Dodd-Frank Update: Legal & Technology Requirements for Firms<br />
Agenda<br />Dodd-Frank & Investment Adviser Registration<br />Technology as Part of an Adviser’s Compliance Program<br />T...
Dodd-Frank and Investment Adviser Registration<br />
Investment Advisers - General<br />An investment adviser is any person who engages in the business of advising others or p...
Who Must Register<br />Advisers solely to Private Funds (e.g., hedge funds and private equity funds) must register with SE...
Adviser is required to register with the state securities regulator, but the Adviser is not subject to examination as an i...
New Exemptions<br />Less than $150 million<br />Venture capital funds<br />Registered CTA <br />Foreign private adviser <b...
State Issues<br />Individual state registration requirements<br />Notice filings <br />Investment Adviser representatives ...
Registering with the SEC <br />Compliance Infrastructure<br />Chief Compliance Officer <br />Policies and Procedures <br /...
Selected Compliance Issues<br />SEC Examinations<br />Compliance Policies and Procedures<br />Emphasis on procedures and t...
Code of Ethics<br />Required:<br />Annual holdings report<br />Quarterly transaction reports<br />Pre-approval for IPOs an...
Circular 230 Disclosure: Internal Revenue Service regulations provide that, for the purpose of avoiding certain penalties ...
Technology in an Investment Adviser’s and Broker/Dealer’s Compliance Program<br />
Two High Level Constituents in Compliance Management<br />Elements in Compliance Program Operations<br />Technology Compon...
Two Major Constituents in Compliance Programs<br />Constituent 1: “Advisory” Deciding What Firm Needs To Do(Many Inputs!)<...
Elements in Compliance Program Operations<br />New Client Qualification (including AML)<br />Personal Trade Monitoring<br ...
Technology Components in a Compliance Program<br />Key Activities in Compliance Program<br />Document Management incl. Pol...
Benefits of Automated Systems<br />After…<br />Compliance Program Before…<br />Organize <br />So You Can <br />Analyze<br ...
Technology in an Investment Adviser’s and Broker/Dealer’s Compliance Program<br />
Technology Best Practice Guidelines<br />
Dodd-Frank Technology Implications<br />Specific technology system safeguards not defined<br />Other portions of Act are m...
Dodd-Frank Guidelines for Others<br />Record Keeping<br />Each organization shall maintain records of all activities relat...
Technology Focus Areas<br />
Disaster Recovery vs. Business Continuity<br />
Five Steps to Business Continuity Planning<br />BCP Life Cycle<br />
Disaster Recovery Blueprint<br />Recovery Point Objective (RPO)<br />The point in time to which you must recover data as d...
Other Disaster Recovery Considerations<br />In-house vs. outsourced<br />Traditional vs. managed service<br />Redundancy o...
Data Retention & Archiving Blueprint<br />SEC advises advisers to retain all internal and external email and IM business c...
Considerations for Archiving <br />
Eze Castle Integration Overview<br />
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Dodd-Frank Update: Legal & Tech Requirements for Hedge Funds

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Learn about the Dodd-Frank Wall Street Reform and Consumer Protection Act and it's implications on hedge funds and private equity firms, including registration requirements and technology best practice guidelines.

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  • Introduce Eze Castle Integration... Founded in 1995 Offices across the world, including 8 offices in the U.S. and locations in London, Geneva and Singapore Over 550 hedge fund clients, managing $300B+ of assets Services and solutions to meet the needs of hedge funds and alternative investment firms, everything from PCs and critical infrastructure to backup and storage solutions, to business consulting and project management
  • There are two major activities for compliance Defining what you have to do as part of your compliance program (Advisory)Monitoring what you have to do (Controls)You define what you have to do with some or all of the inputs
  • Dodd-Frank Update: Legal & Tech Requirements for Hedge Funds

    1. 1. Dodd-Frank Update: Legal & Technology Requirements for Firms<br />
    2. 2. Agenda<br />Dodd-Frank & Investment Adviser Registration<br />Technology as Part of an Adviser’s Compliance Program<br />Technology Best Practice Guidelines<br />
    3. 3. Dodd-Frank and Investment Adviser Registration<br />
    4. 4. Investment Advisers - General<br />An investment adviser is any person who engages in the business of advising others or providing analyses or reports concerning securities for compensation. <br />Includes hedge fund and private equity fund managers<br />Affirmative duty of utmost good faith, and full and fair disclosure of all material facts<br />The Investment Advisers Act of 1940 requires “investment advisers” to register with the SEC unless a specific exemption is available.<br />End of private adviser exemption under Dodd-Frank<br />
