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The History of Hedge Fund Regulation in the United States
The hedge fund industry in the United States has evolved from a niche market participant in the early 1950s to a major industry operating in international financial markets today. Hedge funds in the United States were originally privately-held, privately-managed investment funds, unregistered and exempt from federal securities regulation. With increasing investor demand for hedge funds and significant growth of the hedge fund industry came a tectonic shift in the regulatory framework applicable to the industry.
Several core features characterize the hedge fund industry. A hedge fund’s goal is to earn for its investors a high rate of return on their capital contributions through sophisticated trading strategies in securities, currencies, and derivatives. Historically, hedge funds operate with a relatively short “lock-in,” the amount of time an investor must commit money pledged to the fund. Hedge funds that lose money, and a large proportion do, simply wither away. Because of the emphasis on performance, the hedge fund industry may be labeled a “survival of the fittest” industry. The fund manager takes a 1-2 percent management fee and 20 percent of the fund’s profits (the carry). A successful manager usually establishes a number of distinct, follow-up funds. If a fund manager earns lackluster returns, the investors pull their capital and will not support the manager’s effort to raise new funds.
The core characteristics of the hedge fund industry give rise to a variety of concerns over hedge funds:
(1) People who fear concentrations of money see hedge funds as too large. Hedge funds have grown rapidly, both in number and size. Hedge funds also tend to operate in loose cooperation, like wolf packs.
(2) People who distrust the wealthy elite see hedge funds as the exclusive playground of a very wealthy elite class of investors. These wealthy investors appear to be making double-digit returns not available to normal investors.
(3) People who fear secret conspiracies see hedge funds as insufficiently transparent. Ben Bernanke, former chairman of the Federal Reserve System, has described them as “opaque.” If they comply with applicable exemptions from federal securities regulation, hedge funds do not have to disclose their membership or their investment strategies, which depend on speed, cleverness, and leverage.
(4) People who do not like sharp lenders of last resort believe some hedge funds are vultures, demanding confiscatory terms from those in dire financial situations.
(5) People who condemn risk-taking see hedge funds as a form of gambling. Hedge funds can use leverage to generate high returns. They can borrow from banks and other sources to fund their trading strategies. Although many of the funds have shown significant returns, a few have been spectacular failures. When their strategies fail, hedge funds can produce losses not only for their members but also for their lenders and counterparties.
(6) People who suspect fraud in multifaceted financial scenarios find hedge funds too complex. Hedge funds can play the short side of the market, raising old prejudices against short sellers, and they often engage in sophisticated trading maneuvers, using cutting edge financial products. Because the complex trading maneuvers can take advantage of loopholes in the existing regulatory framework, some see foul play involved. A number of troubling incidents of fraud perpetrated by hedge fund operators caused the SEC to lists fraud as one of its primary reasons for its new hedge fund regulations.
(7) People who are suspicious of “get-rich-quick, guaranteed” sales pitches believe that hedge funds may be duping their own investors with false promises of easy money. Colleges such as The College of Wooster in Ohio have over 80 percent of their entire endowment in hedge funds, to the consternation of some of their alumni who wonder whether the college officials are overmatched when responding to hedge fund solicitations.
(8) People who value market stability in the securities and currency markets worry that hedge funds add to market volatility that is unrelated to fundamental market values and that they contribute to market bubbles and panics.
(9) People with positions in traditional operating companies can see “activist” hedge funds as threatening. Some hedge funds take an “activist” investor tack, attempting to influence the incumbent management in blue chip companies such as Time-Warner Inc., Wendy’s, McDonalds, Knight Ridder, Inc., and General Motors. These actions have aroused the attention and ire of main street managers and their lawyers.
This combination of concerns about hedge funds–large size, elite investors, lack of transparency, perceptions of predatory behavior, high risk and periodic spectacular failure, complexity, perceived false promises of easy money, volatility, and attacks on established interests–can foment popular fear of a new breed of shadowy financial players. The populist anti-hedge fund spin almost writes itself: a wealthy, backroom, elite group of investors, driven by selfish greed, takes excessive risks with cheater-style trading strategies that imperil the health of our banks and our corporations – our entire economy. And popular fear created pressure for government regulation of the industry.
THE REGULATORY FRAMEWORK ORIGINALLY APPLICABLE TO HEDGE FUNDS IN THE UNITED STATES
At the beginning of the industry in the early 1950s, organizers of hedge funds designed the funds to be exempt from the public offering registration requirements of the Securities Act of 1933, the periodic reporting requirements of the Securities Exchange Act of 1934, the registration requirements of the Investment Company Act of 1940, and the registration requirements of the Investment Advisers Act of 1940. The exemptions gave United States hedge funds substantial freedom in their investment activities.
The typical hedge fund manager raises money from wealthy individuals and institutional investors using an exemption for “private offerings” under the Securities Act of 1933 in Rule 506 of Regulation D. Most early hedge funds satisfied the exemption by marketing themselves only to “accredited investors,” institutional investors, insiders, or natural persons with a net worth of over $1 million or income over $200,000 for each of the last two years. Funds that used Rule 506 were prohibited from using any form of “general solicitation or general advertising.” The SEC applied a “pre-existing, substantive relationship” test when deciding that the general solicitation rule has not been violated.
Moreover, a hedge fund was careful to avoid classification as a financial market player that is specifically regulated by the federal legislation. A hedge fund, for example, is not an underwriter, a market maker, or a broker-dealer (market intermediary). A bank or investment subsidiary of an operating company is not a hedge fund. Hedge funds were also careful, by having fewer than 500 investors, to avoid the periodic reporting obligations of Section 12 of the Exchange Act and SEC Rule 12g-1.
The most important regulatory exemption for hedge funds is found in the Investment Company Act of 1940, an act that regulates mutual funds. Hedge funds rely on one of two statutory exclusions in the definition of an investment company. Hedge funds either have fewer than 100 investors or have only investors that are “qualified purchasers,” i.e., individuals who own over $5 million in investments or companies with over $25 million in investments. A hedge fund that comes within one of these statutory exclusions may use investment techniques that are forbidden to the registered investment companies. The most notable technique that is more freely available to hedge funds than other specifically regulated financial entities is “shorting,” betting on decreases in value in asset classes.
Most hedge fund investment strategies are complex, involving a combination of several coordinated trading positions to make the desired market play. Several of the strategies have common names. In “convertible arbitrage,” for example, a hedge fund goes long in convertible securities (bonds or shares that are exchangeable for another form of securities, usually common shares, at a pre-set price) and simultaneously shorts the shares. In “merger arbitrage,” a hedge fund buys target company stock and shorts the stock of the purchaser. In “global macro” plays, a fund takes a long position in one country’s currency and shorts the currency of another (this is also done with government debt). In “market neutral” plays, a fund takes offsetting long positions in undervalued companies and short positions in overvalued companies.
Hedge funds can also structure their operations to avoid other regulations. Hedge funds also typically avoid the regulation of “commodity pools” by the Commodity Futures Trading Commission (CFTC). New CFTC rules exempt pools that sell only to sophisticated participants, “accredited investors” under Regulation D or “qualified purchasers” under the Investment Company Act. Hedge funds avoid regulation under the Employee Retirement Income Security Act (ERISA) by limiting the ownership interest of any employee benefit plan to less than 25 percent of the fund.
CHANGES TO THE INITIAL REGULATORY FRAMEWORK
The New SEC Rules Requiring the Registration of Hedge Fund Managers
Since the growth of the hedge fund industry in the 1980s, the SEC had repeatedly attempted to register hedge fund advisers. Its last attempt at registering them in 2004 was vacated as arbitrary by the United States Court of Appeals for the District of Columbia in Goldstein v. SEC in 2006. Although the vast majority of hedge fund advisers had registered under the SEC’s registration requirements, they immediately deregistered after the Goldstein decision. The advisers’ decisions to deregister in 2006 seems to confirm the industry’s opposition to registration and disclosure requirements.
Because of hedge funds’ alleged impact on the markets in the 1969 bear market, the SEC started to consider ways to bring them under its regulatory authority. Initially, the SEC opined that hedge funds are “dealers” in securities, which could require registration under the Securities Exchange Act. However, the SEC continued to provide guidance, mostly in the form of no-action letters, to help investment advisers determine how to count clients to stay exempt from securities regulation. Courts provided very limited and sometimes contradictory guidance.
Finally, in 1985, the SEC adopted the investment adviser registration safe harbor in Rule 203(b)(3) under the Investment Advisers Act. For purposes of an exemption from registration under that act, the safe harbor allowed a limited partnership, rather than each of its limited partners, to be counted as a “client” of a general partner acting as investment adviser to the partnership. Justifying the rule, the SEC reasoned that if an investment adviser manages an investment pool on the basis of the investment objectives of its participants, the entire pool should be viewed as the adviser’s client rather than each participant. The rule was aimed at providing investment advisers with greater certainty in determining when they might rely on the safe harbor.
The SEC broadened the scope of the rule in 1997 by including other entities used by investment advisers to pool client assets. While the 1985 Rule permitted advisers to count each partnership, trust, or corporation as a single client, the 1997 Rule expanded the rule to cover other legal entities. Specifically, investment advisers were allowed to count a legal organization as a single client provided the investment advice was based on the objectives of the legal organization rather than the individual investment objectives of any owners of the legal organization. This safe harbor allowed investment advisers to manage large amounts of securities indirectly for several hundreds of investors in several hedge funds.
After the fall of Long Term Capital Management (LTCM) in 1998 and its bailout orchestrated by the New York Federal Reserve Bank, it became increasingly apparent that hedge funds could pose risks that might affect international markets. Concerns over excessive leverage by hedge funds and a lack of transparency led to increasing demands for new regulation. Central banks, regulatory agencies, and international regulatory committees conducted studies to determine if hedge funds posed a risk to the global financial system. Many of these studies concluded that there was a need for greater disclosure by hedge funds to increase transparency and enhance market discipline.
Eventually, in December 2004, the SEC, using its rulemaking authority under the Investment Advisers Act, issued a final rule requiring hedge fund advisers to register under that act. The rule was controversial and strongly opposed by hedge fund advisers. Without the private adviser exemption, investment advisers were subject to SEC inspections and bookkeeping and record keeping requirements. Without the private adviser exemption, hedge funds were also faced with disclosure requirements and code of ethics requirements resulting in significantly higher legal fees. The industry argued that completing the 35-page Form ADV was unnecessarily costly and burdensome. Registration also allowed the SEC to screen hedge fund advisers for prior convictions or other professional misconduct.
The rule was issued by a rare three-to-two vote of the SEC Commissioners. The SEC justified its rulemaking with reference to the growth of the hedge fund industry in combination with the retailization of the hedge fund sector, increased hedge fund risk, and financial loss to investors caused by instances of fraud by hedge fund advisers. It cited among the benefits of this rule more information about hedge fund advisers, the deterrence of fraud, the curtailment of losses, and improved compliance controls. The SEC argued that these positive aspects of its rulemaking would benefit mutual fund investors, other investors and markets, regulatory policy, and hedge fund advisers.
The registration requirement precipitated significant opposition by the hedge fund industry. Eventually, in July 2006, the D.C. Circuit in Goldstein v. SEC vacated the hedge fund rule as an instance of arbitrary rulemaking by the SEC. Because the term “client” had not otherwise been defined in the Investment Advisers Act, the SEC had no authority to determine the meaning of the term. Most hedge fund advisers who had registered under the registration rule deregistered. After the Goldstein decision, the SEC proposed a tightening of accredited investor standards under Regulation D, the primary method of raising hedge fund cash, and expanded antifraud protection for private investors.
The Dodd-Frank Act mooted the Goldstein decision by authorizing explicitly the SEC to register hedge fund advisers. Title IV of the Dodd–Frank Act is entitled the Private Fund Investment Advisers Registration Act of 2010 (PFIARA). PFIARA authorizes the SEC to bring hedge funds under regulatory supervision. The Dodd-Frank Act authorized the SEC to promulgate rules requiring registration and enhanced disclosure for private equity and hedge funds managers. As part of the new rules, the SEC introduced controversial reporting obligations that would require the disclosure of strategies and products used by the investment adviser and its funds, performance and changes in performance, financing information, risks metrics, counterparties and credit exposure, positions held by the investment adviser, percent of assets traded using algorithms, and the percent of equity and debt, among other matters.
The Act mandates hedge fund adviser registration to increase record keeping and disclosure. Under PFIARA, hedge funds with more than $150 million Assets Under Management (AUM) are required to register as investment advisers and to disclose information about their trades and portfolios to the SEC. The Dodd-Frank Act also directs the SEC to set up rules for the registration and reporting of hedge fund managers who were previously exempt from registration. By registering hedge fund advisers, the SEC may collect necessary information to curtail those who operate in the “shadows of our markets,” prevent fraud, limit systemic risk, and provide information to investors.
Title IV of the Dodd-Frank Act also requires registered investment advisers to maintain records and any other information that may be necessary and appropriate to avoid systemic risk. Advisers are required to provide confidential reports with respect to certain information related to systemic risk, such as trading practices trading and investment positions the amount of AUM valuation policies side letters the use of leverage, including off-balance sheet leverage counterparty credit risk exposures and other information deemed necessary. PFIARA also makes it mandatory for registered advisers to maintain records and any other information the SEC and the systemic risk regulators may deem necessary.
