The Robare Decision: Implications for Advisers and the SEC (Part Two of Two)

The SEC continues to focus on disclosure issues, particularly in the context of conflicts of interest. A recent court decision supports the SEC’s push for adequate disclosure of potential and actual conflicts of interest, while undermining the regulator’s characterization of willful omissions in disclosures. The U.S. Court of Appeals for the D.C. Circuit (Court) ruled in Robare v. SEC that an investment adviser and two of its principals violated Section 206(2) of the Investment Advisers Act of 1940 by negligently failing to adequately disclose to investors its financial arrangement with a service provider. The Court held, however, that this negligent conduct could not also be the basis for a violation of Section 207 for willful inadequate disclosures to the SEC. This two‑part series analyzes the Robare decision. This second article provides a former senior SEC official’s perspective on the implications of Robare for investment advisers and the SEC’s Division of Enforcement. The first article reviewed the Commission’s findings and the Court’s rulings on those findings. For analysis of other significant court rulings, see “Delaware Court Enforces Contractual Provision Preserving Attorney-Client Privilege Over Seller’s Pre‑Disposition Communications” (Jul. 16, 2019); and “What the Supreme Court’s Decision in Lorenzo v. SEC Means for Fund Managers” (Jun. 18, 2019). To explore the ramifications of the Robare decision and other issues, on Thursday, October 3, 2019, at 1:00 p.m. EDT, the Private Equity Law Report’s sister product – the Hedge Fund Law Report – will host a complimentary webinar, entitled “Focus on Private Funds: A Fireside Chat with SEC Commissioner Hester M. Peirce.” During the program, Robin L. Barton, Senior Reporter for the Hedge Fund Law Report, and Commissioner Peirce will discuss topics of interest to private fund managers, and Commissioner Peirce will also answer attendees’ questions during a Q&A session at the end of the webinar. To register for the webinar, click here.

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