    5. 5. Who Must Register<br />Advisers solely to Private Funds (e.g., hedge funds and private equity funds) must register with SEC if AUM are $150 million or more.<br />Advisers to Private Funds and other accounts must register with the SEC if AUM are $100 million or more.<br />Advisers to Private Funds and other accounts must register with state if AUM is between $25 million to $100 million. However, will instead be required to register with the SEC if:<br /><ul><li>Adviser is not required to register with the state securities regulator as an investment adviser, or
    6. 6. Adviser is required to register with the state securities regulator, but the Adviser is not subject to examination as an investment adviser by the state.</li></ul> Advisers to RICs and BDCs<br /> Adviser holds itself out to the public in the U.S. as an investment adviser<br />
    7. 7. New Exemptions<br />Less than $150 million<br />Venture capital funds<br />Registered CTA <br />Foreign private adviser <br />Intrastate adviser, no funds <br />Small business investment companies<br />New category of “exempt reporting adviser”<br />
    8. 8. State Issues<br />Individual state registration requirements<br />Notice filings <br />Investment Adviser representatives <br />
    9. 9. Registering with the SEC <br />Compliance Infrastructure<br />Chief Compliance Officer <br />Policies and Procedures <br />Prepare Form ADV <br />Part 1 <br />Part 2<br />Register <br />IARD Entitlement and Filing Fees <br />Filing Form ADV <br />Going Effective <br />
    10. 10. Selected Compliance Issues<br />SEC Examinations<br />Compliance Policies and Procedures<br />Emphasis on procedures and training<br />Committees <br /> (risk, valuation, brokerage, compliance)<br />Trading practices<br /> (trade allocation, trade errors, best execution, soft dollars)<br />Insider Trading <br />Pay-to-Play<br />Books and Records <br />Code of Ethics<br />
    11. 11. Code of Ethics<br />Required:<br />Annual holdings report<br />Quarterly transaction reports<br />Pre-approval for IPOs and limited offerings<br />Insider trading policies<br />Best Practices (not required)<br />Pre-approval of most securities transactions<br />Provision of duplicate brokerage statements<br />Restrictions on gifts and entertainment<br />Restrictions on outside activities and boards<br />Access Person v. Supervised Person<br />
    12. 12. Circular 230 Disclosure: Internal Revenue Service regulations provide that, for the purpose of avoiding certain penalties under the Internal Revenue Code, taxpayers may rely only on opinions of counsel that meet specific requirements set forth in the regulations, including a requirement that such opinions contain extensive factual and legal discussion and analysis. Any tax advice that may be contained herein does not constitute an opinion that meets the requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written to be used, for the purpose of avoiding any federal tax penalties that the Internal Revenue Service may attempt to impose.<br />Boston<br />Frankfurt<br />Hartford<br />Hong Kong<br />London<br />Los Angeles<br />New York<br />Orange County<br />San Francisco<br />Santa Monica<br />Silicon Valley<br />Tokyo<br />Washington<br />bingham.com<br />© 2010 Bingham McCutchen LLP One Federal Street, Boston, MA 02110-1726 ATTORNEY ADVERTISING<br />To communicate with us regarding protection of your personal information or to subscribe or unsubscribe to some or all of Bingham McCutchen LLP’s electronic and mail communications, notify our privacy administrator at privacyUS@bingham.com or privacyUK@bingham.com (privacy policy available at www.bingham.com/privacy.aspx). We can be reached by mail (ATT: Privacy Administrator) in the US at One Federal Street, Boston, MA 02110-1726 or at 41 Lothbury, London EC2R 7HF, UK, or at 866.749.3064 (US) or +08 (08) 234.4626 (international).<br />Bingham McCutchen (London) LLP, a Massachusetts limited liability partnership regulated by the Solicitors Regulation Authority (registered number: 00328388), is the legal entity which operates in the UK as Bingham. A list of the names of its partners and their qualifications is open for inspection at the address above. All partners of Bingham McCutchen (London) LLP are either solicitors or registered foreign lawyers.<br />Bingham McCutchen LLP, a Massachusetts limited liability partnership, is the legal entity which operates in Hong Kong as Bingham McCutchen LLP. A list of the names of its partners practicing in the Hong Kong office and their qualifications is open for inspection at the address above. Bingham McCutchen LLP is registered with the Hong Kong Law Society as a Foreign Law Firm and does not practice Hong Kong law. Bingham McCutchen LLP operates in Hong Kong in formal association with Roome Puhar, a Hong Kong partnership which does advise on Hong Kong law.<br />This communication is being circulated to Bingham McCutchen LLP’s clients and friends. It is not intended to provide legal advice addressed to a particular situation. Prior results do not guarantee a similar outcome.<br />