Despite these challenges for the hedge fund industry, several empirical studies conducted by Professor Wulf A. Kaal suggest that the impact of Form PF has been absorbed relatively quickly by the hedge fund industry. The hedge fund industry seems to be adjusting well to the registration and disclosure requirements under the Dodd-Frank Act. Kaal’s data analysis indicates, however, that the data reporting requirements for hedge fund advisers in Form PF and the corresponding SEC forms can be further improved. The majority of SEC-registered hedge fund advisers identified the ambiguity of Form PF data reporting requirements as the most pressing issue. Kaal also shows that the cost of hedge fund manager registration under the Dodd-Frank Act brings increasing returns to scale for the industry, favoring the larger established funds.
The newest regulatory threat to hedge funds, advocated by the leading candidates in both the Democratic and Republican Presidential primaries, is a change in the tax code which would, if enacted, dramatically increase the taxes paid by successful hedge funds on their returns. The increased taxes, unless ameliorated though clever planning, could reduce substantially hedge fund returns and make them less competitive to other forms of intermediated investments.
SUMMARY AND CONCLUSIONS
Financial economists have, for over seventy years, been decrying the lack of independent shareholder involvement in the management of public firms and the lack of swift capital reallocation in American industry. Hedge funds play a major role in both of these functions.
In the aftermath of Title IV of the Dodd-Frank Act, the SEC’s fine tuning of the regulatory framework applicable to the hedge fund industry can further enhance hedge funds’ role in financial markets.
The preceding post comes to us from Wulf A. Kaal, Associate Professor at the University of St. Thomas School of Law, and Dale A. Oesterle, the J. Gilbert Reese Chair in Contract Law at the Moritz College of Law at The Ohio State University. This post is based on the co-authored article: Wulf A. Kaal & Dale Oesterle, The History of Hedge Fund Regulation in the United States, Handbook on Hedge Funds, Oxford University Press (2016), which is available here.
§ 1026.39 Mortgage transfer disclosures.
(a) Scope. The disclosure requirements of this section apply to any covered person except as otherwise provided in this section. For purposes of this section:
(1) A “covered person” means any person, as defined in §.2(a)(22), that becomes the owner of an existing mortgage loan by acquiring legal title to the debt obligation, whether through a purchase, assignment or other transfer, and who acquires more than one mortgage loan in any twelve-month period. For purposes of this section, a servicer of a mortgage loan shall not be treated as the owner of the obligation if the servicer holds title to the loan, or title is assigned to the servicer, solely for the administrative convenience of the servicer in servicing the obligation.
1. Covered persons. The disclosure requirements of this section apply to any “covered person” that becomes the legal owner of an existing mortgage loan, whether through a purchase, or other transfer or assignment, regardless of whether the person also meets the definition of a “creditor” in Regulation Z. The fact that a person purchases or acquires mortgage loans and provides the disclosures under this section does not by itself make that person a “creditor” as defined in the regulation.
2. Acquisition of legal title. To become a “covered person” subject to this section, a person must become the owner of an existing mortgage loan by acquiring legal title to the debt obligation.
i. Partial interest. A person may become a covered person by acquiring a partial interest in the mortgage loan. If the original creditor transfers a partial interest in the loan to one or more persons, all such transferees are covered persons under this section.
ii. Joint acquisitions. All persons that jointly acquire legal title to the loan are covered persons under this section, and under §.39(b)(5), a single disclosure must be provided on behalf of all such covered persons. Multiple persons are deemed to jointly acquire legal title to the loan if each acquires a partial interest in the loan pursuant to the same agreement or by otherwise acting in concert. See comments 39(b)(5)-1 and 39(d)(1)(ii)-1 regarding the disclosure requirements for multiple persons that jointly acquire a loan.
iii. Affiliates. An acquiring party that is a separate legal entity from the transferor must provide the disclosures required by this section even if the parties are affiliated entities.
3. Exclusions. i. Beneficial interest. Section 1026.39 does not apply to a party that acquires only a beneficial interest or a security interest in the loan, or to a party that assumes the credit risk without acquiring legal title to the loan. For example, an investor that acquires mortgage-backed securities, pass-through certificates, or participation interests and does not acquire legal title in the underlying mortgage loans is not covered by this section.
ii. Loan servicers. Pursuant to TILA Section 131(f)(2), the servicer of a mortgage loan is not the owner of the obligation for purposes of this section if the servicer holds title to the loan as a result of the assignment of the obligation to the servicer solely for the administrative convenience of the servicer in servicing the obligation.
