United States: A Compilation Of Actions

Sub-Advisor Able to Advise Registered Investment Company Without Shareholder Approval

In a recent SEC no-action letter (RS Global Natural Res. Fund, SEC no-action letter, available 3/6/14), the SEC stated that it would take a non-enforcement position if a SEC registered investment adviser to a fund registered under the Investment Company Act of 1940 entered into an interim sub-advisory agreement with another SEC registered investment adviser although the sub-advisory agreement had not been approved by a majority of the fund's shareholders, as required under the Investment Company Act. The relief granted by the SEC's no-action position, on an interim basis on obtaining the consent of the fund's shareholders, was necessary because of a reorganization of the adviser to the fund whereby certain members of the adviser's management team formed their own SEC registered investment adviser. In order to avoid any interruption of the advisory services to the fund, the newly registered sub-adviser would on an interim basis enter into the agreement with the adviser.

The SEC, in granting the no-action letter on an interim basis in order to not interrupt services to the fund, reminded the adviser that the sub-advisory agreement would still need to be approved by a majority of the fund's shareholders.

SEC Grants Relief to Brokerage Firm From "Bad-Boy" Disqualification Provisions

Now that the "bad-actor" disqualification provisions are included under Rule 506 as well as Rule 505 of Regulation D and Rule 262 of Regulation A under the Securities Act of 1933, it is likely that more respondents subject to SEC enforcement action will negotiate as part of the agreement to settle enforcement actions, to have the SEC waive the disqualification provisions in exchange for, in part, agreeing to the sanctions recommended by the SEC.

In this instance, the SEC by order dated March 12, 2014, granted investment banker and broker-dealer Jefferies LLC relief from any disqualifications that might arise due to the SEC order that was entered against Jefferies for failing to adequately supervise certain of its employees (see Jefferies LLC, SEC No-Action letter, avail. 3/12/14).

If relief was not provided by the SEC under its authority under the Securities Act, the disqualification provisions would have prevented Jefferies from participating as an issuer, predecessor of the issuer, affiliate to an issuer, general partner or managing member of an issuer, solicitor or underwriter of securities in an offering relying upon the securities registration exemption under Rules 505 or 506 under Regulation D or Rule 262 (Reg. A) under the Securities Act.

It appears that the waiver was granted by the SEC because in a request letter submitted on behalf of Jefferies good cause was shown that Jefferies should not be denied participation in the offerings under the exemptions. The enforcement order issued by the SEC in which Jefferies agreed to pay a $25 million penalty and engage an outside compliance consultant, alleged Jefferies' failure to adequately supervise employees who were lying to their customers about the prices paid by Jefferies for certain mortgage backed securities. Jefferies successfully argued that the subject of the enforcement order (i.e., failure to supervise over employees' illegal activities) had nothing to do with activities involving the future participation by Jefferies in offerings exempt under Rules 505, 506 or Regulation A. In addition, the SEC noted that Jefferies had already taken action to prevent the type of conduct alleged in the enforcement order from reoccurring.

SEC Staff Members Highlight Areas of Focus

The Staff from the SEC's Office of Compliance Inspections and Examinations and the Divisions of Investment Management and Enforcement recently discussed their priorities, at the recent compliance and outreach program for investment adviser and investment company senior officers. Key areas of focus for the Staff are:

  • Valuations of illiquid securities;
  • Portfolio reporting;
  • Investment strategies that are contrary to those disclosed to investors;
  • Corporate governance and fees; and
  • Vigilance in the use of service providers, such as the fund accountant, fund administrator, and fund transfer agent.

With regard to the use of service providers, the Staff illustrated by reference to sub-advisors, noting that if an advisor brings in a sub-advisor that is not familiar with the regulatory regime of the Investment Company Act, the advisor must be very diligent in ensuring that the sub-advisor knows the rules to which it is subject.

SEC Unveils Draft of Five-Year Strategic Plan

The SEC has released for public comment the agency's Draft Strategic Plan that outlines the Commission's strategic goals for the next five years and includes drafts of the SEC's mission, vision, values and performance metrics for that period. The strategic plan can be useful in reviewing what the SEC thinks of as important industry trends or as areas of focus.

It is clear that disclosure to investors and corporate governance will remain front and center for the SEC. The following is a brief summary of other key items in the plan:

  • The SEC continues to be focused on disclosure and corporate governance, and it wants to:
    • improve the quality and usefulness of disclosure, with a focus on issuer's financial conditions, operations, risk management and executive compensation decisions and practices;
    • strengthen proxy infrastructure by considering issues related to the mechanics of proxy voting and shareholder-company communications, including the role of proxy advisory firms;
    • modernize beneficial ownership reporting, including the disclosure obligations relating to the use of equity swaps and other derivative instruments; and
    • modernize the regulatory treatment and valuation of derivatives held by registered investment companies.
  • The SEC continues to want and encourage interaction with industry participants, noting that it plans to enhance efforts to promote compliance by engaging in more proactive communications with registrants and their personnel to leverage third-party knowledge.
  • The SEC noted that it plans to implement a new filing system optimized for data retrieval and analysis that will eventually replace all filings submitted through the EDGAR system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions