2022 ICI INVESTMENT MANAGEMENT CONFERENCE - SUMMARY
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SUMMARY
2022 ICI INVESTMENT
MANAGEMENT CONFERENCE
2022 INVESTMENT MANAGEMENT CONFERENCE
Sponsored by the Investment Company Institute
March 27-30, 2022
TABLE OF CONTENTS
1 ICI PRESIDENT’S ADDRESS
2 KEYNOTE REMARKS: WILLIAM BIRDTHISTLE
3 DISCUSSION WITH SENIOR SEC DIVISION OF INVESTMENT MANAGEMENT
PERSONNEL
5 WHAT’S HAPPENING IN DIFFERENT STROKES: TRENDS IN SPECIALIZED PRODUCTS
8 THE FUND BOARD PERSPECTIVE ON REGULATORY AND INDUSTRY DEVELOPMENTS
10 KEYNOTE REMARKS: NATASHA CAZENAVE
12 LEGISLATIVE OUTLOOK IN A PIVOTAL ELECTION YEAR
13 THINKING OUTSIDE THE BOX: INNOVATIONS IN FINANCIAL OFFERINGS FOR
RETAIL INVESTORS
15 DIVERSITY AND INCLUSION KEYNOTE REMARKS: JULIA TAYLOR KENNEDY
16 WARP SPEED RULEMARKING: ESG, PROXY MATTERS, DISCLOSURE REFORM
19 HOW TO SET A TABLE: AN EXERCISE IN RISK MITIGATION
22 FUND INDUSTRY CIVIL LITIGATION: YEAR IN REVIEW
26 COMPLIANCE CHALLENGES IN THE CURRENT ENVIRONMENT: A CONVERSATION
WITH FUND CCOS
28 GOOD COP, BAD COP: EXAMINATIONS AND ENFORCEMENT UNDER THE GENSLER
COMMISSIONICI PRESIDENT’S ADDRESS efforts, including money market fund reform,
Rule 12b-1 and other examples where the ICI
Speaker: Eric J. Pan, President and CEO, had worked with the SEC to ensure the 1940
Investment Company Institute Act was up-to-date. He said the ICI’s current
Mr. Pan began his remarks by effort would focus on simplifying the
acknowledging the ongoing Russia-Ukraine regulatory structure, seeking to strike a
conflict – a topic that many presenters balance where regulations are neither too
touched on throughout the conference. He numerous nor too prescriptive. He explained
told the story of his recent call with Timur that the goals of the initiative would include,
Khromaev, Chairman of Ukraine’s National among others (i) expanding investor access,
Securities and Stock Market Commission, who including retail investor access to alternative
had fled to Poland with his family. Mr. Pan investments, (ii) leveraging technology, (iii)
said that his conversation with Mr. Khromaev enhancing disclosure and board oversight and
highlighted for him the importance of building (iv) empowering investors to access funds at
investors’ trust and confidence in the financial prices they can afford.
system and helping investors to plan for their
The first step in the ICI’s campaign, Mr.
futures. He acknowledged that many of the
Pan said, was to conduct a comprehensive
ICI’s members were doing this by broadening
study to take stock of the current state of the
the scope of their business, developing
industry and the expectations of today’s
innovative new products and helping
investors. He assured the audience that the
investors manage their savings. With the
ICI’s process will be thorough and transparent.
development of new products and initiatives,
He said that the ICI intends to present policy
he said, comes the need for regulations to
proposals to the SEC outlining the ICI’s
adapt and keep pace. Mr. Pan announced that,
recommendations for enhancement and to
for this reason, the ICI was launching a
work with both sides of the aisle on reforms
comprehensive effort to work with the SEC to
requiring congressional involvement. Mr. Pan
adapt the 1940 Act framework to provide the
looked forward to working with ICI members
flexibility that modern times require.
on the initiative and, thereby, meeting the
Mr. Pan acknowledged that the ICI’s new needs of current and future investors.
campaign was not the first such initiative to
modernize the 1940 Act. He discussed past
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 1KEYNOTE REMARKS: WILLIAM BIRDTHISTLE Birdthistle posited that investor vigilance may
go beyond the scope of the reasonable
Speaker: William A. Birdthistle, Director, investor. He suggested that providing
Division of Investment Management, investors with a uniform statement of a fund’s
Securities and Exchange Commission individual costs may help investors determine
Director Birdthistle delivered the when to exit.
keynote remarks on the first day of the
Director Birdthistle also focused on
conference, the full text of which is available
shareholder engagement in the proxy process.
here. He began by rejecting the “ominous”
He shared his concern that investors may not
title of the December 2021 Barron’s article
have sufficient information about how shares
published shortly after the SEC’s
of the funds in which they invest are voted. He
announcement of his appointment: “Fund
expressed his support for the SEC staff’s
Critic Birdthistle to Take Reins at SEC’s
consideration of comments on proposals to
Division of Investment Management.” The
require streamlined shareholder reports, to
article described Mr. Birdthistle as “a
amend prospectus fee and expense
prominent critic of the fund sector, arguing
disclosure, and to enhance the information
that the industry is riddled with bad behavior
funds report about their proxy votes.
among asset managers.” Director Birdthistle
disagreed with this characterization, stating Director Birdthistle discussed the
that he is a “fund critic” only in that he is “an fiduciary duty that fund advisers owe the
aficionado of the form and [has] a deep funds they manage. He observed that no
appreciation for seeing it done to the best of plaintiff has yet won a case for breach of an
its ability.” adviser’s fiduciary duty brought under Section
36(b) of the 1940 Act and questioned
Returns and fees were a particular focus
“whether the duty enacted in the statute is
of Director Birdthistle’s remarks. He noted
truly being honored.”
