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    Jun. 05, 2025

Checklists to Help Fund Managers Comply With SEC Recordkeeping Requirements

In the wake of a heavy volume of SEC enforcement actions against investment advisers and broker-dealers for failures to comply with prohibitions against off-channel communications, recordkeeping compliance has become all the more urgent. Advisory firms report that they receive frequent inquiries about what specific records they may or may not have to maintain, in what form and for how long. Many fund managers want to know whether a prime broker, trade confirmation agent or other external service provider can domicile records that they are required to keep, without falling afoul of in-house recordkeeping requirements. Adding further complexity are the myriad formats in which records now exist. For some fund managers, compliance could be challenging even without the pervasive and growing use of off-channel devices and methods, such as texting and social media apps, to send and receive business-related communications. This article summarizes the various records that fund managers operating under the SEC’s purview are required to keep and in what format; discusses the challenges of complying with the recordkeeping requirements; presents legal commentary on the significance of recent regulatory actions concerning books and records; and offers downloadable checklists that CCOs can use when reviewing the records they maintain to ensure they are in compliance with the recordkeeping requirements. See our two-part roadmap to maintaining books and records: “Compliance With Applicable Regulations” (Nov. 2, 2017); and “Document Retention and SEC Expectations” (Nov. 9, 2017).

Dealing With Deficiencies: Strategies for Responding to the SEC and Drafting Deficiency Response Letters (Part Two of Two)

Successfully responding to a deficiency letter from the SEC’s Division of Examinations (Examinations) requires alacrity, collaboration, consideration, discretion and diplomacy, among other tools and strategies. It is crucial that private fund managers address issues raised in a way that satisfies examiners, dissuades the SEC’s Division of Enforcement from pursuing further action and avoids saddling the firm with unreasonable or unachievable compliance burdens. This second article in a two-part series offers tips on ways to respond to Examinations staff upon receiving a deficiency letter, considerations when drafting a deficiency response letter, strategies for implementing the enumerated remedies and guidance for how and whether to disclose either letter to investors. The first article covered the exam and deficiency process, steps fund managers can take before an SEC exam to mitigate damage and preliminary steps managers should take to prepare their response to a deficiency letter after an exam has ended. See “Three Steps in Responding to an SEC Examination Deficiency Letter and Other Practical Guidance for Fund Managers From SEC Veteran and Sutherland Partner John Walsh” (Feb. 13, 2014).

FINRA Requests Comment on Revised Rules for Outside Business Activities and Securities Transactions

FINRA Rules 3270 and 3280 require registered representatives and associates to notify their firms of their proposed private securities transactions and/or outside business activities and obtain consent for securities transactions involving selling compensation. FINRA proposes to replace both rules with new Rule 3290 (Rule), which would limit the applicability of the existing rules to outside activities and securities transactions involving “investment-related activity.” The Rule would “enhance efficiency without compromising protections for investors and members relating to outside activities,” according to Regulatory Notice 25‑05 (Proposal), which seeks industry comment. This article discusses the Proposal and how it would change the current regime. See “A Look at FINRA’s 2025 Oversight Report” (Mar. 13, 2025); and “FINRA Sanctions Brokerage Representative for Unreported and Unauthorized Outside Activities and Trading” (Dec. 7, 2023).

SEC Crypto Roundtable: Digital Asset Custody Challenges (Part One of Two)

In January 2025, then-Acting SEC Chair Mark T. Uyeda established a Crypto Task Force, with Commissioner Hester M. Peirce as its leader. The Task Force has been holding a series of roundtable discussions on the regulatory treatment of digital assets. On April 25, 2025, it held two roundtable discussions, one focused on custody by investment advisers and investment companies and another focused on broker-dealer custody. The investment adviser and investment company panel focused on the challenges of complying with the Custody Rule when investing in digital assets, potential modifications to the existing custody regime to accommodate the unique characteristics of digital assets and ways to broaden the universe of qualified custodians. This two-part series synthesizes the key takeaways from the investment adviser and investment company panel, with additional commentary from Justin L. Browder, partner at Simpson Thacher & Bartlett LLP and participant in the roundtable. This first article summarizes the Commissioners’ remarks and reviews the practical custody challenges discussed. The second article will cover potential digital asset custody models, as well as state trust companies and other entities as qualified custodians. See “Navigating Custody and Other Regulatory Issues Associated With Digital Assets” (Aug. 4, 2022).

U.K. Report Finds Little Progress on Women’s Representation, Sexual Harassment and Pay in Finance

In 2018, a committee of the U.K. House of Commons issued a report highlighting the underrepresentation of women in senior positions at financial services firms and significant pay gaps between men and women. In July 2023, the Treasury Committee, a select committee of the House of Commons (Committee), launched a new inquiry, “Sexism in the City,” to assess how much had changed since the 2018 report. “Disappointingly, the answer appears to be ‘not much,’” according to the Committee’s March 2024 report, which is based on written evidence given in response to the Committee’s call for evidence, hearing testimony and a private engagement event with 40 women working in financial services. Despite incremental improvement, women remain underrepresented in the industry, face significant gaps in pay and suffer ongoing sexual harassment. This article discusses the Committee’s key findings and its recommendations to Parliament, the Financial Conduct Authority (FCA) and other relevant bodies, as well as the FCA’s response to the Committee’s recommendations. See “Study Finds Room for Improvement in Hedge Fund DEI Efforts” (Nov. 7, 2024).

Former CFTC GC Joins Morgan Lewis in Washington, D.C.

Robert A. Schwartz, who spent more than a decade with the CFTC, has joined Morgan Lewis as a partner in the investment management practice in Washington, D.C. Drawing on his time at the CFTC, he counsels clients on rules, regulations and enforcement actions undertaken by the agency, as well as litigation involving the CFTC and more broadly affecting those in the derivatives markets. For commentary from other Morgan Lewis partners, see “How to Approach Marketing Material Reviews” (Feb. 27, 2025); and “Understanding the Implications for Hedge Fund Managers of FinCEN’s Final AML Rules (Part Two of Two)” (Nov. 21, 2024).

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Women to Watch: Contributions, Achievements and Observations of Outstanding Female Professionals

To mark International Women’s Day, women editors and reporters at ION Analytics interviewed outstanding women in the industries and jurisdictions we cover. In this part, Law Report Group editors Jill Abitbol, Robin L. Barton and Megan Zwiebel profile notable women in data privacy, cybersecurity, private funds and anti-corruption law, including Anne-Gabrielle Haie, Jessica Lee, Micaela McMurrough, Laura Perkins, Amanda Raad, Madelyn Calabrese, Ranah Esmaili and Genna Garver. Enjoy reading their inspiring remarks here.