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US deregulation speculation builds on White departure

SEC chairwoman Mary Jo White’s legacy, built over almost four years as head of the commission, includes a catalog of far-reaching regulations that impact private fund managers.

Securities and Exchange Commission chairwoman Mary Jo White will leave her role at the end of the Obama Administration, fuelling speculation of widespread deregulation under the incoming president, Donald Trump.

Her replacement is unknown, but recruitment is being headed by Paul Atkins, a former SEC Republican commissioner who has advocated deregulatory policies. Hedge fund manager and Trump supporter Anthony Scaramucci is also advising the transition team.

“As the head of the SEC, you’ve got to get back into reffing the game properly and end the demonisation of Wall Street,” Scaramucci said in an interview before his appointment to Trump’s transition team.

Trump will also be able to fill two other openings on the five-member commission, and could override a 20-year tradition of allowing the opposing political party to pick its own representative on the commission, further increasing his influence over the agency.

In his election manifesto, Trump vowed to “reform the entire regulatory code to ensure that we keep jobs and wealth in America.” He has also indicated he would dismantle the Dodd-Frank Act.

Private fund regulation

White was appointed to her role in April 2013, and is one of the longest-serving chairs of the agency. During her tenure, the commission brought more than 2,850 enforcement actions, more than any other three-year period in its history and obtained judgments and orders totalling more than $13.4 billion.

In the private funds sector, the number of actions brought against asset managers doubled in the 2016 fiscal year, while White oversaw the introduction of a number of hard-hitting regulations affecting the private funds industry. Here is a round-up of private fund-focused actions that took place under her leadership:

• The agency announced a crackdown on compliance with whistleblower protection laws in October. Examiners will be checking compliance manuals, codes of ethics, employment agreements and severance agreements to see whether provisions in these documents may restrict people from speaking to the SEC. 

• It brought a first-of-its-kind charge against Maryland-based Blackstreet Capital Management. The firm was fined $3.1 million after it was found to be engaging in brokerage activity and charging fees without registering as a broker-dealer.

• The SEC amended the Investment Advisers Act rules and Form ADV, the registration and reporting form that investment advisers are required to update annually. They are now required to disclose more information, including the details of separately managed accounts, the location of branch offices, and the addresses of social media accounts. 

• It issued guidance on how a firm should implement a business continuity and transition plan to ensure investment advisers have plans in place to address operational and other related risks, and are able to minimise the impact on clients and investors.

• The agency launched a far-reaching cybercrime reduction initiative, a matter White deems “the biggest threat to the financial services industry.” Cybercrime is among the top examination priorities for enforcement officers. Morgan Stanley was the last financial institution to be fined by the SEC for failing to safeguard customer data. 

• Fees and expenses are also being subject to tight scrutiny by the SEC. It is focusing on three categories of misconduct, targeting advisors who receive undisclosed fees and expenses; advisors who misallocate expenses or shift them without permission; and advisors who fail to disclose conflicts of interests, including those that arise from fee and expenses issues.