that while some portions of the market enjoy
a great deal of movement in response to In closing, Director Birdthistle expressed
economic competition, others do not, and he “optimism and faith in the power of
observed that underperforming funds in investment companies” and congratulated
some cases do not experience the outflows the Division’s Investment Company
one might expect. Consequently, Director Rulemaking Office on the number of
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 2rulemaking initiatives accomplished over the duration of comment periods. She said recent
past six months. practice has been to set a comment deadline
of the later of 30 days after publication in the
DISCUSSION WITH SENIOR SEC DIVISION OF Federal Register or 60 days from the relevant
INVESTMENT MANAGEMENT PERSONNEL
SEC meeting. She said that, as a practical
Speakers: Sarah G. ten Siethoff, Associate matter, comment periods often last longer
Director, Rulemaking Office, Division of than 60 days from the meeting date due to
Investment Management, Securities and the time-frame for publishing the proposals in
Exchange Commission the Federal Register. She also said that
commenters are welcome to provide the SEC
Susan Olson, General Counsel, Investment
with supplemental comment letters, and the
Company Institute
SEC staff generally looks at comments
This session was a recorded fireside chat received after the specified deadline.
between Susan Olson and Sarah ten Siethoff,
taped a week before the conference, covering Rule 17a-7. Ms. Olson noted the desire
a number of topics. for Rule 17a-7 amendments, pointing out that
the ICI had submitted a significant amount of
Number of Rule Proposals and Comment member-firm cross trade data along with
Period Duration/Overlap. Ms. Olson noted recommendations for how the rule could be
the high volume of recent SEC rule proposals improved, including suggestions to facilitate
affecting funds and investment advisers, fixed income cross trades. She noted that this
some of which originate outside of the remains an important matter for the industry,
Division of Investment Management. She said notwithstanding that it has dropped off of the
that a combination of the complexity and SEC’s regulatory agenda. She asked what the
length of some of the proposals, and the ICI could do to continue to make progress in
number of overlapping comment periods, this area. Ms. ten Siethoff said that the SEC
creates concerns that the industry may not staff remains concerned about the conflicted
have sufficient time to provide the most nature of cross trades and permitting them in
helpful input to the SEC. Ms. ten Siethoff asset classes where there are fewer objective
acknowledged the volume of rule proposals, data points available to address those
but noted that she did not expect changes to conflicts. She said that the SEC staff had been
the current approach for establishing the evaluating how the SEC could become
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 3comfortable that new guardrails were swing pricing on any day that a fund
sufficient to expand cross trades beyond the experiences net redemptions, Ms. ten
realm of what would be allowed by relying on Siethoff said that the idea was to make swing
“readily available market quotations.” She pricing an ordinary feature of the fund so that
invited the industry to provide relevant it is not something that kicks in only when a
empirical data regarding the impact of the fund faces a stressed market. She said the
withdrawal of Rule 17a-7 no-action letters in goal was to avoid pre-emptive moves by
connection with the compliance date of Rule investors who are trying to beat a threshold
2a-5. She also left open the possibility that being triggered.
future rule-making initiatives could contain
Other Topics. Mses. Olson and ten
some “enhancements” related to cross trades.
Siethoff also touched on the following topics.
Money Market Fund Proposal – Swing
• Liquidity Risk Management. Ms. ten
Pricing for Institutional Prime Funds. Asked
Siethoff said that the SEC staff
why the SEC included uncapped swing pricing
planned to study the impact of the
and a market impact threshold in the money
liquidity risk management rule, and
market fund rule amendments for institutional
that the SEC staff is doing significant
prime money market funds, Ms. ten Siethoff
data analysis and outreach related to
said that it has become clearer to the SEC that
the March 2020 market dislocations to
it is costly for those funds to transact during
evaluate whether the staff would want
times of stress and those costs should be
to have different tools in similar
borne by investors who are requesting
scenarios in the future and what
liquidity. She acknowledged that the liquidity
lessons were learned.
fee feature of the 2014 rule amendments did
not ameliorate this concern during the March
• Russian Sanctions. Ms. ten Siethoff
2020 market dislocation for two principal
said that a team jumped in when
reasons: (i) money market funds did not (and
sanctions were announced against
did not want to) invoke liquidity fees and (ii)
Russia, and there was significant
the triggering mechanism of the liquidity fee
monitoring and outreach by the
structure created the wrong incentives for
analytics office. She said that the SEC
investors. When Ms. Olson pointed out that
staff had significant information
it seems like a “blunt instrument” to require
available to it, including, as a result of
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 4outreach, identified pressure points in of the details can be tricky to
the financial markets and the asset implement (e.g., at what point is a
management industry beyond just consent to use an old email address
fund holdings. When asked about the too old?), and it is important to pay
possibility of suspending shareholder attention to what is going on in the
redemptions under Section 22(e), Ms. technology space when it comes to
ten Siethoff noted that the SEC does digital communications.
not use that authority lightly. She
• Climate Change Risks Rule Proposal.
noted that one factor that could have
Ms. ten Siethoff encouraged fund
motivated a suspension order would
groups to provide feedback on the
have been the risk of differentiated
rule proposal from the Division of
harm across a mixed shareholder base
Corporation Finance regarding public
where there was the possibility of
company disclosure. She noted that
institutional investors potentially
any fund-focused ESG rule from the
benefiting at the expense of retail
Division of Investment Management
investors in a fund.
would have a different, broader focus
• Pending Proposals. Ms. Olson than just climate.
stressed that e-delivery is still an
important priority for the ICI. Ms. ten
WHAT’S HAPPENING IN DIFFERENT
STROKES: TRENDS IN SPECIALIZED
Siethoff noted disclosure reform is still PRODUCTS
on the agenda, and the industry
should “stay tuned” as the proposal Moderator: Kenneth Fang, Associate General
received a lot of positive feedback. Counsel, Securities Regulation, Investment
Ms. ten Siethoff also agreed that the Company Institute
world has moved further toward Speakers: Christian Clayton, Executive Vice
digital communications. She noted the President, PIMCO Funds
SEC’s desire to assure that digital
Hugh Farrish, Head of Americas ETF Product,
communications between funds and
JP Morgan
shareholders are done thoughtfully,
noting that it may be easy to default Jennifer R. Gonzalez, Partner, K&L Gates LLP
to electronic delivery, but that some
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 5Eric S. Purple, Partner, Stradley Ronon are two basic segments, (i) market cap and (ii)
Stevens & Young, LLP strategic beta, which he noted were huge
categories (representing about 96% of the
This panel explored developments in
ETF market) but with slowing growth, and
ETFs, CEFs (including exchange-listed closed-
three specialized segments, (iii) active, (iv)
end funds, interval funds and tender offer
ESG and (v) thematic, currently small in size
funds) and other investment vehicles. Mr.
but with high organic growth rates. Mr.
