Relevant industry content we've curated covering a wide range of topics
Outsourced Compliance: A Strategic Response to Regulatory Strain
Regulatory uncertainty and stretched compliance teams are creating new pressures for firms navigating an evolving enforcement landscape, even as the SEC appears to be taking a more targeted approach to violations.
Alts Data Provider Rolls Out AI Tool to Analyze Fund Info
Cepres has launched an artificial intelligence tool that allows institutional investors to more easily pull alts product data to help them make investment decisions.
Vista’s Record $5.6B Continuation Fund Highlights Ongoing Exit Drought
Vista Equity Partners has raised $5.6 billion to hold onto one of its portfolio companies and shift it into a new vehicle, in what it claims is the largest single-asset private equity continuation vehicle in terms of new capital raised, total transaction size and total enterprise value.
BlackRock Never Promised to Stop Monitoring Ex-Employee’s Brokerage Accounts: Judge
A former BlackRock employee who sued the firm for monitoring his brokerage account after he was laid off has lost his case, with the judge ruling that he did not make a plausible claim under the Wiretap Act.
RIAs targeted by phishing campaign impersonating SEC
The Securities and Exchange Commission (SEC) is asking RIAs to report an ongoing phishing campaign involving fraudulent emails claiming to be from the agency’s chief information officer.
Compliance experts urge vigilance despite SEC rules pullback
While the Securities and Exchange Commission (SEC) has decided to withdraw several rule proposals that would have applied to RIAs, compliance experts said advisors and executives shouldn’t take their eye off the ball as the regulatory agency is expected to continue evaluating the underlying issues in examinations.
The SEC under the Biden administration issued rule proposals that sought to govern advisors’ use of third-party vendors and artificial intelligence (AI), as well as their cybersecurity and asset custody practices, only to have those proposals scrapped earlier this month by the Commission. The agency is now chaired by president Donald Trump’s nominee, Paul Atkins.
In its own guidance, compliance consultancy STP Investment Services urged RIAs to monitor developments with the Treasury’s Financial Crimes Enforcement Network (FinCEN) which promulgated the rule. STP further encouraged RIAs to implement cybersecurity programs that document risks and adequately train employees. Diligence on third-party service providers also remains critical.
‘For firms that have already invested time and resources to implement aspects of the withdrawn rules, those efforts are not in vain as many of these frameworks include components that are recommended as best practices,’ said Cynthia Kelly, managing director of compliance at STP. ‘This is an ideal time to reaffirm cybersecurity protocols, vendor oversight processes and governance controls.’
Read what Cynthia and other subject matter experts had to say in Citywire RIA here.
Hedge Funds Snag Bigger Share of Assets from Sovereign Funds: SEC
Sovereign wealth funds have been among the fastest-growing groups of investors at large hedge funds over the past decade, according to new data from the Securities and Exchange Commission.
That growth dovetails with a hiring surge by hedge fund managers in recent years for their offices in the Middle East, and particularly in the Gulf states.
According to a recent analysis of Form PF filings by the SEC, sovereign wealth funds and foreign official institutions accounted for 7.5% of the aggregate net asset value, or NAV, at so-called qualifying hedge funds in 2023, up from 5.3% in 2013. A qualifying hedge fund manager has at least $500 million in assets.
“You’ve got similar benefits to like if you were to incorporate a fund in the Cayman Islands. There are tax benefits being in a financial center, like the [Dubai International Financial Centre],” said David Goldstein, director of fund services at STP Investment Service.
Having a local presence also can help unlock new mandates, he said.
“If you have a sovereign wealth fund, especially a Gulf state sovereign wealth fund that’s looking to make investments, they probably rather do it through a Gulf state incorporated vehicle, rather than a Cayman vehicle,” Goldstein said. “It keeps things closer to home. The tax advantages are probably similar or the same, plus it increases employment in their area.”
Read what David and other subject matter experts had to say in FundFire here.
