On July 31, 2018, the Office of the Comptroller of the Currency (“OCC”) issued a news release announcing that it will begin accepting special purpose national bank (“SPNB”) charter applications from fintech companies that do not take deposits but are engaged in the business of lending money or paying checks (including the modern equivalent thereof, which the OCC suggests includes issuing debit cards or otherwise facilitating payments electronically). The OCC’s decision was announced shortly after the U.S. Department of the Treasury released an extensive report endorsing SPNB charters for fintech companies. As part of its announcement, the OCC also published a Policy Statement on Financial Technology Companies’ Eligibility to Apply for National Bank Charters as well as a supplement to the Comptroller’s Licensing Manual.

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On July 18, 2018, the U.S. Securities and Exchange Commission approved amendments to Regulation ATS and Rule 3a1-1 under the Securities Exchange Act of 1934, as amended. The Amendments impose extensive new transparency requirements on alternative trading systems (“ATSs”) that effect transactions in NMS Stocks. With the increase in regulatory burdens associated with operating an NMS Stock ATS and the new requirement to disclose potentially sensitive business information, the competitive landscape among NMS Stock ATSs could be extremely altered. Click here to read more.

On July 11, 2018, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert focusing on the most common deficiencies relating to best execution found by the SEC staff in recent examinations of investment advisers. The Risk Alert provides a snapshot of OCIE’s expectations regarding a fund manager’s best execution policies and procedures.

Click here to read more about how OCIE’s recent Risk Alert will affect private fund managers.

In late June 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) took action on a number of fronts, including re-implementing stricter sanctions against Iran, issuing detailed sanctions regulations under the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky Act”) and easing sanctions against Sudan. Firms that engage in business that touches upon Iran or Sudan should carefully review these changes. Moreover, firms should make sure to incorporate the names of individuals designated under the Global Magnitsky Act into their screening process.

Click here to read more about these sanctions and the effects they may have on your business.

For information regarding recently updated Venezuela- and Ukraine/Russia-related sanctions, click here.

For information regarding OFAC’s list of sanctioned individuals and entities, click here.

For information regarding the U.S. Department of the Treasury’s list of Russian political figures and oligarchs, click here.

Special counsel David Griffel discusses relevant U.S. tax law as of June 2018 that affects non-U.S. managers in this SRZ Insights video.

SRZ Insights videos feature Schulte attorneys sharing their expertise on timely topics in the financial services industry. For more SRZ Insights, visit Schulte on YouTube or Vimeo.

On May 22, 2017, the U.S. Commodity Futures Trading Commission amended and supplemented several CFTC regulations to strengthen anti-retaliation protections for whistleblowers under the Commodity Exchange Act. These amendments, in general, make the CFTC’s whistleblower protections consistent with those afforded by Securities and Exchange Commission rules and reinforce the need for private fund managers that are registered as commodity pool operators or commodity trading advisors to take affirmative steps to avoid violating federal regulations regarding whistleblowing.

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A proliferation of different fee levels and structures is evident throughout the alternative investment industry, and business development companies (BDCs) are no exception. For instance, management and incentive fees within the BDC space vary widely between issuers, with management fees ranging from as low as 1 percent to as high as 2 percent of gross assets. Throughout the industry, common drivers for revisiting existing fee structures include changing market norms and pressure from investors.

Click here to read this article in which partner John Mahon talks to The Hedge Fund Journal about new BDC fee structures and future fee trends.

In an interview with Private Funds Management, partners Marc Elovitz and Joseph Smith discuss regulator views on conflicts of interest and how to best deal with these issues as the fund formation climate becomes more complex. Marc and Joe also share their insights on how conflicts of interests are viewed by the SEC within the private equity space and how they are best dealt with in the industry.

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The past year has been mixed for alternative funds. In the hedge fund space, industry assets under management increased by $70 billion to $3.22 trillion, despite lackluster overall returns and noisy withdrawals by certain institutional investors. In the private equity space, industry assets under management grew 4.2 percent to $2.49 trillion, and 8,975 new funds were launched. Regulatory requirements and investor preference for established managers have increased barriers to entry in both sectors. Meanwhile, competition for investor capital has created a buyer’s market with significant negotiation of fund terms.

Click here to read this article in which partner Stephanie Breslow and associate Patrick Dundas discuss current industry trends affecting hedge and investment funds and provide information regarding regulatory developments impacting the market.