MNPI Remains a High Risk Area for Compliance

Failing to adequately manage Material Non-Public Information (MNPI) remains a high risk area for compliance, as evidenced by recent actions in the U.S. and the U.K. A private equity firm paid $1 million to settle SEC charges for failing to implement effective Insider Trading compliance policies. The FCA published a Decision Notice fining a former CEO £658,900 for market abuse and banning him from future roles linked to regulated activity.

To avoid hefty fines and actions, firms must have comprehensive and actionable policies and procedures around the management of MNPI and insider lists to minimize risk.

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SEC Finds Deficiencies in Disclosing Conflicts of Interest and MNPI

The Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission (SEC) recently published the Risk Alert Observations from Examinations of Investment Advisers Managing Private Funds. 

 

The Risk Alert covers three general areas of deficiencies that the OCIE has identified in examinations of private fund advisers: conflicts of interest, fees and expenses, and policies and procedures relating to material non-public information (MNPI). The alert outlines concerns and compliance issues observed during examinations of registered investment advisers that manage private equity funds or hedge funds—and serves notice that the SEC will continue to put a high priority on customer well-being.

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How Compliance is Reacting to COVID-19 Crisis

As most employees are now working from home, without a doubt, compliance has become more challenging and regulators expect firms to be prepared to manage the risks and challenges promptly. Compliance Week has run a survey to understand how prepared were compliance professionals and organizations for the COVID-19 pandemic.

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SEC Will Focus on Good Faith Efforts in Reg BI Enforcement

On April 7 the SEC published two Risk Alerts providing broker-dealers and investment advisors with information on the expected scope of initial Regulation Best Interest enforcement. The guidance indicated that initial exams will focus on evidence that firms have made “good faith” efforts to comply.

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SEC Holds Firm to the Reg BI Deadline of June 30, 2020

On April 2 the SEC issued a statement indicating that despite the disruption of the COVID-19 pandemic, the June 30, 2020 deadline for Regulation Best Interest (Reg BI) would not be deferred.

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