4. Mergers, corporate acquisitions, or reorganizations. Disclosures are required under this section when, as a result of a merger, corporate acquisition, or reorganization, the ownership of a mortgage loan is transferred to a different legal entity.
(2) A “mortgage loan” means:
1. Mortgage transactions covered. Section 1026.39 applies to closed-end or open-end consumer credit transactions secured by the principal dwelling of a consumer.
(i) An open-end consumer credit transaction that is secured by the principal dwelling of a consumer and
(ii) A closed-end consumer credit transaction secured by a dwelling or real property.
(b) Disclosure required. Except as provided in paragraph (c) of this section, each covered person is subject to the requirements of this section and shall mail or deliver the disclosures required by this section to the consumer on or before the 30th calendar day following the date of transfer.
1. Generally. A covered person must mail or deliver the disclosures required by this section on or before the 30th calendar day following the date of transfer, unless an exception in §.39(c) applies. For example, if a covered person acquires a mortgage loan on March 15, the disclosure must be mailed or delivered on or before April 14.
(1) Form of disclosures. The disclosures required by this section shall be provided clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures required by this section may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
1. Combining disclosures. The disclosures under this section can be combined with other materials or disclosures, including the transfer of servicing notices required by the Real Estate Settlement Procedure Act (12 U.S.C. 2601 et seq.) so long as the combined disclosure satisfies the timing and other requirements of this section.
(2) The date of transfer. For purposes of this section, the date of transfer to the covered person may, at the covered person's option, be either the date of acquisition recognized in the books and records of the acquiring party, or the date of transfer recognized in the books and records of the transferring party.
(3) Multiple consumers. If more than one consumer is liable on the obligation, a covered person may mail or deliver the disclosures to any consumer who is primarily liable.
(4) Multiple transfers. If a mortgage loan is acquired by a covered person and subsequently sold, assigned, or otherwise transferred to another covered person, a single disclosure may be provided on behalf of both covered persons if the disclosure satisfies the timing and content requirements applicable to each covered person.
1. Single disclosure for multiple transfers. A mortgage loan might be acquired by a covered person and subsequently transferred to another entity that is also a covered person required to provide the disclosures under this section. In such cases, a single disclosure may be provided on behalf of both covered persons instead of providing two separate disclosures if the disclosure satisfies the timing and content requirements applicable to each covered person. For example, if a covered person acquires a loan on March 15 with the intent to assign the loan to another entity on April 30, the covered person could mail the disclosure on or before April 14 to provide the required information for both entities and indicate when the subsequent transfer is expected to occur.
2. Estimating the date. When a covered person provides the disclosure required by this section that also describes a subsequent transfer, the date of the subsequent transfer may be estimated when the exact date is unknown at the time the disclosure is made. Information is unknown if it is not reasonably available to the covered person at the time the disclosure is made. The “reasonably available” standard requires that the covered person, acting in good faith, exercise due diligence in obtaining information. The covered person normally may rely on the representations of other parties in obtaining information. The covered person might make the disclosure using an estimated date even though the covered person knows that more precise information will be available in the future. For example, a covered person may provide a disclosure on March 31 stating that it acquired the loan on March 15 and that a transfer to another entity is expected to occur “on or around” April 30, even if more precise information will be available by April 14.
3. Duty to comply. Even though one covered person provides the disclosures for another covered person, each has a duty to ensure that disclosures related to its acquisition are accurate and provided in a timely manner unless an exception in §.39(c) applies.
(5) Multiple covered persons. If an acquisition involves multiple covered persons who jointly acquire the loan, a single disclosure must be provided on behalf of all covered persons.
1. Single disclosure required. If multiple covered persons jointly acquire the loan, a single disclosure must be provided on behalf of all covered persons instead of providing separate disclosures. See comment 39(a)(1)-2.ii regarding a joint acquisition of legal title, and comment 39(d)(1)(ii)-1 regarding the disclosure requirements for multiple persons that jointly acquire a loan. If multiple covered persons jointly acquire the loan and complete the acquisition on separate dates, a single disclosure must be provided on behalf of all persons on or before the 30th day following the earliest acquisition date. For examples, if covered persons A and B enter into an agreement with the original creditor to jointly acquire the loan, and complete the acquisition on March 15 and March 25, respectively, a single disclosure must be provided on behalf of both persons on or before April 14. If the two acquisition dates are more than 30 days apart, a single disclosure must be provided on behalf of both persons on or before the 30th day following the earlier acquisition date, even though one person has not completed its acquisition. See comment 39(b)(4)-2 regarding use of an estimated date of transfer.
