|March 10, 2014|
Previously published on March 6, 2014
Several registered Investment Advisors (“IAs”) have recently received an order (“Order”) from the Kanto Local Finance Bureau (the “KLFB”) to report certain information with respect to their advisory activities in relation to foreign funds for which they provide advice to investors.
In these Orders (all of which appear to be dated February 7, 2014), the KLFB has requested, among other information, a list of the names, number of investors by type, and related information concerning foreign funds covered in investment advice provided to advisory clients of the IAs.
In addition, the Order specifically requires each IA to report whether it (i) has received any economic benefit, directly or indirectly, from the issuers or managers of the foreign funds, or (ii) has provided any support to its advisory clients in connection with the making of subscriptions to such foreign funds.
These Orders appear to have been issued in the aftermath of the inspection of Abraham Private Bank (“APB”), an IA that received an administrative sanction last October.1 The KLFB appears to have concluded that, because APB indirectly received fees from issuers of certain foreign funds, it was engaged in the distribution of securities without a proper registration. A number of the requested items in the Order appear to seek information concerning IA activities similar to the factual situation in APB and suggest that the regulators are trying to determine the extent to which APB’s business model could be in use by other IAs.
Orders issued by the KLFB on February 7, 2014 will require the filing of a report not later than March 6, 2014. It is unclear at this point whether additional Orders will be issued subsequently to other IAs.
1 See http://kantou.mof.go.jp/kinyuu/pagekthp033000024.html.