Currently, there are no specific rules or requirements for investment companies relating to the financial statements of acquired funds. Instead, investment companies apply the general SEC requirements of Rule 3-05 and the pro-forma financial information requirements in Article 11 requiring disclosure and information, which are not always relevant to investment companies.

On August 17, 2018, the SEC adopted what effectively amounts to “housekeeping items” for a variety of public issuers. These updates are effective November 5, 2018. 

Investment advisers deemed to have custody of client funds or securities:  Is your accounting firm both registered with, and subject to regular inspection by, the Public Company Accounting Oversight Board?  In certain situations, it's an important question.  Jim Kaiser explores this and other questions about the SEC's Custody Rule in a recent issue of the Investment Adviser Association newsletter.

BBD recently attended the Investment Adviser Association Compliance Conference, which was held last month in Washington, DC.  Among the hot topics covered were developments related to GIPS^® Performance Verification and the SEC's Custody Rule.

As detailed in a previous post, Regulation S-X Rule 2-01(c)(1)(ii)(A) (the "Loan Rule") prohibits accounting firms from having certain financial relationships with their audit clients and affiliated entities. 

In October 2016, the SEC adopted amendments to Regulation S-X as part of its Investment Company Reporting Modernization efforts. These amendments:

• Update specific disclosure requirements for most types of derivatives
• Update disclosures for other investments as well as investments in and advances to affiliates
• Amend certain rules regarding the general form and content of financial statements

Most of the disclosure requirements are already in place in the industry.  The effective date of these amendments is August 1, 2017. However, certain modifications have been made that are important to communicate. Below, you’ll find a summary of the significant points in the recent amendments along with brief notes on changes from current practice.

There has been much press recently about potential independence issues for certain Big Four auditors of mutual funds as a result of the SEC’s “Loan Rule.”  However, it is not uncommon for large audit firms to have independence issues outside of the “Loan Rule” given their volume of employees, relationships with banks, advisors, etc., as well as audit clients.

Almost two years ago, the SEC adopted amendments to the rules that govern money market mutual funds meant to address the risk of investor runs in money market funds. In summary, the rules in part:

1. Require a floating NAV for institutional prime money market funds
2. Allow for fees and gates to discourage and/or suspend redemptions temporarily at certain asset thresholds