Capitol Asset Strategies

Earlier today the Financial Crimes Enforcement Network, US Treasury released the final version of its #AML/#CFT Rule for #InvestmentAdvisers, including #RegisteredInvestmentAdvisers and #ExemptReportingAdvisers. Several of the early press articles on the Final Rule have been quick to mention that Treasury "loosened" the Final Rule as compared against the draft circulated earlier this year. It is true that #FinCEN made some modifications, including clarifying that for investment advisers that have their principal office and place of business outside the United States, the Final Rule will only apply to activities that (i) take place within the United States, including through the involvement of U.S. personnel of the investment adviser, such as the involvement of an agency, branch, or office within the United States or (ii) provide services to a U.S. person or a foreign located private fund with an investor that is a U.S. person. The Final Rule also excludes some RIAs from the new requirements if they "register with the SEC solely because they are (i) mid-sized advisers, (ii) multi-state advisers, or (iii) pension consultants, as well as (iv) RIAs that do not report any assets under management (#AUM) on Form ADV." Limited exclusions notwithstanding, however, for most #RIAs and #ERAs the Final Rule will impose significant new regulatory burdens, many of which will be #duplicative of what other "#FinancialInstitutions" already covered by the #BankSecrecyAct have to file with regulators on the same transactions. As Capitol Asset Strategies noted in its #ClientMemo on the Proposed Rule earlier this year, this Final Rule will expand the scope and transform the burdens imposed on most investment advisers, including those that have already adopted voluntary AML programs. This Final Rule goes far beyond requiring investment advisers to simply have an AML program. The Final Rule will require covered RIAs and ERAs to: (1) implement a risk-based and reasonably designed AML/CFT program; (2) file certain reports, such as #SuspiciousActivityReports (#SARs), with FinCEN; (3) keep certain records, such as those relating to the transmittal of funds (i.e., comply with the Recordkeeping and Travel Rules); and (4) fulfill certain other obligations applicable to financial institutions subject to the #BSA and FinCEN’s implementing regulations, such as special information sharing procedures. The compliance date for the new Final Rule is set at January 1, 2026. The U.S. Securities and Exchange Commission will do exams and enforcement of this Final Rule for Covered Investment Advisers. If you have any questions, please reach out to the Capitol Asset Strategies' team to discuss what the Final Rule means for your business. #privateequity #privatecredit #venturecapital #hedgefunds

The last 24 hours have been packed with consequential developments. While many understandably focus on the importance of yesterday's #Presidential debate, the #USSupremeCourt's decision today in Loper Bright Enterprises v. Raimondo, which tosses out so called "#Chevron deference" to regulatory interpretations of ambiguous statutes, coupled with yesterday's decision in SEC v. #Jarkesy will usher in some of the largest changes in the power, structure and limits of the #AdministrativeState in over a generation. Like it or not, #Regulatorydeference is in retreat. If you have questions on what these cases, and the larger trends they signify, will mean for your business please reach out to our team at Capitol Asset Strategies. #SEC #IRS #Commerce #FTC #DOJ #regulatorycaprice

Earlier this morning the U.S. Supreme Court issued its opinion in U.S. Securities and Exchange Commission v. Jarkesy. The Court held 6 to 3 that when the #SEC seeks #civilpenalties against a defendant for #securitiesfraud, the #SeventhAmendment entitles the defendant to a jury trial. That is, the SEC's reliance on its Administrative Law Judge system to adjudicate this type of case is #unconstitutional. The Opinion of the Court, authored by Chief Justice Roberts states in relevant part, "A defendant facing a #fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator. Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch. That is the very opposite of the separation of powers that the Constitution demands. Jarkesy and Patriot28 are entitled to a jury trial in an Article III court.” The Court rejected the SEC's claim that the "public rights" exception to Article III jurisdiction applies to this type of adjudication. Per the Court, the public rights "exception has been held to permit Congress to assign certain matters to agencies for adjudication even though such proceedings would not afford the right to a jury trial. The exception does not apply here because the present action does not fall within any of the distinctive areas involving governmental prerogatives where the Court has concluded that a matter may be resolved outside of an Article III court, without a jury [e.g., matters concerning: the collection of revenue; aspects of customs law; immigration law; relations with Indian tribes; the administration of public lands; and the granting of public benefits]. The Seventh Amendment therefore applies and a jury is required." The #Jarkesy decision prevents the #SEC and other regulatory agencies from using their own internal "adjudicatory systems" to short circuit the #Constitutional right of defendants to a trial by jury in court for most legal disputes. #Regulators will still be able to bring cases, but they will have to do so in federal court. Accordingly, the Jarkesy decision could have a major impact not only on how aggressive the #SEC will be in future enforcement actions and how willing #SECregistrants will be to settle serious enforcement disputes without going to court.  Next up from the U.S. Supreme Court later this week will be consequential decisions in Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce (i.e., the “#ChevronDeference reversal cases”). If you have any questions on the implications of the Jarkesy decision to your firm, please reach out to us at Capitol Asset Strategies. https://lnkd.in/g2r543uh

Big swing and a miss for Federal Trade Commission's effort to pierce the corporate veil in its case against Welsh, Carson, Anderson & Stowe. Dan Primack's Axios Pro Rata story below gets it right. The result in Texas should help many #PEinvestors breathe a bit easier about government attacks on the #corporateveil subjecting their funds and firms to #liability for actions of #portfoliocompanies. That said, the case against U.S. Anesthesia Partners still moves forward and the dismissal of Welsh Carson from the case on its own will not alter the heightened focus of the #antitrust regulators on #privateequity investments in #healthcare.

Earlier today the U.S. Securities and Exchange Commission and the U.S. Department of the Treasury jointly released a new Proposed Rule for #RegisteredInvestmentAdvisers and #ExemptReportingAdvisers that would require such advisers to implement reasonable procedures to verify the identities of their customers (i.e., establish #CustomerIdentificationPrograms (#CIP)). This proposal is the "second shoe" to drop on #investmentadvisers this year regarding expanded #AML/#CFT requirements that #regulators want #advisers to adopt. The rule proposed today will have a 60-day comment period that will begin when the rule is officially published in the #federalregister. As #Treasury and the #SEC note, this new proposal is intertwined with a separate proposed rulemaking that would require certain investment advisers to be included in the definition of “#financialinstitution” under the #BankSecrecyAct (#BSA). For more background on that related proposal, please see the Capitol Asset Strategies Client Memo on the topic available via this link: https://lnkd.in/es7k9tCe #AntiMoneyLaundering #RIAs #ERAs #PrivateEquity #VentureCapital https://lnkd.in/eDeDMQ_g

This new article from Brian Croce at Pensions & Investments underscores the tremendous amount of focus that the Federal Trade Commission, DOJ Antitrust Division, U.S. Department of Health and Human Services (HHS), and several #Senators and #Representatives are bringing to the #privateequity #investments in #healthcare debate. My quote in the article highlights concerns with the manner in which the regulatory inquiry and #RequestForInformation are being conducted. “Unfortunately, when you look into the RFI and the related public statements made by agency participants at the March 5 virtual workshop on the topic, it seems like the regulators have already decided the answers they want and that they are really just hunting for bad anecdotes that could be used to support what they want to do anyway, which is make it harder for private equity to invest in healthcare businesses.” There will certainly be much more to come from the regulators and other policymakers on this topic. If you have any questions, please feel free to reach out to us at Capitol Asset Strategies. https://lnkd.in/eGSTimT5