I discovered some additional information about the SEC’s position on the application of the Custody Rule to the REIT subsidiaries of private real estate funds. A few months ago, a real estate fund was undergoing an SEC exam and the examiners focused on custody. The examiners used the June 2014 Guidance on SPVs to take … Read more »
Related Party Mistakes with Private Funds
Related party transactions are rife with problems in all areas of the financial services industry. It’s hard to know if someone is looking out for your best interest, if they have interests on the other side of a transaction. Most private equity funds have some structure set up in the organizational documents to deal with … Read more »
Weekend Reading: Book de Tour
Do you like cycling? Do you like watercolors? Then Book de Tour is the perfect book for you. For the past few years, Greig Leach has been painting watercolors of key events from the Tour de France. This year he decided to compile all of the artwork with a narrative description into a single book. … Read more »
Backtesting Performance Failure
One area of performance advertising that the Securities and Exchange Commission has given great scrutiny, but not banned, is using backtested performance. Since, backtesting only shows theoretical past trades, it does not involve market risk. That means it’s inherently suspect. You can just keep fine-tuning the model to maximize results, with no ability to carry … Read more »
Weekend Reading: Boys in the Boat
Do you hate Hitler? Do you like sports? Then Boys in the Boat is a book to add to your “To Read” list. In the middle of the Great Depression, Joe Rantz is a farmboy from the Pacific Northwest who was literally abandoned as a child and rarely had two pennies to rub together. He … Read more »
Happy Holidays From Compliance Building
I hope you have a happy and joyous holiday season. Whether it be Christmas, Hanukkah, Kwanza, Festivus, Feast of Winter Veil, Saturnalia, or New Year’s Eve, I hope you get to spend some extra time with friends and family. I will be trying to spend some extra time with my friends and family so … Read more »
Train Fares, Integrity, and Financial Services
On Monday Britain’s financial regulator banned a senior financial services professional from the industry for life. His transgression was the failure to pay his train fare. BlackRock director Jonathan Paul Burrows was caught by inspectors at Cannon Street station last year. Mr Burrows has admitted that, on a number of occasions, he deliberately and knowingly … Read more »
Real Estate Crowdfunding
Real estate investing has a long history of crowdfunding. Prior to the 1986 changes to the tax code, there was a large syndication business for getting investors into real estate. Although the investment was usually more for the tax breaks involved instead of income and capital appreciation. With the surge of product crowdfunding through sites … Read more »
Compliance Bricks and Mortar for December 12
These are some of the compliance-related stories that recently caught my attention. Mark Cuban vs. The SEC in WealthManagement.com The only way to reform what ails the Securities and Exchange Commission is to “burn it down and start again,” says Mark Cuban, billionaire entrepreneur, host of the television show “Shark Tank,” and the owner of … Read more »
SEC Demanding Audited Financial Statements for Funds’ REIT Subsidiaries
The Custody Rule is a well intentioned beast of regulation designed to prevent investment advisers from stealing money from their clients. The Rule works well for retail investment advisers and most hedge funds. It starts falling apart for private equity funds and real estate funds. The Securities and Exchange Commission tried providing some additional guidance … Read more »