Farrish noted that ETFs represented 26% of
Farrish noted that the market for active
the combined assets under management of
products improves where it was possible to
long-term open-end mutual funds (excluding
hedge the strategy. Mr. Purple said that the
money market funds and funds of funds) in
adoption of Rule 6c-11 was a game changer,
2021, up from 18% in 2016. He said that
largely leveling the playing field, diminishing
inflows of over $1.1 trillion to this market in
many of the previous distinctions among ETFs
2021 were overwhelmingly driven by inflows
and making it much easier for new entrants to
of almost $800 billion to passive ETFs, but
reach the market quickly. Mr. Farrish
that inflows to active ETFs had the highest
commented on the conversion of mutual
growth rate, albeit from a small asset base.
funds to ETFs, noting the importance of (i) the
He attributed this in part to a decrease in
client experience and limiting disruption (e.g.,
barriers to entry in the ETF market and the
it can be disruptive to a defined contribution
fact that ETFs were easier to distribute
plan if the plan can hold a mutual fund but not
internationally. Mr. Clayton noted that over
an ETF), (ii) confirming that client platforms
the last four years, assets under management
can handle ETFs and conversions and (iii) the
in listed CEFs had increased from
ETF offering some client benefit (e.g., a
approximately $250 billion to approximately
reduction in fees). Mr. Purple said that most
$300 billion, and assets under management in
conversions are “shell reorganizations,”
interval/tender offer CEFs had increased from
requiring the fund board to determine that
approximately $50 billion to approximately
the conversion is in the best interest of mutual
$100 billion. He said growth in the market
fund shareholders.
was driven in particular by investors seeking
income.
Mr. Farrish commented on thematic ETFs,
stating that breakthrough technology and
ETFs. Mr. Farrish classified the ETF
innovation strategies were currently enjoying
market into five segments. He said that there
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 6the greatest market success. Mr. Purple said which means that there are fewer years during
that thematic ETFs often have to contend which the fund can be profitable to the
with the names rule, and that distinguishing sponsor. Mr. Clayton said that that there had
concepts from industries could be challenging. been significant growth in thematic equity
CEFs. He said that it could be a challenge for
Listed CEFs. Mr. Clayton reviewed the
sponsors, who generally like funds with
listed CEF market, noting the IPO boom in
flexible mandates, to differentiate their
2012 and 2013 that was followed by a lull until
offerings in the market. Ms. Gonzalez noted
IPOs picked up again starting in 2019. He
that, especially in the area of ESG funds, the
attributed the high levels of assets raised
SEC staff often requires funds to restrict
since 2019 to changes in the CEF structure.
flexibility so as to comply with the names rule.
He said that (i) now sponsors, instead of
investors, pay financial adviser commissions, Interval and Tender Offer CEFs. Mr.
(ii) now sponsors pay the Clayton distinguished interval and tender
underwriting/structuring fees, instead of offer funds from listed funds, noting in
sharing this burden with investors, (iii) CEFs particular that (i) interval and tender offer
now generally have a limited term (e.g., funds do not have traditional underwritten
twelve years, subject to potential extension) IPOs, (ii) there is no secondary market for
instead of a perpetual term and (iv) CEFs now, these funds’ shares and (iii) the lack of a
at the end of their term, can offer a voluntary secondary market means that there is no
tender offer to investors with an option to discount to NAV for activists to exploit. He
convert to a perpetual term product. Ms. said that tender offer funds have somewhat
Gonzalez said that, previously, investors had more flexibility in terms of liquidity than
been disinclined to invest in IPOs because of interval funds. However, he said, interval
the fees that they would bear, which tended funds are generally easier for investors to
to result in smaller funds being raised. Now, access, because they do not require the
she said, the sponsor generally bears more of subscription agreements typical of tender
the risks associated with earning revenue offer funds. He said that, since the great
from CEFs, including (i) incurring fees relating financial crisis, investors have been more
to the IPO, (ii) identifying the correct understanding of longer-term, less-liquid
investment strategy at the right time, (iii) investment products. However, he added,
facing activists and (iv) having a limited term,
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 7interval funds have not yet been tested by Christopher E. Palmer, Partner, Goodwin
high demand for outflow. Procter LLP
Other Investment Products and Rana J. Wright, General Counsel, Harris
Predictions. The panel concluded with a brief Associates, Interested Trustee, Oakmark
discussion of CITs. Ms. Gonzalez noted that Funds
they are quick to market. Mr. Purple noted
Current Focus Areas for Fund Boards.
the possibility that the SEC staff may
Panelists identified several topics that are
conclude that, if CITs become widely available,
current areas of focus for investment
they are being used beyond the intent of their
company boards, including (i) compliance with
exception from the definition of an
new SEC rules, (ii) the “great resignation” and
“investment company.” The panelists said
the adequacy of the workforce, (iii) adapting
that they believed ETFs would continue to
to employees’ return to the office and (iv) the
grow, with active ETFs eventually
need for fund boards to understand the
representing 10% to 20% of the market. They
adviser’s business strategy (recognizing that
also believed that there would be continued
the fund board does not set the adviser’s
growth in CEFs (and REITS and BDCs).
strategy). Ms. Barr said that fund boards
However, Mr. Purple cautioned that FINRA’s
should adopt a posture of “noses in, fingers
recent proposed rule on the sale of complex
out” with respect to the adviser’s business
products to retail investors had the potential
strategy. Mr. Palmer suggested that, if a
to disrupt sales practices with respect to
board makes clear that it understands that its
interval and tender offer funds as well as
role is not to set strategy for the adviser, the
other products.
adviser may be more willing to share its
THE FUND BOARD PERSPECTIVE ON strategy more fully with the board.
