Regulatory Forum

The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily blocking enforcement of the Corporate Transparency Act (CTA) and its requirements for certain companies to submit Beneficial Ownership Information Reports (BOIR). The preliminary injunction applies nationwide, meaning that all companies currently subject to the CTA’s reporting requirements are now exempt from filing beneficial ownership reports until further notice.

Enforcement could resume if the Court’s order is overturned on appeal, or the Government ultimately succeeds in defending the merits of the CTA. We encourage clients who may have reporting obligations to be prepared, potentially at a moment’s notice, to make the CTA’s required filings—either before the January 1, 2025, deadline, or, if the injunction runs past January 1, 2025, but is then overturned, immediately thereafter.

The SEC Division of Examinations (“Examination Division” or “Division”) published its 2025 Examination Priorities, highlighting the 30th anniversary of the creation of the Division (originally called the Office of Compliance Examinations & Inspections, or OCIE). The priorities memo summarized changes in the industry since that date and ways that the Division has adapted its program, improved communication and transparency, and directed its resources to critical risk areas. The Division outlined its priorities across all of its registrant base, including 1) investment advisers (RIAs and ERAs); 2) investment companies; 3) broker-dealers; 4) self-regulatory organizations; 5) clearing agencies; and 6) other market participants. The Division further summarized its examination efforts related to key risk areas and regulatory developments and stated that it will prioritize examinations of investment advisers that have never been examined and those that have not recently been examined. We have summarized priorities that will most directly impact Standish Compliance clients, including the following:

• Fiduciary Standards of Conduct
• Compliance Programs
• Private Fund Advisers
• Cybersecurity
• Privacy & Regulation S-P
• T+1 Settlements
• Emerging Financial Technologies
• Crypto Assets
• Anti-Money Laundering

We expect that SEC staff will discuss the 2025 priorities in greater detail in its National Compliance Outreach Seminar this Thursday, November 7, 2024. We encourage clients to watch the event online. A link to the live webcast will be made available the morning of Nov. 7 on www.SEC.gov. The Standish Compliance team will work with clients to prepare for and manage examinations incorporating these priorities.

While the pace of rulemaking by the SEC slowed dramatically in the 3rd quarter of 2024, following legal challenges that overturned major rulemaking initiatives, the pace of enforcement actions accelerated as the SEC raced toward the end of its 2024 fiscal year. There were many notable enforcement actions filed in the final month of the fiscal year as well as some key personnel developments.

In early October, the SEC issued a Frequently Asked Questions (FAQ) document related to the compliance date of the amendments to Form PF adopted under the “Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers” rule. The FAQ confirmed the filing deadline for the amended form for annual filers and quarterly filers. The FAQ also clarified that large filers whose fiscal quarter does not end on a calendar quarter end will be required to transition from a fiscal quarter reporting schedule to calendar quarter reporting.

The Standish Compliance team continues to track and analyze regulatory developments and their impact on our private fund and other clients. Let us know if you have questions regarding any recent regulatory developments or their application to your firm.

The SEC charged registered investment adviser, Macellum Advisors, LP, that advised a series of single-security pooled investment vehicles (the “Funds” or “Macellum Funds”) with failing to disclose payments Macellum affiliates received from third-party investment advisers and the resulting conflicts of interest. While Macellum stated in Fund formation documents and various disclosure documents that it “may” or “could” engage in outside activities and other conflicted transactions, the SEC faulted the firm for not specifically disclosing the extensive Consulting Agreements it entered into, or compensation received from the Outside Entities in connection with its activist campaigns. Due to the firm’s cooperation and prompt remedial action taken, the penalty in the case was limited to $75,000.

The SEC charged Marathon Asset Management, L.P. with failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI) related to its participation on ad hoc creditors’ committees. While Marathon had established Insider Trading and Information Barrier policies and procedures in place, as well as MNPI procedures, the SEC faulted the firm for not effectively monitoring or supervising employees to effectively address the risk of receiving or misusing MNPI during participation on ad hoc creditors’ committees. Marathon agreed to pay a $1.5 million civil penalty.

The SEC charged GQG Partners LLC, a registered investment adviser, for entering into non-disclosure agreements with candidates for employment that made it more difficult for them to report potential securities law violations to the SEC. The Firm further entered into a settlement agreement with a former employee that included provisions that SEC deemed to violate the whistleblower protection rule. GQG agreed to pay a $500,000 civil penalty.