Press Release: SEC Votes to Adopt Antifraud Rule Under Investment Advisers Act
The SEC adopted a new antifraud rule under the Investment Advisers Act to prohibit investment advisers—registered or not—from making false or misleading statements to investors in pooled vehicles like hedge funds and private equity funds, strengthening its ability to prosecute fraud across trillions in assets.
The SEC unanimously adopted Rule 206(4)-1 under the Investment Advisers Act to clarify its authority to prosecute fraudulent, deceptive, or manipulative acts by investment advisers to pooled investment vehicles, including hedge funds, private equity, venture capital, and mutual funds. The rule applies to all advisers regardless of registration status and covers entities qualifying under Sections 3(c)(1) or 3(c)(7) of the Investment Company Act, which collectively hold trillions of dollars in investor assets. It prohibits false or misleading statements to investors or prospective investors but does not name specific violators or impose new registration requirements.
The SEC unanimously adopted a new antifraud rule under the Investment Advisers Act on July 11, 2007, to enhance its ability to police misconduct by investment advisers to pooled investment vehicles. The rule explicitly prohibits advisers—whether registered or not—from making false or misleading statements, or engaging in fraudulent acts, toward investors or prospective investors in these pools. It applies broadly to all entities that would qualify as investment companies under Sections 3(c)(1) or 3(c)(7) of the Investment Company Act, encompassing hedge funds, private equity funds, venture capital funds, and mutual funds, which together manage trillions of dollars in assets. The rule does not create new registration obligations but clarifies and expands the SEC’s enforcement authority to hold advisers accountable for fraud. It was designed to deter misconduct and ensure accountability across a rapidly growing segment of the capital markets. The rule took effect 30 days after its publication in the Federal Register. While it empowers the SEC to pursue enforcement actions, it does not allege specific instances of fraud or name any individuals or entities as accused parties.
Extracted insights
- agency sec chairman christopher cox
- agency Securities and Exchange Commission
- Sec Votes To Adopt Antifraud Rule Under Investment Advisers Act
- Sec Adopt New Antifraud Rule
- Sec Clarify Commission's Ability To Bring Enforcement Actions Under The Advisers Act
- Sec Chairman Christopher Cox Say This Rule Applies To Investment Advisers Not Only Of Hedge Funds, But Also Of Private Equity Funds, Venture Capital Funds, And Mutual Funds
- Sec Chairman Christopher Cox Say The Rule Will Give The Commission An Important Tool To Help Us Police This Market — To Deter Misconduct And To Call To Task Those Who Breach Their Obligations To Investors
- New Rule Make It A Fraudulent, Deceptive, Or Manipulative Act, Practice, Or Course Of Business For An Investment Adviser To A Pooled Investment Vehicle To Make False Or Misleading Statements To, Or Otherwise To Defraud, Investors Or Prospective Investors In That Pool
- New Rule Apply To All Investment Advisers To Pooled Investment Vehicles, Regardless Of Whether The Adviser Is Registered Under The Advisers Act
- New Rule Take Effect 30 Days After Its Publication In The Federal Register
SEC Votes to Adopt Antifraud Rule Under Investment Advisers Act FOR IMMEDIATE RELEASE 2007-133 Washington, D.C., July 11, 2007 - The Securities and Exchange Commission today voted unanimously to adopt a new antifraud rule under the Investment Advisers Act that will clarify the Commission's ability to bring enforcement actions under the Advisers Act. "This rule applies to investment advisers not only of hedge funds, but also of private equity funds, venture capital funds, and mutual funds. Collectively, these funds hold trillions of dollars of investors' assets and play an important and growing role in our capital markets," said SEC Chairman Christopher Cox. "The rule will give the Commission an important tool to help us police this market — to deter misconduct and to call to task those who breach their obligations to investors." The new rule will make it a fraudulent, deceptive, or manipulative act, practice, or course of business for an investment adviser to a pooled investment vehicle to make false or misleading statements to, or otherwise to defraud, investors or prospective investors in that pool. The rule will apply to all investment advisers to pooled investment vehicles, regardless of whether the adviser is registered under the Advisers Act. Under the new rule, a pooled investment vehicle will include any investment company and any company that would be an investment company but for the exclusions in Sections 3(c)(1) or 3(c)(7) of the Investment Company Act. The new rule will take effect 30 days after its publication in the Federal Register. * * * The full text of the detailed release concerning the new rule will be posted to the SEC Web site as soon as possible. # # # Additional materials: Video of Chairman's Statement Windows Media Player (10 MB) QuickTime (10 MB) http://www.sec.gov/news/press/2007/2007-133.htm Home | Previous Page Modified: 07/11/2007
SEC Votes to Adopt Antifraud Rule Under Investment Advisers Act FOR IMMEDIATE RELEASE 2007-133 Washington, D.C., July 11, 2007 - The Securities and Exchange Commission today voted unanimously to adopt a new antifraud rule under the Investment Advisers Act that will clarify the Commission's ability to bring enforcement actions under the Advisers Act. "This rule applies to investment advisers not only of hedge funds, but also of private equity funds, venture capital funds, and mutual funds. Collectively, these funds hold trillions of dollars of investors' assets and play an important and growing role in our capital markets," said SEC Chairman Christopher Cox. "The rule will give the Commission an important tool to help us police this market — to deter misconduct and to call to task those who breach their obligations to investors." The new rule will make it a fraudulent, deceptive, or manipulative act, practice, or course of business for an investment adviser to a pooled investment vehicle to make false or misleading statements to, or otherwise to defraud, investors or prospective investors in that pool. The rule will apply to all investment advisers to pooled investment vehicles, regardless of whether the adviser is registered under the Advisers Act. Under the new rule, a pooled investment vehicle will include any investment company and any company that would be an investment company but for the exclusions in Sections 3(c)(1) or 3(c)(7) of the Investment Company Act. The new rule will take effect 30 days after its publication in the Federal Register. * * * The full text of the detailed release concerning the new rule will be posted to the SEC Web site as soon as possible. # # # Additional materials: Video of Chairman's Statement Windows Media Player (10 MB) QuickTime (10 MB) http://www.sec.gov/news/press/2007/2007-133.htm Home | Previous Page Modified: 07/11/2007