REGULATORY AND INDUSTRY
DEVELOPMENTS The panel discussed preparations for
compliance with the SEC’s new valuation rule
Moderator: Thomas T. Kim, Managing
(Rule 2a-5 under the 1940 Act). Ms. Barr
Director, Independent Directors Council
expressed the expectation that many fund
Speakers: Kathleen T. Barr, Independent groups are not likely to need to make
Director, William Blair Funds and significant changes in their valuation practices
Professionally Managed Portfolios in order to comply with the rule, but that
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 8related documentation (valuation policies, of cybersecurity incidents. Mr. Palmer said
board reporting formats, etc.) are likely to that investment companies and their advisers
change somewhat. Mr. Kim noted that the have a shared interest in avoiding serious
rule requires both annual and quarterly cybersecurity problems, but that investment
reporting to the board, as well as “prompt” company boards nevertheless should inquire
reporting following the occurrence of certain into the adequacy of the resources the adviser
specific valuation-related events. Mr. Palmer devotes to cybersecurity risk prevention,
observed that the new rule provides helpful detection and management.
clarification of where the responsibility for
Diversity and Inclusion. The panel
oversight of pricing services lies, noting that
discussed the importance of diversity and
the “valuation designee” appointed by the
inclusion on investment company boards and
board has that responsibility. He said fund
in investment advisers’ workforces. Ms. Barr
boards should, however, seek to understand
said that a key to achieving a diverse board is
the oversight approach that the valuation
being intentional about recruiting diverse
designee is taking with respect to the pricing
candidates and developing a pipeline of
services it uses.
diverse candidates in anticipation of future
The panel discussed the SEC’s recent openings on the board. One panelist also
proposal of new rules regarding cybersecurity expressed the view that, in recruiting new
risk oversight for registered investment board members, boards should look primarily
companies and investment advisers (Rule 38a- for candidates who have inquiring minds
2 under the 1940 Act and Rule 206-4(9) under rather than for candidates chosen for a
the Advisers Act). Ms. Barr noted that Rule specific, narrow professional background
206-4(9), as proposed, would require (e.g., cybersecurity). Ms. Wright observed
investment advisers to adopt and implement that a diverse fund board can model diversity
cybersecurity risk management programs for the adviser and its workforce. The panel
that encompass private funds managed by discussed the practice that many fund boards
the adviser and third-party service providers, have established of requesting information
as well as the adviser itself. Ms. Wright stated regarding the adviser’s and other fund service
that many large advisers already rely on providers’ workforce diversity and inclusion
prepared “playbooks” that lay out steps that practices and policies. Mr. Kim noted that the
would be taken in the event of various types Independent Directors Council is planning
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 9future initiatives to help foster a more diverse members. He also said that it is important for
community of fund directors. board members to understand where the
economic incentives for the adviser and its
Areas of Innovation. Mr. Kim invited each
personnel lie, so that the board can identify
panelist to identify areas of innovation in the
and monitor areas of potential conflicts of
work of investment company boards. Ms.
interest.
Wright cited an interest in better
understanding the needs of fund investors, ESG Investing. The panel briefly
including those investors who buy and hold discussed the incorporation of ESG factors in
fund shares through intermediaries rather managing investment company portfolios. Mr.
than directly. She noted that individual Palmer highlighted the need for fund boards
investors increasingly have access to an to understand the adviser’s approach to the
adviser’s services through a variety of application of ESG factors in its investment
“wrappers,” including not only mutual funds, process. Ms. Wright observed the current
but also collective investment trusts for absence of clear, widely accepted metrics and
employee benefit plans and separately standards for ESG investing. Ms. Barr
managed accounts. Ms. Barr said that fund emphasized the importance of board
boards should seek to understand the extent members participating in continuing
to which investors are migrating from mutual education programs relating to relevant
funds into other products managed by the topics including ESG investing.
adviser, and the mechanics through which
such transfers occur (e.g., redemptions in
KEYNOTE REMARKS: NATASHA CAZENAVE
kind), as well as the tax consequences of these
Speaker: Natasha Cazenave, Executive
transfers for the mutual fund and its
Director, European Securities and Markets
shareholders.
Authority (ESMA)
Mr. Palmer emphasized the need for fund Ms. Cazenave opened her remarks by
boards to receive appropriate education to noting that ESMA is a strong supporter of
enable the board to exercise appropriate international cooperation and the goal of
oversight of fund operations and the reaching international consistency, wherever
relationship between the fund and the adviser. possible. She discussed two areas of focus for
He said that management and outside ESMA in 2022: (i) developing a framework for
counsel can be helpful in educating board
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 10the asset management industry to positively taxonomy regulation, noting that the
contribute to climate-related matters and (ii) taxonomy is still developing and ESMA is
strengthening the resilience of funds to trying to provide practical guidance where
market, credit and resiliency shocks. possible. She noted that the supervisory
authorities were challenged in their
Climate-Related Matters. Ms. Cazenave
supervisory duties due to the fact that they
stated that the disclosure requirements in the
lack sufficient data about products advertised
EU’s Sustainable Finance Disclosure
as “sustainable” in the market. She observed
Regulation (SFDR), which have applied since
that sustainability considerations are
March 2021, are a key building block of
transforming the fund industry and stated
ESMA’s framework. She said the disclosure
that ESMA always welcomes feedback from
requirements are intended to enhance
market participants.
investor confidence and support ESG market
growth in a sound environment. She noted Financial Resiliency. Ms. Cazenave
that the industry continues to prepare for stated that ensuring orderly and stable
compliance with the remaining SFDR markets is at the core of ESMA’s mission. She
requirements, which will take effect in January discussed the role of money market funds,
2023. She reported that the relevant EU noting that the market volatility experienced
supervisory authorities are in the process of in March 2020 demonstrated money market
preparing for review of the SFDR indicators, a funds’ vulnerabilities. She reviewed ESMA’s
key part of the SFDR disclosures, for three key proposals regarding money market
“principal adverse impacts.” She explained funds: (i) removing the possibility of
that the supervisory authorities are amortized cost for low volatility net asset
responsible for ensuring that the indicators value money market funds, (ii) decoupling
remain relevant in light of scientific and regulatory thresholds from suspensions,
environmental developments. She noted that, gates and redemption fees for certain money
although SFDR was intended to be a market funds, and (iii) increasing daily liquid
“transparency regulation,” the industry and asset and weekly liquid asset ratios for certain
investors are increasingly treating it as a money market funds. She then discussed
means of classifying products and, in the case ESMA’s review of the AIFMD, noting that
of the industry, marketing products as ESG ESMA hopes to increase and harmonize the
products. She then commented on the liquidity tools available to fund managers
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 11across European jurisdictions. Ms. Cazenave explained that while many of the Act’s
concluded by stating that ESMA will continue components are popular, collectively they are
its efforts to ensure that supervisory very expensive and, therefore, the Act as a
authorities have the right tools and data to whole is less popular. He noted that it is not
oversee the market risks. enough to have good policy, and that “good
politics” is also necessary to win passage. Ms.