2. Single disclosure not required. If multiple covered persons each acquire a partial interest in the loan pursuant to separate and unrelated agreements and not jointly, each covered person has a duty to ensure that disclosures related to its acquisition are accurate and provided in a timely manner unless an exception in §.39(c) applies. The parties may, but are not required to, provide a single disclosure that satisfies the timing and content requirements applicable to each covered person.
3. Timing requirements. A single disclosure provided on behalf of multiple covered persons must satisfy the timing and content requirements applicable to each covered person unless an exception in §.39(c) applies.
4. Duty to comply. Even though one covered person provides the disclosures for another covered person, each has a duty to ensure that disclosures related to its acquisition are accurate and provided in a timely manner unless an exception in §.39(c) applies. See comments 39(c)(1)-2, 39(c)(3)-1 and 39(c)(3)-2 regarding transfers of a partial interest in the mortgage loan.
(c) Exceptions. Notwithstanding paragraph (b) of this section, a covered person is not subject to the requirements of this section with respect to a particular mortgage loan if:
(1) The covered person sells, or otherwise transfers or assigns legal title to the mortgage loan on or before the 30th calendar day following the date that the covered person acquired the mortgage loan which shall be the date of transfer recognized for purposes of paragraph (b)(2) of this section
1. Transfer of all interest. A covered person is not required to provide the disclosures required by this section if it sells, assigns or otherwise transfers all of its interest in the mortgage loan on or before the 30th calendar day following the date that it acquired the loan. For example, if covered person A acquires the loan on March 15 and subsequently transfers all of its interest in the loan to covered person B on April 1, person A is not required to provide the disclosures required by this section. Person B, however, must provide the disclosures required by this section unless an exception in §.39(c) applies.
2. Transfer of partial interests. A covered person that subsequently transfers a partial interest in the loan is required to provide the disclosures required by this section if the covered person retains a partial interest in the loan on the 30th calendar day after it acquired the loan, unless an exception in §.39(c) applies. For example, if covered person A acquires the loan on March 15 and subsequently transfers fifty percent of its interest in the loan to covered person B on April 1, person A is required to provide the disclosures under this section if it retains a partial interest in the loan on April 14. Person B in this example must also provide the disclosures required under this section unless an exception in §.39(c) applies. Either person A or person B could provide the disclosure on behalf of both of them if the disclosure satisfies the timing and content requirements applicable to each of them. In this example, a single disclosure for both covered persons would have to be provided on or before April 14 to satisfy the timing requirements for person A's acquisition of the loan on March 15. See comment 39(b)(4)-1 regarding a single disclosure for multiple transfers.
(2) The mortgage loan is transferred to the covered person in connection with a repurchase agreement that obligates the transferor to repurchase the loan. However, if the transferor does not repurchase the loan, the covered person must provide the disclosures required by this section within 30 days after the date that the transaction is recognized as an acquisition on its books and records or
1. Repurchase agreements. The original creditor or owner of the mortgage loan might sell, assign or otherwise transfer legal title to the loan to secure temporary business financing under an agreement that obligates the original creditor or owner to repurchase the loan. The covered person that acquires the loan in connection with such a repurchase agreement is not required to provide disclosures under this section. However, if the transferor does not repurchase the mortgage loan, the acquiring party must provide the disclosures required by this section within 30 days after the date that the transaction is recognized as an acquisition on its books and records.
2. Intermediary parties. The exception in §.39(c)(2) applies regardless of whether the repurchase arrangement involves an intermediary party. For example, legal title to the loan may transfer from the original creditor to party A through party B as an intermediary. If the original creditor is obligated to repurchase the loan, neither party A nor party B is required to provide the disclosures under this section. However, if the original creditor does not repurchase the loan, party A must provide the disclosures required by this section within 30 days after the date that the transaction is recognized as an acquisition on its books and records unless another exception in §.39(c) applies.
(3) The covered person acquires only a partial interest in the loan and the party authorized to receive the consumer's notice of the right to rescind and resolve issues concerning the consumer's payments on the loan does not change as a result of the transfer of the partial interest.
1. Acquisition of partial interests. This exception applies if the covered person acquires only a partial interest in the loan, and there is no change in the agent or person authorized to receive notice of the right to rescind and resolve issues concerning the consumer's payments. If, as a result of the transfer of a partial interest in the loan, a different agent or party is authorized to receive notice of the right to rescind and resolve issues concerning the consumer's payments, the disclosures under this section must be provided.
