Protecting Your Investment: Insights for 2020

The Securities and Exchange Commission’s proposed rules related to the Advisers Act advertising rule and cash solicitation rule could substantially change how US private fund managers market and sell their products and services. The proposed rules expand the definition of “advertisement,” set rules for communications with prospective and existing investors in private funds, differentiate between retail and nonretail communications, and extend the solicitation rule to all compensation and investors in private funds.

For our banking clients – who include many of the largest commercial, investment, and retail banking institutions and diversified bank holding companies – what does the new year hold? The industry is keeping an eye on what actions federal agencies could take in terms of significant rulemaking projects like overhauling the Volcker Rule and rolling back underwriting standards for payday loans. For insights from our banking team into potential regulation to watch, read this Law360 article.

The United Arab Emirates made major changes to anti-bribery and anti-corruption laws at the end of 2018. Those regulations are expected to stay the same in 2020. However, the UAE is expecting a new federal anti-money laundering law to affect how financial institutions operate in that area by imposing more onerous due diligence reporting obligations. Under the new law, which we detail in this Global Legal Insights bylined article, all financial institutions and designated non-financial businesses and professionals are required to report suspected incidents of money laundering to the Financial Intelligence Unit.

Effective January 1, the Fair Access to Credit Act will impose several significant changes to the small consumer loan (under $10,000) provisions of the California Financing Law, including rate caps, limits on the maximum/minimum loan term, and new reporting and customer education requirements, each of which will apply prospectively to newly made loans.

The increasing interest of foreign investors in investment opportunities in Japanese equity markets, and the associated engagement by these shareholders with Japanese listed companies (issuers), has resulted in a significant increase in the “5% filing.” The 5% filing provides that a holder of more than 5% of the shares or similar interests in a listed issuer in Japan files a large shareholding report with the local finance bureau. While 5% reporting rule is by now well-known outside Japan, many of the novel nuances in its application are less familiar to legal and compliance professionals charged with ensuring compliance with these rules. In this Practical Law bylined article, we break down the rules governing these filings and review some of the less well-known aspects.

The SEC is gearing up for battle in the US Supreme Court this spring in Liu v. SEC, which tackles the deeper question of whether the commission may seek and obtain disgorgement from a federal court as “equitable relief” for a securities law violation, even though the Supreme Court has determined such disgorgement is a penalty. With disgorgement being a significant part of the remedies that the SEC seeks in all of its cases, all eyes will be on the court, according to this Compliance Week article (subscription may be required). A finding or a determination that it is not authorized to impose disgorgement would have a significant impact on the commission’s enforcement program.

In this American Lawyer article, traditional false claims acts cases targeting the healthcare, defense, and government contractor communities are likely to continue apace, the next waves of FCA activity—both at the federal and state levels—are building and signaling even more potential exposure and active litigation, especially arising out of antitrust investigations, non-compliance with cybersecurity requirements, and “reverse” false claim liability.

Fund Directions featured the 2020 outlook for the mutual funds industry, highlighting the trend of advisers lowering fees due to the competitive environment. There’s every reason to think we’ll continue to see that kind of pressure with no real catalyst on the horizon to alleviate or change that dynamic. The advisers themselves are being proactive, and that reflects the challenges in maintaining and gaining market share.