LEGISLATIVE OUTLOOK IN A PIVOTAL Mesack added that it is hard to get anything
ELECTION YEAR
done in an election year, and that passing
Moderator: Kathleen L. Mellody, Senior something as transformational as the Build
Government Affairs Officer, Investment Back Better Act with slim Congressional
Company Institute margins is especially challenging. Mr. Blocker
noted that there are a few proposals with
Speakers: Andy Blocker, Global Head of
bipartisan support that could be approved in
Public Policy and Head of US Government
an election year, including proposals to
Affairs, Invesco Ltd.
enhance US competitiveness with China, the
Michelle Y. Mesack, Managing Director, Head Secure Act 2.0 and the Postal Service Reform
of Federal Government Relations, J.P. Act. He stated that the top Democratic
Morgan Chase & Co. priorities in the coming months also included
The session began with a discussion of confirmations and passing budgets.
the current state of Washington, DC politics,
Ms. Mellody asked the panelists to
including whether the political climate was as
discuss how the asset management industry is
contentious as portrayed by news outlets. Mr.
viewed in Washington, DC. Mr. Blocker
Blocker observed that while the
observed that the industry was not viewed as
contentiousness is real, it is often
negatively as some other industries, such as
overemphasized by news outlets. Ms. Mesack
banking, but that it was hard to get Congress’
added that politicians reflect their
attention on asset management-related
constituents, and that as more districts
issues unless they impact “real people” (i.e.,
become “hard red” or “hard blue,” politicians
individuals other than wealthy investors). Ms.
feel pressure to take more polarized views.
Mesack noted that the ICI was viewed as a
The panelists discussed the outlook for very credible institution on Capitol Hill.
the Build Back Better Act. Mr. Blocker
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 12The panelists agreed that proposals to panelists agreed that, because there was one
tax wealth or unrealized gains were unlikely to Democratic vacancy and one Republican
pass in the coming year. Ms. Mesack added vacancy, the two positions were likely to be
that a possible change in tax treatment for paired and approved reasonably quickly.
ETF distributions in-kind was also off the table,
at least for the time being.
THINKING OUTSIDE THE BOX: INNOVATIONS
IN FINANCIAL OFFERINGS FOR RETAIL
INVESTORS
The panelists discussed the likelihood
that control of the House and/or Senate
Moderator: Bridget D. Farrell, Assistant
would flip in the 2022 elections, and the
General Counsel, Securities Regulation,
related implications for the asset
Investment Company Institute
management industry. Ms. Mesack and Mr.
Speakers: Marian Fowler, Partner, Kirkland &
Blocker noted that, at least based on current
Ellis LLP
indicators, control of the House appeared
likely to flip to Republicans, and control of the Kristen Freeman, Senior Director and Counsel,
Senate was viewed as a toss up. They agreed ProShares
that inflation and the economy were key Richard C. Sarhaddi, Chief Compliance
factors that would shape the November Officer, Just Invest LLC, Vanguard
elections. If full control of Congress shifts to
Alison Staloch, Chief Financial Officer,
Republicans in November, Ms. Mesack
Fundrise
believed that it was unlikely Republicans
would be able to pass a Republican-oriented Ms. Farrell began the panel by discussing
agenda, but that it would trigger a change in the SEC’s focus on financial products aimed at
control of committee gavels. In addition, in “retail investors,” noting that there is no
the case of the Senate, she indicated, standard definition of this term. Mr. Sarhaddi
Republican control likely would force more said that Vanguard thinks of retail investors as
moderate nominations for judges and other including individual and IRA investors. Ms.
positions requiring Senate confirmation. Fowler agreed there is no single regulatory
definition, but described several regulatory
The panelists also addressed a number of concepts that could be instructive, including (i)
questions from the audience. In response to Regulation Best Interest, which focuses on
a question about the likely timetable for filling individuals who receive information for
the two SEC commissioner vacancies, the
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 13investment purposes—the assets and income incorporated into the system. Competing
of the individual are not relevant and (ii) the priorities like these, the panel noted, can be
definitions of “accredited investor” under the addressed by having the technology and
Securities Act, “qualified purchaser” under compliance functions coordinate throughout
the Investment Company Act and “qualified the buildout process so that each understands
client” under the Investment Advisers Act, the requirements of the other. The panelists
each of which includes asset- and/or income- also discussed the importance of testing the
based tests. system after completion and prior to
implementation to confirm that it provides
Accessing Retail Investors. Mr. Sarhaddi
the described functionality. The panel also
said that the ability to scale technology to
discussed the SEC staff’s 2017 guidance on
access and serve retail investors is relatively
“robo-advisers.”
new, using as an example advances that have
allowed financial advisors to offer “direct Ms. Fowler discussed products that could
indexing” to smaller accounts. Ms. Staloch be used to offer private market/alternative
said that younger retail investors want investment opportunities to retail investors,
information and advice delivered to them including interval funds, closed-end funds that
differently—accessible on their smartphones, invest in private equity, business
with instant access and direct communication. development companies, parallel vehicles for
non-knowledgeable employees of alternative
The panel discussed the importance of
managers and SPACs. Ms. Staloch explained
involving legal and compliance teams in
that Fundrise had started by offering
efforts to develop and enhance technology
products pursuant to Regulation A of the
platforms. The noted that the compliance
Securities Act, but that size limitations on
team needs to understand what is being
these offerings led Fundrise to sponsoring
developed and how it is being used during the
registered interval funds instead.
process, otherwise a system might be built
only to discover that it has compliance issues Recent FINRA Request for Comment. Ms.
once finished. For example, they explained Freeman discussed the recently issued FINRA
that system developers may want to develop Regulatory Notice 22-08, which solicits
simple and attractive user interfaces, but the comment on possible new restrictions on the
securities laws may require disclaimers, “click- sales of “complex products” to retail
throughs” and other items that need to be investors. She said that, although issued as a
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 14request for comment, conceptually, the security, how it should be custodied, valued
Notice signals a departure from a disclosure- and audited, as well as personal trading issues.
based regime. For example, FINRA requests
Direct Indexing. Mr. Sarhaddi discussed
comment on requiring a “knowledge check”
direct indexing, which involves a retail
(i.e., test) of retail investors before permitting
account owning an index’s constituent
them to invest in complex products, and
securities directly rather than through an
suggests possible limitations on self-directed
index fund. He said direct indexing allows for
(i.e., execution only) trades. She also said that
individualized adjustments to the index (e.g.,
FINRA’s list of “complex products” was very
for ESG considerations) and enhanced tax
lengthy and could include interval funds,
management.
defined outcome funds, global real estate
funds, funds that used derivatives (even if for
DIVERSITY AND INCLUSION KEYNOTE
hedging) and many other products that are REMARKS: JULIA TAYLOR KENNEDY
not necessarily thought of as “complex.”
