SEC New Chairman Jay Clayton Sworn In – last week Justice Anthony Kennedy swore in Jay Clayton as the new SEC Chairman. Clayton has a long background working in the the securities industry at a large law firm and has acted as a law school professor with respect to various aspects of the securities industry. Clayton begins the Chairmanship during rapidly changing times – technological innovation is changing both the products in the securities industry as well as how market participants interact with those products. We are both excited and hopeful that he will be able to lead the SEC in this this environment to adequately protect investors while also encouraging innovation and growth within the industry. More information on his background can be found in the SEC press release.
State Cybersecurity Workshop – we hear about cybersecurity threats on an almost daily basis now; last week introduced a phishing scam involving Google Docs. As this issue continues to be a forefront issue, the regulators and states are trying to help industry participants become better prepared in this area. As an example, Washington state just announced that it will hold a “Cyber Security Workshop for Small & Medium Businesses” in Washington state in conjunction with the National Cyber Security Alliance (NCSA). We anticipate we will see more initiatives like this for investment managers going forward and encourage all managers to continue their education in this area.
CFTC Reduces Burden for Swap CCOs – last week the CFTC published in the Federal Register amendments to regulations applicable to certain chief compliance officers of firms that engage in swaps. We recognize that these CCOs have a very difficult job (especially as the products become more and more complex) and we applaud the CFTC for attempting to identify areas where regulatory burdens can be lifted. We anticipate there will be a number of comments in this area, which are due by July 7, and we will provide updates as applicable.
AI Trend Continues – we note that a number of the legal projects we are currently working on deal with Artificial Intelligence (AI) in some way. A service provider to the investment management industry, Orbital Insight, showcase that AI is front and center on the minds of the industry when it announced a $50M Series C round.
State Carried Interest Tax Changes? – according to this update a number of states are contemplating changes to the manner in which carried interest is taxed. It seems like it will be a bit of a waiting game until a Federal tax bill is proposed, but it is interesting to note that there seems to be some kind of momentum toward changing the manner of taxation.
CFTC Requests Public Input on Simplifying Rules – the CFTC announced that it is asking for input on how regulations should be modified to better address regulatory items and to reduce costs. We think this is a step in the right direction and also mirrors the initiative by FINRA (which we reported on earlier). We believe that investor protection is paramount, but we also believe that modifications to certain investment regulations can increase efficiency and reduce costs for market participants which would be a benefit for everyone. For more information see the CFTC’s ProjectKiss site; comments are generally due by September 30.
Bart Mallon is a founding partner of Cole-Frieman & Mallon LLP and focuses his legal practice on the investment management industry. He can be reached directly at 415-868-5345.