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Jacko Law Group Blog

Rule 3a-4: Are Your Model Portfolios Really Investment Companies?

In 1997, the SEC adopted Rule 3a-4 of the Investment Company Act of 1940 (the “Rule”) which provides a non-exclusive safe harbor to exclude certain similarly-managed accounts, such as model portfolios, from the definition of an investment company (e.g., a mutual fund).

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Department of Labor to Re-Propose Definition of “Fiduciary”

As discussed in a previous Jacko Law Group, PC Legal Risk Management Tip, in October of last year the Department of Labor (the “DOL”) published a proposed rule that would amend the definition of "fiduciary", and would significantly expand the categories of persons who would be deemed to be fiduciaries subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). On Monday, however, the DOL announced that it will re-propose the rule, and stated that this decision was in part a response to requests from the public, including members of Congress and the financial services industry, that the DOL allow an opportunity for more input on the proposed rule.

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Investment Advisers May Soon Have A SRO – And FINRA Wants To Be It

Recently, Congressmen Spencer Bachus, Chairman of the House Financial Services Committee, circulated a draft bill entitled The Investment Adviser Oversight Act of 2011 (the "Bill"). If introduced and passed, the Bill will amend the Investment Advisers Act of 1940 to require both federal and state-registered investment advisers to become a member of a national investment adviser association (“NIAA”). Among other things, the Bill provides for the NIAA to implement rules designed to prevent fraudulent and manipulative acts, protect investors, and outlines how the NIAA may apply to register as the overseer of investment advisory industry. Importantly, the Bill also lists exemptions for investment advisers with assets of 90% or more attributable to the following types of clients from having to become a member of the NIAA:

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SEC No-Action Letter Provides Further Guidance for Private Fund Solicitors

As discussed in a previous blog posting, investment advisers must comply with Rule 206(4)-3 (the “Rule”) of the Investment Advisers Act of 1940 when using solicitors. Notably, in July 2008, the SEC issued a no-action letter (the “Letter”) which provided additional guidance to Rule 206(4)-3’s applicability. In this Letter, the SEC stated that Rule 206(4)-3 generally does not apply to a RIA's cash payment to a person solely to compensate that person for soliciting investors or prospective investors for, or referring investors or prospective investors to, a private fund managed by the adviser. In support of this interpretation, the SEC noted that:

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Rare East Coast Earthquake Serves as a Reminder to Review Business Continuity Plans

The 5.8 magnitude earthquake that shook large portions of the eastern seaboard on August 23rd should serve as a useful reminder to registered investment advisers and broker-dealers to review and update their business continuity plans.

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