The Securities Compliance Podcast Season 5 Episode 8 – PFAR Takes a Vacation and No More Chevron

Podcast

Securities Compliance Podcast: Compliance in Context

In Season 5 Episode 8 of The Securities Compliance Podcast: Compliance in Context, host and Calfee Partner Patrick D. Hayes welcome two special guests, Ms. Alpa Patel and Mr. Igor Rozenblit, to share their insights and help unpack the Loper Bright and Corner Post decisions, PFAR getting vacated, and what’s next on the examination and enforcement front.

Show

Interview With Alpa Patel and Igor Rozenblit

• Reviewing recent judicial developments.
• What happened in Loper Bright Enters. v. Raimondo?
• What does the end of Chevron mean, and what are the key takeaways?
• How does the decision in Corner Post, Inc. v. Bd. of Governors of the Fed. Resrv. Sys. extend the impact of Loper Bright/end of Chevron and potential future agency rule challenges?
• Reviewing the Private Fund Adviser Rules being vacated.
• What happened in Nat’l Ass’n of Private Fund Managers v. SEC?
• How do you see this impacting SEC Examinations and Enforcement?
• What are the key areas that you expect to see a continued focus from the Staff?
• Discussion of recent SEC Enforcement, including the focus on recordkeeping.
• Analyzing the current regulatory environment, the industry’s appetite to challenge the SEC on certain issues, and the impact of the upcoming presidential election.

Quotes

12:10 – “The rules expanded over the years, and it was always in reaction to litigation, right? Sothis will just be more. PFAR being dropped, and that was obviously more on a statutory authority side. But when you have a rule that’s struck down for being arbitrary and capricious, which is normally how these rules go, the answer to that is, well, let me give you more reasons. And that is why, you know, our releases ended up just writing more. The more you can draft, the better because you’re trying to counteract the idea that you did not address some random issue that a commenter raised, you know, in their 600-page comment letter. So that’s, that is the give and take and sort of the beauty of the Administrative Procedures Act of, well, okay, you’re telling me I didn’t do enough. I will do more. And that’s exactly where you’re going to end up more here.” – Alpa Patel

23:55 – “I think the vacation of PFAR didn’t really change the examination approach of the commission at the moment. I think, had PFAR stood, there was a pretty good probability that exams would have changed pretty significantly and would have transformed into a group that tests a lot of the PFAR disclosures that were required, but that did not happen. In terms of the areas that PFAR covered, those areas are traditional exam risk areas, and that is why they were in PFAR. It really didn’t work the other way around. So in terms of what exam does now, it’s really a version of what they’ve always been doing, which is identifying potential conflicts of interest, identifying potential technical violations of certain rules, including the books and records rule, which is kind of a hot topic right now, and pursuing those in both an exam and enforcement context.” – Igor Rozenblit

27:01 – “So I think you’re going to see more regulation by enforcement to get their message out about particular practices that they find problematic. And there are lots of different themes you’re going to see – that you’re continuing to see from the exams. And if anything, it’s more to building the case that they are – that this is an area of law that needs regulation and needs sort of very specific principle-based rules. Let me show you by bringing a bunch of cases and showing a bunch of exam issues that get referred, and the more you’re able to cite to it, the more sort of groundswell you have to prove, from a prophylactic perspective, these principled-based rules are required, or these actually more prescriptive-based rules are required because there is fraud going on.” – Alpa Patel

40:16 – “And to be frank, like the technological solutions aren’t great. And I think advisors have really struggled with how are we supposed to monitor, you know, some forms of communication, but have really put the time and the resources into trying to get on the right side of this issue. And as Igor will say, like, it’s still hard. The surveillance piece is still hard, no matter if you, as the advisor, do everything correctly, trying to get it right with your employees is not easy. And if they are going to sort of really pick apart procedures and actual surveillance practices, we’re in trouble. And I think they know, there’s sort of not a great answer to that other than hoping that they show some judicious application of the rules here.” – Alpa Patel

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About the Securities Compliance Podcast: Compliance in Context

Introducing the Securities Compliance Podcast: Compliance in Context presented by Calfee, Halter & Griswold, and the National Society of Compliance Professionals and hosted by Patrick D. Hayes, Partner and Chair of Calfee's Investment Management practice.

Designed as a personal master class for the securities legal and compliance professional, this podcast embodies Patrick’s passion to help you put Compliance In Context™ by combining the technical expertise of industry thought leaders and innovators with the practical experience of doers and key decision makers.

Listeners will find the podcast on Apple Podcast, Google Podcast, Spotify, and Stitcher.

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The opinions expressed by guest speakers and panelists during Securities Compliance Podcasts may not necessarily reflect the viewpoints of the attorneys and professionals of Calfee, Halter & Griswold LLP, or its subsidiaries or affiliates. Calfee’s educational content is intended to inform and educate readers about legal developments and is not intended as legal advice for any specific individual or specific situation. Please consult with your attorney regarding any legal questions you may have. With regard to all content including case studies or descriptions, past outcomes do not predict future results.