2. Examples. i. A covered person is not required to provide the disclosures under this section if it acquires a partial interest in the loan from the original creditor who remains authorized to receive the notice of the right to rescind and resolve issues concerning the consumer's payments after the transfer.
ii. The original creditor transfers fifty percent of its interest in the loan to covered person A. Person A does not provide the disclosures under this section because the exception in §.39(c)(3) applies. The creditor then transfers the remaining fifty percent of its interest in the loan to covered person B and does not retain any interest in the loan. Person B must provide the disclosures under this section.
iii. The original creditor transfers fifty percent of its interest in the loan to covered person A and also authorizes party X as its agent to receive notice of the right to rescind and resolve issues concerning the consumer's payments on the loan. Since there is a change in an agent or party authorized to receive notice of the right to rescind and resolve issues concerning the consumer's payments, person A is required to provide the disclosures under this section. Person A then transfers all of its interest in the loan to covered person B. Person B is not required to provide the disclosures under this section if the original creditor retains a partial interest in the loan and party X retains the same authority.
iv. The original creditor transfers all of its interest in the loan to covered person A. Person A provides the disclosures under this section and notifies the consumer that party X is authorized to receive notice of the right to rescind and resolve issues concerning the consumer's payments on the loan. Person A then transfers fifty percent of its interest in the loan to covered person B. Person B is not required to provide the disclosures under this section if person A retains a partial interest in the loan and party X retains the same authority.
(d) Content of required disclosures. The disclosures required by this section shall identify the mortgage loan that was sold, assigned or otherwise transferred, and state the following, except that the information required by paragraph (d)(5) of this section shall be stated only for a mortgage loan that is a closed-end consumer credit transaction secured by a dwelling or real property other than a reverse mortgage transaction subject to §.33 of this part:
1. Identifying the loan. The disclosures required by this section must identify the loan that was acquired or transferred. The covered person has flexibility in determining what information to provide for this purpose and may use any information that would reasonably inform a consumer which loan was acquired or transferred. For example, the covered person may identify the loan by stating:
i. The address of the mortgaged property along with the account number or loan number previously disclosed to the consumer, which may appear in a truncated format
ii. The account number alone, or other identifying number, if that number has been previously provided to the consumer, such as on a statement that the consumer receives monthly or
iii. The date on which the credit was extended and the original amount of the loan or credit line.
2. Partial payment policy. The disclosures required by §.39(d)(5) must identify whether the covered person accepts periodic payments from the consumer that are less than the full amount due and whether the covered person applies the payments to a consumer's loan or holds the payments in a separate account until the consumer pays the remainder of the full amount due. The disclosures required by §.39(d)(5) apply only to a mortgage loan that is a closed-end consumer credit transaction secured by a dwelling or real property and that is not a reverse mortgage transaction subject to §.33. In an open-end consumer credit transaction secured by the consumer's principal dwelling, §.39(d) requires a covered person to provide the disclosures required by §.39(d)(1) through (4), but not the partial payment policy disclosure required by §.39(d)(5). If, however, the dwelling in the open-end consumer credit transaction is not the consumer's principal dwelling (e.g., it is used solely for vacation purposes), none of the disclosures required by §.39(d) is required because the transaction is not a mortgage loan for purposes of §.39. See §.39(a)(2). In contrast, a closed-end consumer credit transaction secured by the consumer's dwelling that is not the consumer's principal dwelling is considered a mortgage loan for purposes of §.39. Assuming that the transaction is not a reverse mortgage transaction subject to §.33, §.39(d) requires a covered person to provide the disclosures under §.39(d)(1) through (5). But if the transaction is a reverse mortgage transaction subject to §.33, §.39(d) requires a covered person to provide only the disclosures under §.39(d)(1) through (4).
(1) The name, address, and telephone number of the covered person.
1. Identification of covered person. Section 1026.39(d)(1) requires a covered person to provide its name, address, and telephone number. The party identified must be the covered person who owns the mortgage loan, regardless of whether another party services the loan or is the covered person's agent. In addition to providing its name, address and telephone number, the covered person may, at its option, provide an address for receiving electronic mail or an Internet Web site address, but is not required to do so.
(i) If a single disclosure is provided on behalf of more than one covered person, the information required by this paragraph shall be provided for each of them unless paragraph (d)(1)(ii) of this section applies.
1. Multiple transfers, single disclosure. If a mortgage loan is acquired by a covered person and subsequently transferred to another covered person, a single disclosure may be provided on behalf of both covered persons instead of providing two separate disclosures as long as the disclosure satisfies the timing and content requirements applicable to each covered person. See comment 39(b)(4)-1 regarding multiple transfers. A single disclosure for multiple transfers must state the name, address, and telephone number of each covered person unless §.39(d)(1)(ii) applies.
