Financial Executive Alliance Presentation November 5, 2014

Transcription

1 PROVIDING ASSURANCE THROUGH EXPERIENCE Financial Executive Alliance Presentation November 5, 2014 Gary Watkins, Partner (804)

2 OUR FIRM AND MISSION Our Firm ACA Compliance Group is a global compliance consulting firm comprised of former SEC, FINRA, FSA, NFA, CFTC, and state examiners along with former senior compliance managers from prominent financial institutions. We provide unparalleled regulatory compliance and GIPS verification services to some of the largest investment advisers, hedge fund managers, broker-dealers, and mutual fund firms in the industry. Our Mission The mission of ACA Compliance Group is to ethically provide highly customized and innovative solutions to assist our clients in enhancing their compliance, operational, and business processes. 2

3 OUR CONSULTANTS 144 Compliance Professionals Advanced degrees and certifications include: JD, MBA, CFA, CPA, CFE, CIPM, CAIA 112 Compliance Consultants and Analysts 56 former regulatory inspectors from the SEC, FINRA, NFA, FSA, and/or various state agencies 32 full-time GIPS performance verification professionals US Europe Hong Kong Brasil CFAs CIPMs CAIAs 3

4 BROAD GEOGRAPHIC REACH Europe United States New York Washington, D.C. Boston Chicago Los Angeles San Francisco Miami Dallas Atlanta Denver Austin Pittsburgh Portland Charlotte Boca Raton Silver Spring Morristown Chattanooga Richmond Hartford Raleigh London Jersey Brasil Rio de Janeiro Asia Hong Kong 4

5 CLIENT DEMOGRAPHICS ACA works with some of the largest and most prominent financial services firms in the country, including: 63% of the top 100 hedge fund managers (as noted in the April 14, 2014 edition of Hedge Fund Alert) 50% of the top 50 Private Equity funds (as noted in the May 2014 PEI 300) 57% of America s top 100 Money Managers (as noted in 2014 by Institutional Investor) Since inception, ACA has provided services to more than 2,800 clients. ACA provides ongoing regulatory compliance consulting and GIPS verification services and systems to over 800 clients on a recurring basis. 5

6 INVESTMENT ADVISER/ PRIVATE FUND SERVICES Compliance Services Compliance program reviews Advertising and sales literature reviews Employee and proprietary trading reviews Expense allocation reviews Electronic communications reviews Cybersecurity reviews Mock Exams Mock SEC exams Mock CARs exams Consulting and Support Services Policy and procedure development SEC inspection support services Regulatory mandated consulting Compliance training On-site CCO support services Registration and Filings 13F, 13G, and 13H report filing SEC and state registration IARD administration 6

7 MY BACKGROUND Co-founder of ACA and based in Richmond, VA Work with investment advisers including private fund managers Conduct mock SEC examinations/annual compliance program reviews Guide advisers through actual SEC examinations Help advisers develop compliance policies and procedures Complete SEC registration for new advisers

8 IF I AM BORING AND ILL-INFORMED..don t blame Paul Pitts!!

9 AGENDA SEC Examination Trends and Focus Areas Enforcement Trends Regulatory Reminders

10 POP QUIZ 1. Some months have 31 days, how many have 28? 2. You are participating in a race. You overtake the second person. What position are you in? 3. Mary s father has five daughters: Nana, Nene, Nini, Nono. What is the name of the fifth daughter? 4. I have in my hands two U.S. coins which total 55 cents. One coin is not a nickel. What are the coins? 5. A man and his son had a terrible car accident and were rushed to the hospital. The man died on the way, but the son was still alive and a surgeon was called in to operate. However, the surgeon saw the young boy and said, "I can't operate on this boy. He's my son. Who is the surgeon? 10

11 TYPE OF EXAMS Risk Assessment Examinations Cause Examinations Randomly Selected Examinations Presence Examinations Risk-Targeted Examination Sweeps Never Before Examined Reviews

12 EXAMINATION FOCUS AREAS Custody and safeguarding of assets Expense allocation Marketing and performance advertising Allocation of investment opportunities Quantitative trading models Conflicts of interest with RIA business models Valuation Cybersecurity

13 EXPENSE ALLOCATIONS Commonly cited focus area especially for private fund managers Close examination of LPA and other fund governance documents for permitted expenses Allocation of expenses to the manager vs. the fund(s) Allocation of expenses among the funds Is one fund bearing expenses that should be allocated to other funds? In the case of private equity funds, how are expenses allocated between the fund(s) and the portfolio companies? Review of policies and procedures associated with expense allocation practices, as well as G/L s and audited financials 13

14 RECENT EXPENSE ALLOCATION ENFORCEMENT CASES SEC Charges New York Based Private Equity Adviser with Misallocation of Portfolio Company Expenses (Sept 22, 2014) SEC Charges Minneapolis Based Hedge Fund Managers with Bilking Investors and Portfolio Pumping (Sept 8, 2014) SEC Announces Charges Against New York Based Brokerage and Founder Despite Attempts to Mislead Examiners (August 8, 2014) Harbinger s Former COO Agrees to Settle Charges for Assisting Hedge Fund Scheme (July 28, 2014) 14

15 ENFORCEMENT TRENDS

16 ENFORCEMENT TRENDS Rule 105 Enforcement has continued to focus on firms and individuals allegedly violating Rule 105 of Regulation M, most recently announcing settlements with 19 firms. Ownership Reports SEC has recently announced multiple settlements with persons and entities that failed to file Schedule 13 and 16 reports in a timely manner.

17 ENFORCEMENT TRENDS Marketing SEC Announces Charges and Asset Freeze Against Hedge Fund Advisory Firm Distributing Falsified Performance Results (May 7, 214) SEC Charges Tacoma, Wash. Area Firm for Undisclosed Principal Transactions and Misleading Performance Advertisements (September 8, 2014) SEC Charges N.Y. Based Money Manager and Firm for Misleading Advertisements (January 30, 2014)

18 ENFORCEMENT TRENDS Insider Trading SEC Charges Two with Insider Trading on Pershing Square s Announcement on Herbalife (Sept 30, 2014) SEC Charges Brooklyn Man for Facilitating Insider Trading Scheme Via Post-It Notes at Grand Central Terminal (Sept 19, 2014) SEC Charges Investor Relations Firm Executive With Insider Trading Ahead of News Announcements By Clients (August 26, 2014) SEC Charges Former Bank Executive and Friend With Insider Trading Ahead of Acquisition (August 18, 2014) SEC Charges Atlanta-Based Accountant With Insider Trading on Confidential Information From Client (August 14, 2014) SEC Charges Investor Relations Executive With Insider Trading While Preparing Clients Press Releases (July 22, 2014) SEC Charges Group of Amateur Golfers in Insider Trading Ring (July 11, 2014)

19 REGULATORY REMINDERS Schedules 13G and 13D, and Forms 13F and 13H Privacy Policy New Issuer Eligibility SEC form D Bad Actor Questionnaires Compliance Questionnaires ADV Update

20 REGULATORY REMINDERS State Notice Filings Compliance Policies and Procedures Form PF Employee Holding Reports Solicitor Certifications

21 CONTACT Gary Watkins, Partner Midlothian Tnpk., Ste. 402 Richmond, VA (804)