Media Mentions
Schulte partner Allison Scher Bernbach featured in Private Equity Law Report
June 14, 2024
Schulte Roth & Zabel partner Allison Scher Bernbach discussed a series of recent SEC enforcement settlements related to violations of the Marketing Rule and a related risk alert (“Risk Alert”) issued by the SEC's Division of Examinations (“Examinations”) in Private Equity Law Report's article, "Recent SEC Enforcement Sweep and Risk Alert Highlight Weak Areas of Marketing Rule Compliance for Managers to Bolster." In regard to the enforcement settlements, Allison noted that while the hypothetical performance violations that were the focus of the enforcement actions are not necessarily common practices in the private equity industry, an important element of these enforcement sweeps is the message the SEC is sending through the volume of cases involved. She also cautioned, “It’s also a message that even with respect to one or two instances of deficiency that seem minor at first glance, there can still be an enforcement proceeding for inadequate policies and procedures.”
Shortly after the enforcement actions were settled, the SEC issued a risk alert to “encourage accurate completion of the Marketing Rule items contained in Form ADV and to promote compliance with” the Compliance Rule, Books and Records Rule and general prohibitions under the Marketing Rule. The Risk Alert is arguably more substantive than others that Examinations released in the past as to the Marketing Rule, which is very valuable for the industry, Allison said. “Risk alerts have historically been tools that advisers use to benchmark their practices against what is highlighted in the risk alerts, which really helps to guide market practices and offer a sense of the SEC’s expectations.”
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Alerts
On June 28, 2024, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice of proposed rulemaking that would amend existing anti-money laundering/countering the financing of terrorism (“AML/CFT”) program[1] regulations to require that financial institutions establish, implement and maintain effective, risk-based and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process (hereinafter, “Proposed Rule”).[2] For purposes of the Proposed Rule, “financial institutions” include: banks; broker dealers; mutual funds; futures commission merchants (“FCMs”) and introducing brokers in commodities (“IB-Cs”); insurance companies; money services businesses (“MSBs”); casinos and card clubs; dealers in precious metals, precious stones or jewels; operators of credit card systems; loan or finance companies; and housing government sponsored enterprises.[3] In addition to establishing minimum risk assessment requirements for these AML/CFT programs, the Proposed Rule would require that financial institutions document each component of their AML/CFT programs and make this documentation available to FinCEN or its designee, which can include the appropriate agency to which FinCEN has delegated examination authority,[4] or the appropriate SRO.[5] The Proposed Rule would also require that these AML/CFT programs be approved and overseen by the financial institution’s board of directors or, if the financial institution does not have a board of directors, an equivalent governing body.
Alerts
On June 28, 2024, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice of proposed rulemaking that would amend existing anti-money laundering/countering the financing of terrorism (“AML/CFT”) program[1] regulations to require that financial institutions establish, implement and maintain effective, risk-based and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process (hereinafter, “Proposed Rule”).[2] For purposes of the Proposed Rule, “financial institutions” include: banks; broker dealers; mutual funds; futures commission merchants (“FCMs”) and introducing brokers in commodities (“IB-Cs”); insurance companies; money services businesses (“MSBs”); casinos and card clubs; dealers in precious metals, precious stones or jewels; operators of credit card systems; loan or finance companies; and housing government sponsored enterprises.[3] In addition to establishing minimum risk assessment requirements for these AML/CFT programs, the Proposed Rule would require that financial institutions document each component of their AML/CFT programs and make this documentation available to FinCEN or its designee, which can include the appropriate agency to which FinCEN has delegated examination authority,[4] or the appropriate SRO.[5] The Proposed Rule would also require that these AML/CFT programs be approved and overseen by the financial institution’s board of directors or, if the financial institution does not have a board of directors, an equivalent governing body.