SEC Releases Final Interpretation of the Standard of Conduct for Investment Advisers

The SEC has, for some time, been reviewing the standard of conduct required of investment advisers and broker-dealers under federal securities laws. Recently, these various initiatives concluded with the publication of four final items of guidance.

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New Fund-of-Funds Rule

Investment advisers may soon have a new cybersecurity reporting requirement from a federal regulator. Anti-money laundering (“AML”) requirements have recently been interpreted to include cybersecurity suspicious activity reporting (“SAR”) requirements, so if AML obligations – which are on the horizon – are extended to investment advisers, then these newly articulated cybersecurity reporting obligations will follow.

Financial regulators are emphasizing the risk poor cybersecurity poses to market integrity and financial stability, and elaborating on policies and controls they expect the firms they oversee to have in place. Investment managers’ responsibility for cybersecurity has grown like compound returns. The SEC’s Office of Compliance Inspections and Examinations disclosed that its examination staff would

As the end of 2015 approaches, financial regulators continue to emphasize the risk that poor cybersecurity poses to market integrity and financial stability, and to elaborate on the policies, procedures and controls they expect investment advisers, commodity pool operators and registered investment companies to have in place.

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Systems that allow manufacturing companies to control industrial machinery remotely present additional cyber risk when it comes to the protection of trade secrets. Security experts are advising boards of such companies to include these often-overlooked systems in cyber-risk reviews. The issue is becoming more serious as attacks on these industrial control systems, also known as

Cybersecurity continues to be a priority for the Securities and Exchange Commission (SEC). The SEC’s Office of Compliance Inspections and Examinations conducted a cybersecurity “sweep” examination in 2014 and released a summary of its results in early 2015. The SEC’s Division of Investment Management — which regulates investment companies and investment advisers — has now

Like many companies, investment managers require a wide range of third-party vendor-provided products and services to manage their daily operations. These vendors have varying levels of access to sensitive data, and policies are needed to reduce the cybersecurity risks that third-party vendors present. It is critical to have comprehensive contract provisions in place to reduce