Speaker: Julia Taylor Kennedy, Executive
Accessing Cryptocurrency Investments. Vice President, Coqual
Ms. Freeman said that there was a
Ms. Taylor presented Coqual’s research
tremendous retail interest in bitcoin and other
on how managers can reinforce inclusive
crypto investments and described different
practices and behaviors in their organizations.
ways in which retail investors could access
She began with a history of diversity, equity
crypto investments. She discussed some of
and inclusion efforts and explained that,
the advantages of investing through a pooled
broadly speaking (i) diversity addresses
investment vehicle, as well as the limitations
representation, (ii) inclusion addresses
the SEC has placed on accessing crypto
individual behaviors, (iii) belonging focuses on
investments through registered vehicles. Ms.
building empathy, and (iv) equity is about
Fowler noted that the SEC, the Biden
processes, systems and rules. She stated that
Administration and Congress are all very
this four-pronged approach is key to
focused on crypto investments, suggesting
promoting effective practices and culture
the possibility of regulation and/or legislation
within an organization.
from a variety of sources. She also discussed
some of the regulatory issues associated with Ms. Taylor focused in particular on the
cryptocurrency, such as whether it is a concept of equity and provided advice on
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 15how to achieve equity in areas such as Introduction. Ms. Donohue opened the
resource allocation, performance evaluations, panel by noting the current unprecedented
promotions and pay practices. She explained pace of rulemaking coming from the SEC. She
that equity is not the same as equality – the described the shortened comment periods
goal of equity is to achieve fairness in associated with such rulemakings and recent
outcomes, not simply to treat everyone the appointments by Chair Gensler within the
same. SEC that will influence rulemaking in the
months to come. She highlighted that, at the
Ms. Taylor then shared a number of facts
time of the panel and since the appointment
and statistics from Coqual’s research,
of Chair Gensler, the SEC had issued 25
examining how different groups (e.g., Latinx
proposals, with comment windows shortened
men, Black women) expressed their
from a range of 60-90 days from the date of
perception of different practices. She also
inclusion in the Federal Register to 60 days
discussed the state of pay and promotion
from the date of posting online.
equities, including theories regarding a
“motherhood tax” and a “fatherhood bonus.” Ms. Donohue explained that the panel
would focus primarily on three themes in
WARP SPEED RULEMARKING: ESG, PROXY recent rulemaking and three specific
MATTERS, DISCLOSURE REFORM
disclosure proposals. She said that
Moderator: Dorothy Donohue, Deputy thematically the SEC’s rulemaking can be
General Counsel, Securities Regulation, categorized into three buckets: market
Investment Company Institute resiliency, funds/advisers and market
disclosures. Within these buckets, she said
Speakers: Lance C. Dial, Partner, Morgan,
that the panelists would discuss (i) ESG
Lewis & Bockius LLP
proposals and public company climate-
Bob Grohowski, Managing Counsel, related disclosures, (ii) modernization of fund
Legislative and Regulatory Affairs, T. Rowe proxy-voting disclosures and (iii) fund
Price Associates, Inc. disclosure reform. The panelists introduced
themselves and commented briefly on the
Peter G. Reali, Managing Director, Head of pace of rulemaking.
Stewardship—Responsible Investing, Nuveen
Fund Advisors, LLC Mr. Dial cautioned that the themes
highlighted by Ms. Donohue each present
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 16critical issues, and that addressing them all at Mr. Grohowski addressed the
the same time may make it difficult to allot sequencing of regulation in the ESG space.
each proposal the appropriate time and He explained that, in order for an investment
consideration necessary to provide adviser to provide comprehensive ESG
constructive commentary. Mr. Grohowski reporting, it will need to have received certain
agreed and noted that much of the recent data from the companies in which it invests. If
rulemaking has emphasized real-time the SEC were to simultaneously mandate
reporting and disclosure. He said that, while disclosure at the adviser and company level,
it may be technologically possible to provide there would likely be data gaps where
real-time information to the market, extreme insufficient underlying data is available to
transparency may not be in the best interests meet reporting requirements. Mr. Dial
of long-term investors and that this issue must agreed, noting that the release of the public
be carefully considered. company climate-related disclosure proposal
seems to signal a recognition by the SEC of
Mr. Reali concurred that the rulemaking
the importance of this sequencing.
agenda has been ambitious, but applauded
the SEC for addressing many of the large Ms. Donohue asked the panelists for
systemic issues facing the industry. their views regarding what funds and advisers
may be expected to report. Mr. Grohowski
ESG Proposals. Ms. Donohue asked the
noted that, in other jurisdictions, the industry
panelists to discuss the ESG proposals that
is seeing requirements at the adviser level to
may impact the industry. Mr. Dial discussed
make disclosures regarding their investment
the regulatory landscape for ESG matters,
process, the “tone from the top” regarding
noting as an example the lack of a consistent
ESG matters, portfolio risk management and
message from the Department of Labor
stewardship of investment targets, but is not
regarding ESG. He also stated that the SEC
seeing requirements to disclose specific
staff has, in examinations, expressed the view
metrics, unless the adviser has publicly
that ESG may be a particular type of
committed to specific goals that can be
investment or investments rather than a
tracked with metrics. He said that, at the fund
strategy, which would have broader
level, we are seeing narratives, but also core
implications for fund disclosures.
