Mike Boyle, a partner in BBD's Investment Management Group, provided commentary in an article in "Ignites" written by Beagan Wilcox Volz on the PCAOB's recent guidance for audit committees regarding the inspection of audit firms. In "PCAOB Helps Funds Challenge Stonewalling Auditors," Boyle addresses BBD's philosophy regarding discussion of the results of PCAOB inspections with clients.

Current financial markets provide various incentives for entities interested in raising capital for their developing enterprises to offer potential investors. One example of an incentive used is a warrant issued along with a debt instrument. The warrants could theoretically be exercised at a future date for a common stock interest in the company, once the capital raised from the debt issuance begins to bear fruit and the enterprise value increases. For mutual and hedge funds investing in these developing companies, the financial statement disclosure requirements have drastically increased due to the Statement on Financial Accounting Standard No. 161, Disclosures about Derivative Instruments and Hedging Activities (the “Statement” or “FAS 161”). The Statement has been included in the FASB Codification (the “Code”) under 815-10 Derivatives and Hedging. FAS 161 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.

In this, the third and final post in our series on UBTI issues for RICs and RIC shareholders, we will examine IRS guidance for RICs and REITs on excess inclusion income. As stated in our previous posts on this topic, the most common source of excess inclusion that we believe a RIC may have will typically come from its investment in a mortgage oriented REIT. The rules for passing through excess inclusion income to shareholders for RICs are almost identical for the rules on the same for REITs. RICs with investments in REITs that have mortgage investments could potentially receive excess inclusion allocations from their REIT investments. Therefore, this post will focus on REITs as the source of RIC excess inclusion income. However, a RIC can have excess inclusions from direct investments in taxable mortgage pools or REMIC residual interests, as previously discussed.

In this, the second post in our series of RIC UBTI issues, we give a high level overview of the circumstances where a RIC or RIC shareholder can find themselves subject to tax on UBTI, despite the fact that a RIC generally will act as a UBTI blocker of such income.

The tax treatment of income reported by a regulated investment company (RIC) to its shareholders is for the most part, fairly straightforward. From that perspective, a shareholder of a RIC organized under subchapter M of the Internal Revenue Code is, with some exceptions, treated as a shareholder of any other corporation. However, is a tax exempt entity, which is a RIC shareholder, necessarily treated the same as if it were a shareholder of a corporation? In this three-part series of posts, we will examine the general rules that must be considered by a RIC and its shareholders when a RIC’s investments generate “unrelated business taxable income (UBTI).”

The Indian Department of Revenue, as required under the India Income Tax Act of 1961 (“the Act”), assesses a tax on short-term capital gains recognized on the sale of Indian securities. The cost of acquisition and holding period must be determined by the first-in-first-out method (“FIFO”). Long-term is any holding period greater than one year. Short-term is any holding period less than one year.

How should mutual fund audit professionals interface with compliance teams? What would an auditor say are the four things every mutual fund compliance team needs to know to build effective relationships? John Braun, a partner in BBD's Investment Management Group, answers these questions for the latest "Your Q&A" column in "Ignites."

Jim Kaiser, a partner in BBD's Investment Management Group, recently recorded a Webinar with Kristin McCann, Compliance Officer for Gemini Fund Services, LLC, discussing the use of a third-party pricing vendor and why we all need to become more of a valuation expert. Jim and Kristin offer valuable insight in the Webinar to both fund management and fund boards.

Are SOX challenges decreasing for Funds? Jim Kaiser, a partner in BBD's Investment Management Group, answers this question for the latest "Your Q&A" column in "Ignites."

Most, if not all mutual fund complexes or fund accounting agents charged with valuing securities for ’40 Act mutual funds utilize a third party pricing agent. The use of an independent pricing agent does not relieve fund management of responsibility with respect to the adequacy of the prices received. Management needs to understand how the prices received from a pricing vendor are determined and have processes and procedures in place to determine that the pricing received meets GAAP requirements, namely that prices meet the standards of what a willing market participant would pay in an arms-length transaction.