Category Archives: Investor Protection

FinCEN Proposes Highly Anticipated Investment Adviser AML/CFT Rule

by David Sewell, Timothy Clark, Stephanie Brown-Cripps, Nathaniel Balk, Nathalie Kupfer, and Rosie Jiang

Photos of authors

Top (left to right): David Sewell, Timothy Clark, and Stephanie Brown-Cripps
Bottom (left to right): Nathaniel Balk, Nathalie Kupfer, and Rosie Jiang
(Photos courtesy of Freshfields Bruckhaus Deringer LLP)

On February 13, 2024, the U.S Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a proposed rule to extend anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance obligations to certain types of investment advisers operating in the United States (Proposed Rule).[1]  The agency simultaneously released a “2024 Investment Adviser Risk Assessment” (Risk Assessment), its first comprehensive effort to describe and measure “illicit finance threats involving investment advisers.”[2]

FinCEN’s release marks the latest development in a decades-old debate about whether investment advisers should be subject to the Bank Secrecy Act (BSA) and the attendant AML/CFT requirements that have long been applied to banks, broker-dealers, and other financial institutions.  If adopted in the current (or a similar) form, the Proposed Rule would bring this long-running debate to a close once and for all.  

Below, we briefly summarize the Proposed Rule, including its scope, requirements and potential implications, and highlight open questions and next steps.  

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Facts About Fraud from the FTC – and What it Means for Your Business

by Lesley Fair 

Photo of author

Lesley Fair (photo courtesy of author)

The FTC just issued its 2023 Consumer Sentinel Network Data Book jam-packed with facts about the kind of scams consumers have reported to us. Has the reported dollar amount lost to fraud gone up or down this year? And what are the most frequently reported scams? At this point you may ask, “I run a lawful business. Why should it matter to me?” Two reasons. First, scammers have you, your company, and your community in their sights and the Data Book can help you defend against emerging fraud trends. Second, scammers often try to mask their illegal intent by hiding behind legitimate businesses. For companies that work hard to maintain their good reputation, it’s not enough not to be a scammer. You also don’t want to be “scam-adjacent.”

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Crypto Experts Discuss the SEC’s Approval of Bitcoin ETFs

On January 10, 2024, the U.S. Securities and Exchange Commission (SEC) approved, for the first time, Bitcoin exchange traded funds for spot markets.  A link to SEC Chair Gary Gensler‘s announcement is available here. In this post, two crypto experts discuss the SEC’s decision.

Photos of the authors

Daniel Payne and Ijeoma Okoli (photos courtesy of authors)

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Cryptoasset Developments: Observations on the Thawing Crypto Winter

by Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, Samantha M. Altschuler, and Sabina M. Beleuz Neagu

Photos of the authors

Left to right: Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, Samantha M. Altschuler and Sabina M. Beleuz Neagu (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

The U.S. cryptoasset industry just rang in the new year with the watershed SEC approval of the first spot ETFs for a digital asset.  With the approval of the first bitcoin Spot ETFs, making possible a path for millions of Americans to have direct bitcoin exposure in retirement and other traditional investment accounts, it is an appropriate time to reflect on significant recent developments that may shape the crypto industry in the year to come.

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SEC Marketing Rule Settlements Total 10 Before One Year Anniversary of Compliance Date

by Marc Berger, Michael Osnato, David Blass, and Meaghan Kelly

Photos of the authors.

From left to right: Partners Marc Berger, Michael Osnato, David Blass, and Meaghan Kelly. (Photos courtesy of Simpson Thacher & Bartlett LLP.)

On September 11, 2023, the SEC announced settled charges against nine registered investment advisers for violations of the Amended Marketing Rule (“Marketing Rule”) for advertising hypothetical performance to the general public on their websites without adopting and/or implementing policies and procedures required by the Marketing Rule. The advisers settled to anti-fraud charges (Section 206(4) of the Advisers Act) and violations of the performance section of the Marketing Rule (Rule 206(4)1-d). Two of the nine advisers also settled to related record-keeping violations. The advisers paid civil penalties ranging from $50,000 to $175,000 each, for a total amount of $850,000 in combined penalties. Continue reading →

SEC Proposes Rule to Eliminate or Neutralize Conflicts in the Use of “Predictive Data Analytics” Technologies

by Andrew J. Ceresney, Charu A. Chandrasekhar, Avi Gesser, Jeff Robins, Matt Kelly, Gary E. Murphy, Jarrett Lewis, Robert B. Kaplan, Marc Ponchione, Sheena Paul, Catherine Morrison, Julie M. Riewe, Kristin A. Snyder, and Mengyi Xu

Photos of the authors

Top left to right: Andrew J. Ceresney, Charu A. Chandrasekhar, Avi Gesser, Jeff Robins, Matt Kelly, Gary E. Murphy, and Jarrett Lewis.
Bottom left to right: Robert B. Kaplan, Marc Ponchione, Sheena Paul, Catherine Morrison, Julie M. Riewe, Kristin A. Snyder, and Mengyi Xu.
(Photos courtesy of Debevoise & Plimpton LLP)

On July 26, 2023, the U.S. Securities and Exchange Commission (“SEC”) issued proposed rules (the “Proposed Rules”) that would require broker-dealers and investment advisers (collectively, “firms”) to evaluate their use of predictive data analytics (“PDA”) and other covered technologies in connection with investor interactions and to eliminate or neutralize certain conflicts of interest associated with such use. The Proposed Rules also contain amendments to rules under the Securities Exchange Act of 1934[1] (“Exchange Act”) and the Investment Advisers Act of 1940[2] (“Advisers Act”) that would require firms to have policies and procedures to achieve compliance with the rules and to make and maintain related records.

In this memorandum, we first discuss the scope of the Proposed Rules and provide a summary of key provisions. We also discuss some key implications regarding the scope and application of the rules if adopted as proposed. The full text of the proposal is available here.

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