metrics that allow tracking of, for example,
carbon footprints, and he also described
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 17heightened disclosure requirements Mr. Dial provided a summary of the rule,
applicable when a fund holds itself out as explaining that it would require narrative
ESG-focused. disclosure regarding climate-related risks,
largely based on the TCFD framework,
Mr. Grohowski explained that the Task
including physical risks and those related to
Force on Climate-Related Financial
conversion to less climate impactful
Disclosures (TCFD) framework—cited in the
operations. He also discussed requirements
public company climate-related disclosure
related to Scope 1, Scope 2 and Scope 3
proposal—includes both a quantitative and
greenhouse gas emissions, noting the multi-
qualitative analysis that, if required at the
year phase-in process that will be required to
fund level, may implicate rules regarding
manage the scope of data required.
predicting fund performance. He cautioned
regulators to carefully consider whether the Mr. Grohowski said that the TCFD
same requirements that work in an operating discusses disclosure as a “journey,” but
company context can be mapped onto fund commented on the difficulty of that approach
disclosures without unintended in a regulated industry. He also noted that,
consequences. although the SEC proposals would prohibit
required disclosures when there are data
Mr. Reali emphasized the timeliness of
gaps or mechanics that make the information
disclosure requirements, noting the
misleading, navigating how and when to rely
increasing pressure from clients to have
on this carve-out would be challenging. Mr.
access to this type of information, even with
Reali agreed, emphasizing the importance of
respect to products that are not ESG-branded.
accepting the idea that it will be a
Public Company Climate-Related complicated undertaking to compile and
Disclosures. Ms. Donohue turned the audit information responsive to the
panelists’ attention to the recently released requirements. Nonetheless, he noted that, if
public company climate-related disclosure companies are required to provide data in a
proposal, noting its applicability to public uniform manner, investors in those companies
companies and business development will be able to access and compile such data
companies (BDCs) but not to registered funds. more efficiently.
In response to a question from Ms.
Donohue, the panelists discussed the
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 18litigation risks faced by any proposed rules in a final rule is expected in October. She
the ESG space. Mr. Dial noted that the explained that, among other things, the
climate-related disclosure rule would be proposals would eliminate Rule 30e-3,
subject to Administrative Procedure Act modernize and shorten shareholder reports
claims. He said that litigation may address the and provide funds the option to discontinue
authority of the SEC and whether the mailing annual prospectuses to current
proposals align with the SEC’s three-part shareholders under certain circumstances.
mission, as well as whether they violate the
Mr. Dial again emphasized the seismic
First Amendment.
shift represented by various proposals to
Modernization of Fund Proxy Voting require real-time data. This will have
Disclosures. Mr. Dial summarized certain profound effects on how funds think about
proposed changes to Form N-PX that would and report data.
simplify the disclosure regarding how a fund
voted proxies, including requiring that the
HOW TO SET A TABLE: AN EXERCISE IN RISK
MITIGATION
disclosure must be machine-readable for data
aggregators. He noted that the proposal Moderator: Peter Salmon, Senior Director,
would require a fund to disclose the number Technology & Cybersecurity, Investment
of shares on loan that are not recalled to be Company Institute.
voted. Messrs. Reali and Dial discussed the
Speakers: John Ansbach, Vice President,
challenge of determining how to weigh the
Stroz Friedberg
value of lending shares against recalling and
voting. Mr. Grohowski agreed that the Mike Catlin, Head of Technology Services and
disclosures seem to carry an implicit, but CISO, Capital Group
problematic, notion that securities lending is
somehow inconsistent with shareholder Christopher Wilson, Board Chair, Invesco
interests. Mr. Dial agreed, noting that the Funds
required disclosures might chill securities
This panel conducted a “live” tabletop
lending more broadly.
exercise in which the panelists analyzed and
Fund Disclosure Reform. Ms. Donohue responded to an attack scenario as it evolved
briefly discussed the August 2020 fund and grew increasingly complex. Topics
disclosure annual report proposal, noting that addressed included when and how to involve
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 19the board, outside counsel, law enforcement, Scenario 2. Second email with “proof of
insurance carriers and the media. The goal of life.” I still have your data. I am serious about
the exercise was to identify roles, the data I have. Provides a sample. Only 69
responsibilities and escalation protocols. hours to pay. Shows investor names, Social
Security numbers, bank account and routing
Scenario 1. RedPanda666 email to U.S.
number.
transfer agent from an unknown sender—I
have your data. Press link. Mr. Catlin explained that a follow-up
email such as this ratchets up the response
Mr. Catlin noted that receipt of an email
because the threat actor seems to have data.
like this should trigger investigation by the
He said that at this stage, he would involve
internal security team but would likely not be
the legal department, communications team
further escalated at this stage. Such an
and the insurance carrier. Mr. Ansbach
investigation should consider whether the
suggested that, in addition to those parties
firm has previously received emails from the
identified by Mr. Catlin, outside counsel
same sender and whether the recipient
should also be involved as well as a cyber-
clicked the included link, which could result in
carrier who may bring in a data breach coach
the download of ransomware to the system.
(i.e., a law firm that specializes in data
Mr. Ansbach noted that outside counsel
breaches) and a forensic investigator to
would not be involved at this stage, and Mr.
support the internal IT team. He said that it is
Wilson added that the Board would not
also a good practice to reach out to law
typically be notified at this point. He
enforcement through pre-established
explained, however, that the Board should
relationships. Mr. Wilson said that he would
understand, prior to any incident, what
expect that, in many firms, the Board and
management would do in situations like this,
Audit Committee chairs would be informed of
what the escalation protocols in place are,
the receipt of the email. The chairs should be
what insurance arrangements are in place and
informed of the facts, the steps being taken
what the role of the CCO would be. Ideally,
and the resources being used.
the Board has periodic meetings with IT
professionals to understand, for example, the After the appropriate parties have been
systems and resources available in the event involved, Mr. Catlin said that a forensic
of a breach. examination should seek to understand what
file systems the data came from and who had
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 20access to those systems, and that any consider dark web monitoring and threat
accounts identified in the email should be intelligence work, including with respect to
monitored for activity. Mr. Ansbach the employee. He also suggested reaching
suggested that engaging with the threat actor out to the tweeting investor, explaining that
can be helpful at this stage and can be an investigation is underway and that a
managed by a third-party negotiating firm. forensic analysis has not yet confirmed the
Communications would include self-serving scope or method of breach. He also noted
statements because of anticipated litigation, that the Board should be provided with an
such as “our shareholder records are very update. Mr. Wilson noted that the Board may
important to us.” These communications with determine to hire a consultant at this stage.
