Friday, 1 August 2014
Last updated 14 hours ago
Apr 21 2011 | 7:17am ET
Massachusetts is cracking down on the misuse of non-public information obtained through so-called “expert network firms,” the firms that provide access to employees and consultants with specialized industry information.
Secretary of the Commonwealth William Galvin said the proposed regulation will require state-registered investment advisers who pay expert network firms for this access to obtain from the expert a written certification that they are not subject to any confidentiality restrictions and will not provide confidential information to the investment adviser.
“The Securities Division of my office recently filed an action against a state-registered adviser who utilized one of these expert consulting firms to obtain confidential and non-public information,” Secretary Galvin said, referring to his recent complaint against hedge fund Risk Reward Capital Management and its principal James Silverman. The complaint charged that Silverman received nonpublic information about at least two pharmaceutical companies from Guidepoint Global consultants. Galvin said that Silverman used the insider information to revive the flagging fortunes of his $24 million RRC Bio Fund.
“These firms tout their compliance systems but policies are often not followed and the systems can be ineffective,” Galvin said in the statement released yesterday. “This first-in-the-nation regulation is intended to stop or, at the very least, make more difficult the wrongful use of this inside information obtained through paid consultation.”
Yesterday Galvin also filed regulations governing the exemption status for investment advisers including small hedge funds. The exemption, modeled on a rule offered by the North American Securities Administrators Association, is intended to mirror the recent changes to Federal investment adviser registration provisions set out under the federal Dodd-Frank Act which are designed to provide more information to investors about investment advisors who were previously unregulated.
Both regulations will take effect after a public comment period and a public hearing on June 23.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…