structured Medium-Term Notes24-8
  • § 24:3 : Background and Securities Law Issues24-8
    • § 24:3.1 : No-Action Relief24-8
    • § 24:3.2 : Regulation M: Rule 101 and Rule 10224-9
    • § 24:3.3 : Margin Rules: Exchange Act Section 11(d)(1)24-10
    • § 24:3.4 : Short Selling Rules: Rule 200(g) of Regulation SHO and Former Rule 10a-124-10
    • § 24:3.5 : SEC Request for Comment24-11
  • § 24:4 : Registration, Disclosure and Listing Requirements24-12
    • § 24:4.1 : SEC Registration24-12
    • § 24:4.2 : Disclosure Requirements24-12
    • § 24:4.3 : Opinions of Counsel24-15
    • § 24:4.4 : Liability Standards24-15
    • § 24:4.5 : Listing Requirements24-15
  • § 24:5 : Post-Offering Issues24-16
    • § 24:5.1 : Reopenings24-16
    • § 24:5.2 : Redemptions24-16
    • § 24:5.3 : Inventory Sales24-17
  • § 24:6 : Regulatory Focus and Recent Developments24-17
    • § 24:6.1 : Increased Focus on Structured Products24-17
    • § 24:6.2 : FINRA and NYSE24-18
    • § 24:6.3 : SEC24-21
  • § 24:7 : Non-Listed Structured Medium-Term Notes24-22
  • § 24:8 : Selected Issues24-23
    • § 24:8.1 : Taxation24-23
    • § 24:8.2 : Investment Company Act and Investment Advisers Act24-23
    • § 24:8.3 : Commodities Exchange Act Issues24-24
    • § 24:8.4 : Broker-Dealer Issues24-24
  • § 24:9 : Conclusion24-25
Chapter 25: Insurance-Linked Securities
  • § 25:1 : Introduction25-2
  • § 25:2 : General Types of ILS25-3
    • § 25:2.1 : ILS Based on Insurable Events25-3
      • [A] : Reinsurance25-3
      • [B] : Components/Issues25-4
        • [B][1] : Threshold Regulatory Issues25-4
          • [B][1][a] : Statutory Definitions of Insurance25-4
          • [B][1][b] : Regulatory Relief25-5
          • [B][1][c] : Regulatory Risk and Offering Restrictions25-7
        • [B][2] : Components and Structuring25-10
          • [B][2][a] : The SPV25-10
          • [B][2][b] : The Indenture25-11
          • [B][2][c] : Allocation of Loss Provisions25-12
          • [B][2][d] : Reinsurance or other Risk-Transfer Agreement25-13
          • [B][2][e] : Offering Materials25-15
          • [B][2][f] : Service Providers25-17
          • [B][2][g] : Other Lines25-18
    • § 25:2.2 : ILS Based on Redundant Reserves25-18
      • [A] : Closed Block Securitization25-18
      • [B] : Redundant Reserve Securitizations More Broadly25-20
  • § 25:3 : NAIC and State Developments25-22
    • § 25:3.1 : Protected Cell Company Model Act25-22
      • [A] : Securitization25-23
      • [B] : Protected Cell25-23
      • [C] : Legal Identity25-24
      • [D] : Directors’ Duty to Maintain Separateness25-25
      • [E] : Bankruptcy Remoteness Issues25-25
    • § 25:3.2 : Special Purpose Reinsurance Vehicle Act25-26
      • [A] : SPRV Insurance Securitization25-26
      • [B] : Forming an SPRV25-27
      • [C] : Limitations on Use25-27
    • § 25:3.3 : Other State Laws25-28
      • [A] : Captive Insurance Generally25-28
      • [B] : The Rise of Special Purpose Captives25-29
      • [C] : Regulatory Activity25-30
Chapter 26: Introduction to Life Settlements; and Appendix 26A
  • § 26:1 : Background26-3
    • § 26:1.1 : Life Insurance26-3
    • § 26:1.2 : Life Insurance Policies as Transferrable Property26-4
    • § 26:1.3 : Life Settlements26-5
  • § 26:2 : The Life Settlement Marketplace26-8
    • § 26:2.1 : Generally26-8
    • § 26:2.2 : Characteristics of Life Insurance Policies26-10
      • [A] : The Insurance Policy—Generally26-10
      • [B] : Types of Insurance Products26-11
        • [B][1] : Term Insurance26-11
        • [B][2] : Permanent Life Insurance26-11
          • [B][2][a] : Whole Life Insurance26-12
          • [B][2][b] : Universal Life Insurance (UL)26-12
          • [B][2][c] : Limited Pay Life Insurance26-13
      • [C] : Parties to the Insurance Contract/Policy26-13
      • [D] : Special Policy Provisions26-15
      • [E] : Contestability26-15
      • [F] : Underwriting by the Insurance Company26-17
      • [G] : Maturity—Collection of the Death Benefit26-19
  • § 26:3 : The Players in the Life Settlement Marketplace26-20
    • § 26:3.1 : Insured/Policy Owner26-20
      • [A] : Generally26-20
      • [B] : Issues and Risks26-21
        • [B][1] : Possible Alternatives26-21
        • [B][2] : Insured’s Identity and Medical Records26-21
        • [B][3] : Insured Contacts and Future Disclosure Obligations26-21
        • [B][4] : Need For Insurance Coverage26-22
        • [B][5] : Policy Replacement Issues26-22
        • [B][6] : Public Assistance26-22
        • [B][7] : Taxation26-22
