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Distribution in Guise’ Enforcement Actions in Works: SEC

Distribution in Guise’ Enforcement Actions in Works: SEC

In case you missed this article in today’s issue of Ignites. Looks like what they examined in the “Distribution in Guise” sweep will  be covered now in regular exams of funds. This should take it down stream to some of the smaller funds as the sweep probably just hit the big fund companies.

“Originally it was a sweep exam, and my sense is now the staff is incorporating the kind of review it did in the sweep into regular exams of fund companies,” says Barry Barbash, partner at Willkie Farr. “[T]he same sort of distribution queries are being made as part of regular exams.”

There is also now a focus on conflicts of interest, not just internally but with affiliates advisors or funds.

So a fund complex sets up its daily compliance review, where every morning and every night they might run through a checklist of 25 to 50 tests,” says Amy Lynch, president of FrontLine Compliance. “But that usually does not take into account conflicts outside the fund; they can’t review for conflicts that might occur with affiliates’ advisors or funds.”

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