    13. 13. Technology in an Investment Adviser’s and Broker/Dealer’s Compliance Program<br />
    14. 14. Two High Level Constituents in Compliance Management<br />Elements in Compliance Program Operations<br />Technology Components in a Compliance Program<br />Benefits of Automated Systems<br />Agenda<br />
    15. 15. Two Major Constituents in Compliance Programs<br />Constituent 1: “Advisory” Deciding What Firm Needs To Do(Many Inputs!)<br />Regulator’s Rules<br />Legislation<br />Expected Practices<br />External Advisory (legal or compliance consultants)<br />Regulators’ Reporting Requirements<br />Regulators’ <br />“Show Me”<br />Expectations<br />Firm’s Culture<br />Firm’s Products<br />Risk Assessments<br />Defines<br />Firm’s Compliance Program (Policies and Procedures)<br />Constituent 2: “Control”: Doing What Firm Said it was Going to Do<br />Manual processes or technology tools to ensure policies and procedures are followed<br />
    16. 16. Elements in Compliance Program Operations<br />New Client Qualification (including AML)<br />Personal Trade Monitoring<br />Other Code of Ethics and Conflict of Interest Management<br />Calendar and Activity Management <br />Document Management<br />Case Management<br />Email/Social Media Retention and Surveillance <br />Trade and Fund Surveillance<br />Books and Records <br />Business Continuity Planning<br />
    17. 17. Technology Components in a Compliance Program<br />Key Activities in Compliance Program<br />Document Management incl. Policies & Procedures<br />New Client<br />Qualification<br />Personal Trading <br />Pre-Clearance, Rules, Employee Trades<br />Compliance Program Management<br />Case/Issue Tracking<br />Client Complaints, Trade Errors, etc.<br />Compliance<br />Calendar<br />Procedures, Filings, Reviews, Controls, Tests, Due Diligence, Attestations, Certifications <br />Document & Report Review <br />Marketing, Trade Reports, etc.<br />Custom Forms, Questionnaires <br />& Checklists<br />Conflicts of Interest <br />Disclosures & Review Gifts, Outside Activities, Political Contributions, etc.<br />Surveillance <br />Trading, Positions, Email, Social Media<br />Key Underlying Technology Components<br />CRM<br />Books & Records<br />Trading and Accounting<br />Business Continuity Planning<br />Data Storage & Retention<br />
    18. 18. Benefits of Automated Systems<br />After…<br />Compliance Program Before…<br />Organize <br />So You Can <br />Analyze<br />Provides<br />Benefits:<br />Reduces Costs<br />Reduces Risk<br />Saves Management Time<br />Attracts Assets<br />
    19. 19. Technology in an Investment Adviser’s and Broker/Dealer’s Compliance Program<br />
    20. 20. Technology Best Practice Guidelines<br />
    21. 21. Dodd-Frank Technology Implications<br />Specific technology system safeguards not defined<br />Other portions of Act are more specific<br />Imply best practices<br />Investor requirements dictating expectations<br />
    22. 22. Dodd-Frank Guidelines for Others<br />Record Keeping<br />Each organization shall maintain records of all activities related to the business of the facility, including a complete audit trail —<br />(i) in a form and manner that is acceptable to the Commission; and<br />(ii) for a period of not less than 5 years.<br />
    23. 23. Technology Focus Areas<br />
    24. 24. Disaster Recovery vs. Business Continuity<br />
    25. 25. Five Steps to Business Continuity Planning<br />BCP Life Cycle<br />
    26. 26. Disaster Recovery Blueprint<br />Recovery Point Objective (RPO)<br />The point in time to which you must recover data as defined by your organization<br />Recovery Time Objective (RTO)<br />The duration of time within which a business process must be restored after a disaster<br />
    27. 27. Other Disaster Recovery Considerations<br />In-house vs. outsourced<br />Traditional vs. managed service<br />Redundancy of DR infrastructure<br />Data Center security<br />Managed by Business Continuity Professionals<br />24x7x365 support and monitoring<br />Frequency of testing<br />
    28. 28. Data Retention & Archiving Blueprint<br />SEC advises advisers to retain all internal and external email and IM business communications<br />Tape backup is not adequate!<br />Sound practices for Archiving include:<br />Retaining email and IMs for prescribed amount of time by law<br />Storing data in WORM format<br />Searchable indexing of files <br />Keeping archived data on your own server and make sure it is easily available<br />
    29. 29. Considerations for Archiving <br />
    30. 30. Eze Castle Integration Overview<br />
    31. 31. 260 Franklin Street, 12th floor Boston, MA 02110 617-217-3000 www.eci.com<br />
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