clients are done pursuant to attorney-client
Scenario 4. The employee shows up at
privilege, but Mr. Ansbach noted that the law
work. It turns out that she had a medical
is “squishy” around attorney-client privilege,
emergency, and had downloaded and printed
and so the firm should work closely at the
data as part of an assignment. She had sent
direction of outside counsel to protect the
a text to her supervisor but only now notices
communications as much as possible.
that the text was never received. The firm is
Scenario 3. The transfer agent (TA) receiving media inquiries, asking whether TA
discovers that a service desk employee has has been hacked.
been absent for the last two days and that
Mr. Catlin noted that the investigation
files the employee handles include three
should address the new information from the
investors’ names sent by the threat actor. The
employee, including whether the printed
employee’s file had 3,000 names. Also, one of
information may have been the source of the
the three investors has now tweeted that the
breach. Mr. Ansbach explained that outside
TA has been hacked and is warning people on
counsel should be consulted as to next steps
Twitter.
with the employee and that the public
Mr. Catlin noted that the firm still does relations firm should be consulted regarding
not know the extent of the actual breach and external messaging. He noted that deadlines
suggested that the focus of the investigation are often malleable, as long as you continue
is now on the system where the file resides to to engage with the threat actor, but that there
determine if there is any irregular activity. Mr. are no guarantees. Negotiation can
Ansbach also suggested that the investigation sometimes help to stretch out the
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 21conversation while law enforcement, forensics Abigail Murray, Managing Counsel, Janus
and public relations are doing their jobs, but, Henderson Investors
he added, sometimes the business team will
Fee Litigation Under Section 36(b). The
decide to make the payment to put an end to
panel began by discussing the current status
the potential exposure.
of excessive fee litigation under Section 36(b)
Scenario 5. Resolution. The FBI and of the 1940 Act. Mr. Murphy expressed
others collect evidence that implicates the optimism at “seeing the light at the end of the
cleaning staff and are able to take down the tunnel” of traditional 36(b) litigation with no
threat actor. new cases filed in nearly five years and no
cases currently pending. The final case in the
Mr. Catlin explained that at the
recent wave of litigation concluded when the
conclusion of an incident, a firm should do an
Tenth Circuit Court of Appeals affirmed the
internal post-mortem. He also recommended
district court’s trial opinion in favor of
notification to the broader pool of investors
GreatWest in July 2021. The court’s opinion
to provide assurances and explain steps taken
in the GreatWest case highlighted once again
by the firm to protect investors. Mr. Wilson
the difficult burden plaintiffs face in 36(b)
suggested that the Board CCO, as well as
litigation. Specifically, the court rejected
internal audit, can help analyze how the
plaintiffs’ criticism that the board did not
incident was handled, and the public relations
adequately negotiate with the adviser in
team can help to ensure good and effective
approving fund fees; rather, the court held
communication.
that asking questions of the adviser and
engaging in a dialogue about fees is a form of
FUND INDUSTRY CIVIL LITIGATION: YEAR IN
REVIEW negotiation. Mr. Murphy concluded that the
law is very settled now in this area and that
Moderator: Julia Ulstrup, Senior Vice board process remains the critical factor,
President and General Counsel, ICI Mutual noting that courts are reluctant to upset the
Insurance Company informed business judgment exercised by the
Speakers: Eben P. Colby, Partner, Skadden, board, and the key considerations include
Arps, Slate, Meagher & Flom LLP whether the board asked questions, whether
they engaged outside consultants and
Sean M. Murphy, Partner, Milbank LLP experts, and whether they pressed back on
2022 INVESTMENT MANAGEMENT CONFERENCE | Page 22the adviser from time to time. In response to to pursue and establish. He did highlight a
this, Ms. Murray confirmed how heavily her distinction to be aware of, which is that while
firm relies on service providers, including fund civil plaintiffs are not incentivized to challenge
and trustee counsel to assist the board with high fees charged by small funds, the SEC
their oversight responsibilities. does not have an interest one way or another
about the size of the fund at stake and so may
Mr. Colby noted that the single 36(b)
focus on smaller funds with higher fees. In the
case recently filed was against a SPAC. There,
end, Mr. Murphy reiterated that he remains
the plaintiffs have argued that for a certain
confident that the settled authority
period of time before it acquires a start-up
underlying Section 36(b) still stands in the
company, the SPAC was effectively acting as
SEC’s way.
an investment company investing in securities
and, therefore, is required to engage in a 15(c) Prospectus Liability/Disclosure-Based
process and approve fees consistent with the Litigation. The panel discussed prospectus
standard established under Section 36(b) of liability and disclosure-based litigation, which
the 1940 Act. The case remains pending. has remained relatively quiet. Mr. Murphy
noted a case filed against an adviser recently
The panel discussed their expectation of
in California for having an allegedly
what is to come for 36(b) litigation. Mr.
misleading prospectus by charging active
Murphy expressed confidence that this last
management fees for what is effectively an
wave of manager-of-managers and
index fund. The plaintiffs voluntarily
subadvised fund cases is over but expressed
dismissed that case, likely realizing it was not
concern and offense at Director Birdthistle’s
based on a solid legal theory. Although
remarks from the prior day in which the
litigation in this space has been quiet, claims
Director questioned whether Section 36(b) is
under the 1933 Act remain attractive to
truly being honored given that no adviser has
plaintiffs since they can point to an evergreen
ever been found to be in violation of it. Mr.
prospectus with a strict liability standard that
Murphy queried whether Director Birdthistle
can be filed in (and not removed from) state
was suggesting there are additional ways to
court. Since the Supreme Court’s ruling in
attack advisory fees through the use of the
Janus, the defendants in these types of cases
SEC’s tool box, such as breach of fiduciary
primarily focus on the directors who signed
duty or loyalty claims, but concluded that such
the registration statement, and the adviser
an attack would be a difficult one for the SEC
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