CORE-CCO Services, LLC

Core is excited to welcome Maryellen Maurer as a new Managing Director in Boston. Maryellen joins us from the SEC’s Private Fund Unit and brings extensive knowledge and experience from the SEC and as an in-house private fund expert. We look forward to introducing her to existing and future clients.

Q1 2024 Highlights The first quarter of 2024 was marked by a measured shift in the SEC’s aggressive rulemaking agenda. Following legal challenges filed in 2023 opposing the expansive Private Fund Rulemaking, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit heard oral arguments in the private fund rule challenge in early February 2024. Subsequently, in June 2024, the court issued its opinion that the SEC exceeded its statutory authority in adopting the Private Fund Rules and the court vacated the entire final rulemaking. This decision followed another setback for the SEC in December 2023 when the Fifth Circuit vacated the SEC’s recently adopted rules regarding stock repurchases after agreeing that the SEC acted arbitrarily and capriciously by failing to consider the rule’s economic justifications, as noted in our Q4 Regulatory Update. Also as noted in the Q4 update, in December, three hedge fund associations again sued the SEC in the 5th Circuit Court to vacate new rules that would increase the transparency of short selling and securities lending, as described below. The groups argued that the SEC did not consider the interconnected nature of the two rules and adopted contradictory approaches that they assert will harm investors. This trend in legal challenges set the stage for the SEC itself to voluntarily stay its final public company climate disclosure rules which it passed on March 6, 2024. The SEC has experienced significant turnover in staff in its rulemaking divisions as a result of the controversial breakneck speed of rulemaking in prior months, with limited ability to replace such staff given the agency’s hiring freeze. As the SEC’s will and confidence in new rulemaking endeavors has taken a hit, so has the capacity of the team charged with rulemaking. While the Examination Division has been similarly impacted by slowed hiring, they nevertheless continued an active examination agenda throughout the first quarter of the year, with numerous ongoing SEC examinations of Core clients. New registrant examinations have continued quite predictably for new firms within the first 12-18 months of registrants and more quickly in some cases. In Core’s experience, the timeline for document production in examinations has been compressed with initial production sometimes requested in one week for shorter request lists or two weeks for longer lists. Examiners have returned to regular onsite examinations in many cases and exams seem to be wrapped up within 90 days in many cases. As always, specific details of examinations vary significantly depending on the office conducting the examination, whether the Private Fund Unit is involved, and other unique facts and circumstances. https://lnkd.in/gPAQnfm2

In breaking news, after several months of deliberation, the U.S. Court of Appeals for the Fifth Circuit issued its opinion this morning that the Securities and Exchange Commission exceeded its statutory authority in adopting the Private Fund Rules and deeming all portions of the rules unauthorized. The court vacated the entire final rule, including the following:   - Quarterly Statements Rule - Private Fund Audit Rule - Adviser-Led Secondary Rule - Restricted Activities Rule - Preferential Treatment Rule   Related rules such as the recordkeeping amendments are also deemed vacated. The SEC could file an appeal, propose other rules, or issue guidance under current rules to accomplish some of the stated intent of the rulemaking. Core will provide a more fulsome client alert and will continue to follow any related developments and provide guidance to clients. However, this is a big win for the private fund industry and Core clients. #Privatefunds #Newrule #Compliance #Regulation #SEC

On September 6, 2023, the Securities and Exchange Commission Division of Examinations (“Exam Division”) issued a Risk Alert titled Assessing Risks, Scoping Examinations, and Requesting Documents. This Risk Alert provides information to inform investment advisers of the Exam Division’s examination selection process and typical initial request for documents and information, assist advisers in preparing themselves for an examination and enhance their compliance efforts. Regardless of your familiarity of the Exam Division’s examination process, we believe it’s a best practice to stay abreast of the Division’s risk-based approach for selecting advisers as it continues to use various technology resources to collect and analyze large sets of industry and firm level data, including enhanced disclosure documents and various filings.