Focus on Funds Newsletter

Investment Advisor Advertising: Does the "Testimonial Rule" Apply to Third-party Review Sites?

Alternative Investments: What Do Investment Advisors Want?

Are You Aware of the Latest Updates on Passive Foreign Investment Company Reporting Rules?

FASB Clarifies the Definition of an Investment Company: How to Evaluate Your Entity’s Status

Incentive Compensation: Allocation or Fee?

August

Options and Futures Receive Special Tax Treatment
Mark A. Soslow, CPA

If you trade futures, options, or similar investments, it's important to familiarize yourself with Internal Revenue Code Sec. 1256. That section offers lower capital gains tax rates for short-term trading of regulated futures contracts, foreign currency contracts, non-equity options (including broad-based stock index options), dealer equity options and dealer securities futures contracts (collectively, "Sec. 1256 contracts") on a "qualified board or exchange" (QBE).  In this article you will find out more about the 60/40 tax treatment, mark-to-market treatment, qualified investments, and suggestions for avoiding mistakes.

Download the full article to the right.

FASB Simplifies Reporting of Investments Measured at Net Asset Value
Karen Kerby, CPA

In May 2015, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) designed to simplify disclosure requirements for certain investments measured at net asset value (NAV). This is good news for hedge funds, funds-of-funds, and other entities that hold alternative investments.  Find out why the update occurred, what's different, see if you're exempt, and recommended action for public business entities. 

Download the full article to the right.

May

Cybersecurity for Hedge Funds: What’s Your Plan?
Mark A. Soslow, CPA

Hedge funds can’t afford to take a reactive approach to cybersecurity. Data breaches and frauds at financial institutions, investment firms and other financial services providers continue to make headlines at unprecedented rates. So all funds should have a plan for addressing cyber risks.

This article discusses the problem, shows how to assess your risk, and offers solutions for cybersecurity.

Download the full article to the right.

Sales and Use Tax Exposure Alert for Businesses Not Registered as Sales Tax Vendors
Alan H. Ackermann, CPA

Many businesses not providing taxable services or products assume that sales tax filings are irrelevant to them and unnecessary.  Examples of such businesses include those that do not sell tangible property to end-users and those that do not provide taxable services such as hedge fund/asset management companies.
 

Non-filing of sales and use tax returns may create significant tax exposure to such companies due to potential noncompliance with the compensating use tax statutes of state and local jurisdictions. 

Download the full article to the right.

February

SEC Committee Calls for Revised “Accredited Investor” Definition
Karen Kerby, CPA

In October 2014, the SEC’s Investor Advisory Committee (IAC) recommended significant changes to the definition of "accredited investor" which are still pending. If adopted, these changes will have a big impact on private stock offerings.

This article examines why changes to the definition are important, reviews what's being proposed, and offers some suggestions on how to address deficiencies.

Tax Treatment of Passive Foreign Investment Companies: What Happens When a PFIC is no Longer a PFIC?
Suzy Lee, CPA, MST

The Passive Foreign Investment Company (PFIC) rules are designed to prevent U.S. shareholders from escaping current taxation on certain foreign investments. A PFIC is a foreign corporation that meets a 75% passive income or 50% passive asset test.

This article examines the default regime, takes a look at two types of elections you can make, and reviews what happens when the PFIC status ends.

October

The Volcker Rule: What Does it Mean for Private Funds?
Karen Kerby, CPA

In December 2013, U.S. banking and securities regulators issued final regulations implementing the "Volcker Rule." Mandated by the Dodd-Frank Act of 2010, the rule prohibits banking entities from engaging in certain risky activities, including short-term proprietary trading and sponsoring or owning interests in certain private funds.

This article examines such topics as investment restrictions and how, despite these restrictions, funds can capitalize on the limited opportunities that exist to raise capital from banks through the adoption of alternative fund structures.

Investment Advisor Advertising: Does the "Testimonial Rule" Apply to Third-party Review Sites?
Mark A. Soslow, CPA

Earlier this year, the SEC issued welcome guidance on the prohibition against testimonials in advertising by investment advisors and its implications for social media websites. In Guidance Update 2014-4, the SEC's Division of Investment Management clarified that Registered Investment Advisors are allowed to publish third-party reviews - from sites such as Yelp or Angie's List - under certain circumstances.

This article examines the rationale for the rule and the importance of establishing independence and reviewing your social media policies.

June

Alternative Investments: What Do Investment Advisors Want?
Karen Kerby, CPA

In recent years, investment advisors have increasingly recommended to their clients alternative investments, such as hedge funds and private equity funds. At the same time, advisors have stepped up their due diligence efforts in evaluating these investments.

This article examines topics such as due diligence trends and warning signs that may lead to additional due diligence.

Are You Aware of the Latest Updates on Passive Foreign Investment Company Reporting Rules?
Mark A. Soslow, CPA

On December 30, 2013, the U.S. Treasury Department and the IRS issued regulations which define Passive Foreign Investment Company (PFIC) shareholders and outline the reporting requirements for PFICs.

This article examines topics such as what constitutes a PFIC shareholder, reporting requirements, and tax-exempt organization status.

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