        • [B][8] : Creditors and Bankruptcy26-22
    • § 26:3.2 : Financial Advisors/Producers/Brokers26-22
    • § 26:3.3 : Life Settlement Providers26-23
    • § 26:3.4 : Investors or “Funders”26-24
      • [A] : Generally26-24
      • [B] : Issues and Risks26-25
        • [B][1] : Suitability for Purchase26-25
        • [B][2] : Lack of Liquidity26-25
        • [B][3] : Pricing Risks and Valuation Issues26-25
        • [B][4] : Time Risks26-25
        • [B][5] : Life Expectancy Reports26-26
        • [B][6] : Premium Optimization26-26
        • [B][7] : Mistakes in Servicing Policies26-26
        • [B][8] : Missing Insureds26-26
        • [B][9] : Possible Insolvency of Insurance Companies26-26
        • [B][10] : Life Insurance Companies’ Aversion to Investment Transactions Involving Life Settlements26-27
        • [B][11] : Impact of Increase in Cost on Life Insurance Policies26-27
        • [B][12] : Insurance Companies’ Contestability of Life Insurance Policies26-27
        • [B][13] : Termination of Policy before Death of Insured26-28
        • [B][14] : Sale Contested By Family Members26-28
        • [B][15] : Stranger Originated Life Insurance Policies26-28
        • [B][16] : Refusal to Pay Benefits on Certain Policies26-28
        • [B][17] : Certain Fraudulent Activities26-28
        • [B][18] : Life Settlements Regulation26-29
    • § 26:3.5 : Life Expectancy Providers26-29
  • § 26:4 : Life Settlement Transaction26-30
  • § Figure 26-1 : Individual Policy Acquisition Flow26-30
  • § § 26:5 : Regulatory Treatment26-30
    • § § 26:5.1 : Generally26-30
    • § § 26:5.2 : State Insurance Laws26-34
    • § § 26:5.3 : Securities Laws26-34
      • [A] : Federal Level26-34
      • [B] : State Level26-39
  • § § 26:6 : Litigation Involving Life Settlements26-41
    • § § 26:6.1 : Overview26-41
    • § § 26:6.2 : Significant Cases26-43
      • [A] : Grigsby v. Russell26-43
      • [B] : New England Mutual Life Insurance Co. v. Caruso26-43
      • [C] : Kramer v. Phoenix Life Insurance Co.26-44
      • [D] : PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust26-45
      • [E] : Settlement Funding L.L.C. v. AXA Equitable Insurance Co.26-46
      • [F] : Berkshire Settlements, Inc. v. Ashkenazi26-48
      • [G] : The Lincoln Life and Annuity Company of New York v. Berck26-49
      • [H] : Ohio National Life Assurance Corporation v. Davis, et al.26-52
      • [I] : Pruco Life Insurance Co. v. Brasner26-52
      • [J] : Sciarretta v. The Lincoln National Life Insurance Company26-53
      • [K] : PHL Variable Insurance Co. v. The Faye Keith Jolly Irrevocable Life Insurance Trust, et al.26-54
      • [L] : Principal Life Insurance Co. v. Lawrence Rucker 2007 Insurance Trust26-55
      • [M] : Penn Mutual Life Insurance Co. v. Greatbanc Trust Co.26-56
      • [N] : PHL Variable Insurance Co. v. Virginia L. Lankow Life Insurance Trust26-57
  • § § 26:7 : Tax Issues26-57
  • Appendix 26A : Policy Closing ChecklistApp. 26A-1
Chapter 27: Interval Funds
  • § 27:1 : Introduction27-2
  • § 27:2 : Legal and Regulatory Framework27-3
    • § 27:2.1 : Important Terms and Definitions27-3
      • [A] : “Registered Investment Company”27-3
      • [B] : “Continuously Offered”27-3
      • [C] : “Redemption; Repurchase Offer”27-3
      • [D] : “Interval”27-3
    • § 27:2.2 : Basic Parameters27-3
      • [A] : Structure and Governance27-4
      • [B] : Investment Adviser27-4
      • [C] : Principal Underwriter27-5
      • [D] : Independent Auditor; Audit Committee27-5
      • [E] : Other Service Providers27-5
      • [F] : Liquidity27-6
      • [G] : Compliance27-6
      • [H] : Taxation27-6
    • § 27:2.3 : Other Operating Requirements and Limitations27-7
      • [A] : Repurchase Offers27-7
      • [B] : Investments in Other Investment Companies27-7
      • [C] : Leverage27-7
      • [D] : Derivatives27-8
      • [E] : Plan of Distribution27-8
      • [F] : Investor Eligibility27-8
      • [G] : Disclosure Documents27-8
      • [H] : SEC Reporting27-9
  • § 27:3 : Organizing and Forming an Interval Fund27-9
    • § 27:3.1 : Required Steps27-9
    • § 27:3.2 : Timing27-10
  • § 27:4 : Capital Structure27-10
    • § 27:4.1 : General Rules27-10
    • § 27:4.2 : Voting Rights27-10
  • § 27:5 : Portfolio Composition and Management27-10
    • § 27:5.1 : Investment Objective(s), Policies and Strategies27-10
    • § 27:5.2 : Investments in Other Funds27-11
    • § 27:5.3 : Liquidity27-12
  Table of Authorities
  Index

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