SEC Investment Management Director to Leave; No Successor Named
The director of the Securities and Exchange Commission’s Division of Investment Management, Natasha Vij Greiner, is leaving the agency, as SEC Chair Paul Atkins seeks to refocus the agency.
The SEC has not yet named a successor for Greiner, whose exit is effective July 4, leaving the investment management division’s priorities unclear, said Igor Rozenblit, a managing partner at Iron Road Partners.
As director of this division, Greiner has been responsible for administering the Investment Company Act of 1940 and the Investment Advisor Act of 1940, which oversees investment vehicles, companies and advisers, according to a press release from the SEC.
The reduced headcount adds to the uncertainty over the agency’s priorities, said Cynthia Kelly, managing director of compliance at STP Investment Services, in an email to FundFire.
“Hundreds of staff have taken voluntary buyouts or are exiting under cost-cutting pressures, raising concerns about institutional knowledge loss,” she said.
Read more on what Cynthia and other subject matter experts had to say here.
‘Dirty’ Data Complicates Managers’ Alts Push
Asset managers and fund administrators are wrestling with major data hurdles in the alternatives space that could amplify operational problems as firms push these strategies to a broader investor base.
Some firms are trying to use generative artificial intelligence and automation to solve these issues but are still facing roadblocks, industry executives said.
A.I. in U.S. Ops May Help T+1 Overseas
The U.S. securities operations industry is seeing a boon of interest in artificial intelligence (A.I.) tools — from generative A.I. to predictive fail systems — as global market participants prepare for tighter settlement cycles across Europe, the United Kingdom, and Switzerland from Oct. 11, 2027.
This wave of enthusiasm comes as global financial services institutions face the daunting technological challenge of coordinating among 27 European Union member countries — each with its own financial market infrastructure — as well as Switzerland and the U.K. Firms are equally wary of costly settlement penalties mandated under the E.U.’s Central Securities Depositories Regulation (CSDR) and similar rules in the U.K.
Kaisha Schnoll, vice president, settlements at STP Investment Services, says T+1 in the U.S. went a lot smoother than everyone anticipated. But she says she doesn’t think it will be so simple when it comes to the U.K. and Europe. Anecdotally, Schnoll says, a lot of brokers and custodians, and investment firms have yet to adopt technology and automation. Furthermore, current financial penalties for fails in the U.K. and the E.U. mean that as they move to T+1, “there’s even more at risk.”
“And I think that that’s what’s going to motivate a lot of these firms and investors to put the resources and the budget behind preparing for T+1,” she adds.
STP Investment Services is not yet utilizing A.I. within its trade settlement platform. Over the past year, it has been looking at a fail module that uses A.I. to predict failures. The tool uses A.I. to analyze data from custodians, brokers, and securities lending agents, alongside positional data to predict whether a trade will settle or not. It also includes a built-in tool to calculate CSDR penalties.
Read more from Kaisha and other subject matter experts in FTF here.
Bitcoin Bump, Volatile Markets Boost Crypto Hedge Funds
Pensions and endowments are increasingly exploring incorporating digital assets into their portfolios, though only a handful have reached the point of pulling the trigger on new allocations to crypto-focused hedge funds, according to industry observers.
Various factors – including volatile public markets, a rosier regulatory picture and new cryptocurrency price peaks – are opening the door for institutions.
There is a lot more interest among pension funds and endowments this year as the Trump administration advocates for a friendlier environment for digital assets regulation and investing, according to Chris Rhine, head of liquid active strategies at Galaxy Digital, a crypto banking and trading platform.
Hedge Fund Launches Plummet as Investor Sentiment Wobbles
Hedge fund managers are launching new funds at the slowest pace in more than decade as a choppy economic environment buffeted by the Trump administration’s evolving policies has left investors unnerved and has exacerbated what was already a difficult fundraising environment.
Only 88 new hedge funds came to market during the first quarter, the slowest quarter for launches since 2020, according to data from Preqin. Another 15 funds launched in April and May, putting the industry on pace to have fewer funds debut this year than the 618 that launched in the second quarter of 2020 at the height of the Covid-19 pandemic.
