Fulcrum Fees: An Imperfect Solution For Active Managers?

Posted by John Braun on Mar 30, 2020 5:57:21 PM

Fulcrum fee arrangements have been used by certain actively traded registered funds for years but are of late garnering increased attention as active managers attempt to stave off passive investing and the lower fee structure often associated with it. The concept aligns the interest of the advisor with that of the investor by rewarding the advisor when it outperforms its benchmark and reducing the fees of the advisor (to that of an index fund-like fee or even zero) when it underperforms its benchmark.

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COVID-19 and Financial Statement Disclosures

Posted by James Kaiser on Mar 25, 2020 10:30:59 AM

The Coronavirus pandemic (“COVID-19”) is causing significant financial and operating hardships across all industries. Any companies that are currently preparing GAAP financial statements, including investment companies, should consider whether or not the impact of COVID-19 represents a significant event as defined in FASB Accounting Standards Codification (“FASB ASC”) 855, Subsequent Events.

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The SEC's Proposed Rule 2-01 Auditor Independence Updates: Do These Modifications Do The Trick?

Posted by John Braun on Feb 12, 2020 6:53:00 PM

On December 30, 2019, the SEC proposed amendments to certain independence requirements with the goal of further aligning the auditor’s independence analysis with Rule 2-01’s “reasonable investor” concept.  The concept asks us to consider whether a reasonable investor with knowledge of all the relevant facts and circumstances would conclude that the auditor is capable of exercising objective and impartial judgment?

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Blog Post Written By Lori Ehleben Featured In National Society of Compliance Professionals Newsletter

Posted by Erin McClafferty on Dec 2, 2019 7:58:00 PM

NSCP Currents, the newsletter of the National Society of Compliance Professionals, recently included an article written by BBD partner Lori Ehleben that originally was published as a blog post of interest to private funds and investment advisors here in Investment Company Notebook.

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Alternative Investment Fund Tax Allocations: What You Need To Know About IRC Section 704

Posted by Matthew Romano on Nov 19, 2019 4:42:00 PM

In this post, we will discuss the rules and mechanics of alternative investment fund tax allocations.  Most alternative investment vehicles are structured as partnerships. Therefore, Subchapter K of the Internal Revenue Code (“IRC”), specifically IRC Section 704, provides the guidance and rules for tax allocations.

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PCAOB Auditing Standard AS 2501- Auditing Accounting Estimates, Including Fair Value Measurements

Posted by John Braun on Nov 8, 2019 1:03:00 PM

The new standard (AS 2501), which is effective for fiscal years ending on or after December 15, 2020, replaces three existing standards relative to auditing accounting estimates. While this replacement implies that much of the content already existed, the PCAOB has adopted this standard because the use of complex accounting estimates and fair value measurements continues to grow. Their oversight activities have revealed a pattern of audit deficiencies in these areas of the audit that are also often some of those areas with the greatest audit risk.

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Delays For Three Major FASB Standards A Win For Private Companies and Smaller SEC Filers

Posted by Cory Stewart on Nov 1, 2019 3:54:31 PM

On Wednesday, October 16, 2019, the Financial Accounting Standards Board (“FASB”) unanimously voted to delay effective dates on standards related to accounting for leases, credit losses and hedging.  These delays impact private companies and smaller SEC filers.  The effective dates remain unchanged for larger public entities.

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Securities Lending Fees – Income or Expense Offset?

Posted by James Kaiser on Oct 24, 2019 5:28:58 PM

I’ve recently had some mutual fund and ETF clients ask if they can reflect securities lending fees as an offset to expenses, as opposed to income on their fund’s Statement of Operations. While this alternative presentation would not have any impact on the reported net investment income of the fund, it would serve to reflect a reduced net expense ratio, which could be helpful in marketing the fund to investors.  My initial reaction to this question was- “No, of course not!”  However, after performing a little research, the answer is actually “maybe.”

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Partnership Taxation: What You Should Know About Section 754 Elections

Posted by Matthew Romano on Oct 15, 2019 4:11:44 PM

A Section 754 election can be a favorable tax efficiency tool that is unique to partnerships (as compared to corporations).  However, the complexity, administrative burden and changing economic environment should always be considered carefully.  Every general partner of a partnership should be aware of these rules and their implications.

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The 2017 Tax Cuts and Jobs Act in Practice: How Does Section 199A, the Qualified Business Income Deduction, Affect Investment Companies?

Posted by Matthew Romano on Jul 25, 2019 1:46:26 PM

This post is the second in a three-part series that examines implications of the 2017 Tax Cuts and Jobs Act for the investment management industry.  Part One introduced the Section 199A deduction and its impact on the investment management industry. Part Three will examine the deduction and C Corporation to S Corporation transitions.  Feel free to be in touch with Matt Romano, tax partner, with questions about how these complex new tax developments affect you and your business.

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