Regulatory Forum

While the pace of rulemaking by the SEC slowed dramatically in the 3rd quarter of 2024, following legal challenges that overturned major rulemaking initiatives, the pace of enforcement actions accelerated as the SEC raced toward the end of its 2024 fiscal year. There were many notable enforcement actions filed in the final month of the fiscal year as well as some key personnel developments.

In early October, the SEC issued a Frequently Asked Questions (FAQ) document related to the compliance date of the amendments to Form PF adopted under the “Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers” rule. The FAQ confirmed the filing deadline for the amended form for annual filers and quarterly filers. The FAQ also clarified that large filers whose fiscal quarter does not end on a calendar quarter end will be required to transition from a fiscal quarter reporting schedule to calendar quarter reporting.

The Standish Compliance team continues to track and analyze regulatory developments and their impact on our private fund and other clients. Let us know if you have questions regarding any recent regulatory developments or their application to your firm.

The SEC charged registered investment adviser, Macellum Advisors, LP, that advised a series of single-security pooled investment vehicles (the “Funds” or “Macellum Funds”) with failing to disclose payments Macellum affiliates received from third-party investment advisers and the resulting conflicts of interest. While Macellum stated in Fund formation documents and various disclosure documents that it “may” or “could” engage in outside activities and other conflicted transactions, the SEC faulted the firm for not specifically disclosing the extensive Consulting Agreements it entered into, or compensation received from the Outside Entities in connection with its activist campaigns. Due to the firm’s cooperation and prompt remedial action taken, the penalty in the case was limited to $75,000.

The SEC charged Marathon Asset Management, L.P. with failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI) related to its participation on ad hoc creditors’ committees. While Marathon had established Insider Trading and Information Barrier policies and procedures in place, as well as MNPI procedures, the SEC faulted the firm for not effectively monitoring or supervising employees to effectively address the risk of receiving or misusing MNPI during participation on ad hoc creditors’ committees. Marathon agreed to pay a $1.5 million civil penalty.

The SEC charged GQG Partners LLC, a registered investment adviser, for entering into non-disclosure agreements with candidates for employment that made it more difficult for them to report potential securities law violations to the SEC. The Firm further entered into a settlement agreement with a former employee that included provisions that SEC deemed to violate the whistleblower protection rule. GQG agreed to pay a $500,000 civil penalty.

In another off-channel communication enforcement sweep, the SEC charged twelve firms, including investment advisers and broker-dealers, with failures to maintain electronic communications. The sweep resulted in civil penalties of more than $88 million ranging from $35 million against two of the largest firms to $0 against one firm that conducted an internal investigation, uncovered its own violations, and self-reported to the SEC.

The SEC brought charges against Texas-based registered investment adviser, Atom Investors LP, for its failure to maintain and preserve off-channel communications in violation of the recordkeeping provisions of the federal securities laws. However, the SEC did not impose a penalty because Atom Investors self-reported the conduct, promptly remediated the violations, and provided substantial cooperation to Commission staff in an investigation of another entity.