%1

The U.S. Securities and Exchange Commission on Wednesday voted to overhaul rules for private equity and hedge funds, but in a victory for the industry did not make it easier for investors to sue fund managers and also did not ban arrangements that make it easier for some investors to cash out than others, Reuters reported. The securities regulator's five-member panel voted 3-2 in favor of a series of changes aimed at increasing transparency, fairness and accountability in the private funds industry, which has more than doubled its assets over the past decade. The industry manages around $20 trillion in assets. The new rules require private funds to issue quarterly fee and performance reports and disclose certain fee structures while barring giving some investors preferential treatment over redemptions and portfolio exposure. The rules also require funds to perform annual audits. The rules will go into effect in 60 days. Some rules will have a staggered adoption, depending on the size of the fund.

Fintech investment adviser Titan Global Capital Management USA LLC agreed to pay over $1 million to settle charges from the U.S. Securities and Exchange Commission (SEC) that it misled investors about performance metrics and custody of clients' crypto assets, Reuters reported. Titan, a New York-based registered investment adviser, misled investors with statements made on its website about hypothetical returns from August 2021 to October 2022, the SEC said in a statement. That included touting annualized crypto performance results as high 2,700% without telling investors they were extrapolated from a "purely" hypothetical three-week period, the SEC said in a charging document. The resolution marks the first violation under a recently-amended SEC rule that allows advisers to use such hypothetical metrics only if they meet certain requirements designed to prevent fraud. Titan, which did not admit to or deny the SEC's findings, said in a statement that it fully cooperated with the SEC's inquiry and continues to make "significant investments to build and enhance its compliance program". Regulators also found Titan made conflicting statements to clients about how it handled custody for crypto assets and failed to adopt policies for employees' personal trading in crypto assets, among other violations, the agency said.

Crypto exchange Binance late on Monday filed for a protective court order against the U.S. Securities and Exchange Commission saying the regulator's requests for information were "over broad" and "unduly burdensome," Reuters reported. In a court filing in the US District Court of Columbia, BAM Trading, Binance U.S.'s operating company and BAM Management said the group had already provided sufficient information to the regulator. The protective order seeks to limit the SEC, among other things, to four depositions from BAM employees, and to drop the deposition of BAM's chief executive and of its chief financial officer, without naming anyone. In June, U.S. regulators sued Binance and CEO Changpeng Zhao for allegedly operating a "web of deception," listing 13 charges including claims that the company artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.

Hedge funds and private equity firms are laying the groundwork for a legal clash with the U.S. Securities and Exchange Commission over its bid to tighten rules on disclosing fees and dealing with investors, Bloomberg News reported. The Managed Funds Association recently told members that the trade group could sue the SEC within two weeks of the new regulations being finalized, unless they’re softened significantly from what the agency proposed in February 2022. The email message, which was obtained by Bloomberg News, spotlights rising industry angst around a cornerstone of Chair Gary Gensler’s regulatory agenda. As proposed, the new rules would require hedge funds and private equity firms to disclose details of what they charge investors, while blocking certain types of fee arrangements. It would also be easier for pensions and endowments to successfully sue managers over investment decisions. Trade groups and investment firms, including Citadel and Andreessen Horowitz, have sent the SEC comments opposing the plan since the regulator released its initial proposal. The SEC hasn’t announced a date to implement the plan, but a near-final version is now circulating between the offices of the agency’s five commissioners, according to people familiar with the status, who asked not to be identified discussing non-public matters. That typically means a final vote could come in a month, or less.

Crypto trading platform Bittrex agreed to pay $24 million to settle charges that it operated an illegal securities exchange, the Securities and Exchange Commission said yesterday, the Wall Street Journal reported. The SEC sued the platform's U.S. and overseas entities in April. The agency accused its U.S. firm of operating an illegal securities exchange, broker-dealer and clearinghouse. It alleged that Bittrex's overseas entity failed to register as a national securities exchange. Its U.S. entity filed for bankruptcy in May, after being sued by regulators and winding down its U.S. operations.

Securities and Exchange Commission (SEC) Chairman Gary Gensler warned in a new interview that artificial intelligence (AI) will eventually lead to financial crises, The Hill reported. “This technology will be the center of future crises, future financial crises,” Gensler told The New York Times. “It has to do with this powerful set of economics around scale and networks.” Gensler predicted the future business systems in the U.S. will be reliant on two or three foundational models, which he says would make a financial crash more likely due to “herding,” which means all companies will rely on the same information. The SEC proposed a new rule last month that would require investment advisers to rid conflicts of interest in their technologies. Gensler said in a press release at the time that AI could place brokers’ or investment advisers’ interests above the investors’ interests, which is what the proposed rule would aim to curtail.

The U.S. Securities and Exchange Commission (SEC) sued internet marketer Richard Schueler, known online as Richard Heart, and his projects Hex, PulseChain and PulseX, alleging he raised over $1 billion across three different unregistered securities offerings beginning in 2019, CoinDesk.com reported. Heart also defrauded his investors, the SEC alleged in a lawsuit on Monday, by using investor funds for personal goods. "Heart continually touted these investments as a pathway to grandiose wealth for investors, claiming that Hex, for example, 'was built to be the highest appreciating asset that has ever existed in the history of man,'" the lawsuit said. "... Although Heart claimed these investments were for the vague purpose of supporting free speech, he did not disclose that he used millions of dollars of PulseChain investor funds to buy luxury goods for himself." PulseX and PulseChain launched earlier this month, but faced rocky starts in the weeks immediately after going live, seeing high fees, liquidity issues and exploitable bugs. The prices of the HEX, PLS and PLSX tokens fell post-launch.

The Securities and Exchange Commission (SEC) adopted a rule this week that will require publicly traded companies to report significant cyber incidents that are “material” to investors, The Hill reported. Companies will have four business days to report to the agency from the time they determine that the incident was material. “Whether a company loses a factory in a fire — or millions of files in a cybersecurity incident — it may be material to investors,” SEC Chair Gary Gensler said in a statement. “Currently, many public companies provide cybersecurity disclosure to investors. I think companies and investors alike, however, would benefit if this disclosure were made in a more consistent, comparable, and decision-useful way,” he added. Under the new rule, companies will have to disclose the incident’s nature, scope, timing and impact.