On December 1, the SEC announced enforcement actions against three advisory firms and six individuals as part of the Commission’s new initiative whereby the Commission’s Asset Management Unit uses proprietary risk analytics to evaluate hedge fund returns. Performance that appears inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further scrutiny. The enforcement actions allege that the firms and managers engaged in a wide variety of illegal practices in the management of hedge funds or private pooled investment vehicles, including fraudulent valuation of portfolio holdings, misuse of fund assets, and misrepresentations to investors about critical attributes such as performance, assets, liquidity, investment strategy, valuation procedures, and conflicts of interest.

The SEC and FINRA have issued a Risk Alert and a Regulatory Notice on broker-dealer branch inspections, and offered suggestions to help securities industry firms better perform this key supervisory function. The Risk Alert noted that the branch inspection process is a critical component of a comprehensive risk management program and can help protect investors and the interests of a firm. The SEC and FINRA offered the following tips to help perform robust branch inspections:

On October 3, 2011, Rule 13h-1 went into effect which, among other things, requires “large traders” to begin identifying themselves to the SEC on December 1^st by filing Form 13H. Under Rule 13h-1, a “large trader” is defined as a person, including affiliated entities, whose discretionary transactions in NMS securities[1] (a) equal or exceed 2 million shares or $20 million during any calendar day, or (b) 20 million shares or $200 million during any calendar month. A large trader must file a Form 13H with the SEC within 10 days after reaching either one of these thresholds.