(ii) If a single disclosure is provided on behalf of more than one covered person and one of them has been authorized in accordance with paragraph (d)(3) of this section to receive the consumer's notice of the right to rescind and resolve issues concerning the consumer's payments on the loan, the information required by paragraph (d)(1) of this section may be provided only for that covered person.
1. Multiple covered persons, single disclosure. If multiple covered persons jointly acquire the loan, a single disclosure must be provided on behalf of all covered persons instead of providing separate disclosures. The single disclosure must provide the name, address, and telephone number of each covered person unless §.39(d)(1)(ii) applies and one of the covered persons has been authorized in accordance with §.39(d)(3) of this section to receive the consumer's notice of the right to rescind and resolve issues concerning the consumer's payments on the loan. In such cases, the information required by §.39(d)(1) may be provided only for that covered person.
2. Multiple covered persons, multiple disclosures. If multiple covered persons each acquire a partial interest in the loan in separate transactions and not jointly, each covered person must comply with the disclosure requirements of this section unless an exception in §.39(c) applies. See comment 39(a)(1)-2.ii regarding a joint acquisition of legal title, and comment 39(b)(5)-2 regarding the disclosure requirements for multiple covered persons.
(2) The date of transfer.
(3) The name, address and telephone number of an agent or party authorized to receive notice of the right to rescind and resolve issues concerning the consumer's payments on the loan. However, no information is required to be provided under this paragraph if the consumer can use the information provided under paragraph (d)(1) of this section for these purposes.
1. Identifying agents. Under §.39(d)(3), the covered person must provide the name, address and telephone number for the agent or other party having authority to receive the notice of the right to rescind and resolve issues concerning the consumer's payments on the loan. If multiple persons are identified under this paragraph, the disclosure shall provide the name, address and telephone number for each and indicate the extent to which the authority of each person differs. Section 1026.39(d)(3) does not require that a covered person designate an agent or other party, but if the consumer cannot contact the covered person for these purposes, the disclosure must provide the name, address and telephone number for an agent or other party that can address these matters. If an agent or other party is authorized to receive the notice of the right to rescind and resolve issues concerning the consumer's payments on the loan, the disclosure can state that the consumer may contact that agent regarding any questions concerning the consumer's account without specifically mentioning rescission or payment issues. However, if multiple agents are listed on the disclosure, the disclosure shall state the extent to which the authority of each agent differs by indicating if only one of the agents is authorized to receive notice of the right to rescind, or only one of the agents is authorized to resolve issues concerning payments.
2. Other contact information. The covered person may also provide an agent's electronic mail address or Internet Web site address, but is not required to do so.
(4) Where transfer of ownership of the debt to the covered person is or may be recorded in public records, or, alternatively, that the transfer of ownership has not been recorded in public records at the time the disclosure is provided.
1. Where recorded. Section 1026.39(d)(4) requires the covered person to disclose where transfer of ownership of the debt to the covered person is recorded if it has been recorded in public records. Alternatively, the disclosure can state that the transfer of ownership of the debt has not been recorded in public records at the time the disclosure is provided, if that is the case, or the disclosure can state where the transfer may later be recorded. An exact address is not required and it would be sufficient, for example, to state that the transfer of ownership is recorded in the office of public land records or the recorder of deeds office for the county or local jurisdiction where the property is located.
(5) Partial payment policy. Under the subheading “Partial Payment”:
1. Format of disclosure. Section 1026.39(d)(5) requires disclosure of the partial payment policy of covered persons for closed-end consumer credit transactions secured by a dwelling or real property, other than a reverse mortgage transaction subject to §.33. A covered person may utilize the format of the disclosure illustrated by form H-25 of appendix H to this part for the information required to be disclosed by §.38(l)(5). For example, the statement required §.39(d)(5)(iii) that a new covered person may have a different partial payment policy may be disclosed using the language illustrated by form H-25, which states “If this loan is sold, your new lender may have a different policy.” The text illustrated by form H-25 may be modified to suit the format of the covered person's disclosure under §.39. For example, the format illustrated by form H-25 begins with the text, “Your lender may” or “Your lender does not,” which may not be suitable to the format of the covered person's other disclosures under §.39. This text may be modified to suit the format of the covered person's integrated disclosure, using a phrase such as “We will” or “We are your new lender and have a different Partial Payment Policy than your previous lender. Under our policy we will.” Any modifications must be appropriate and not affect the substance, clarity, or meaningful sequence of the disclosure.
(i) If periodic payments that are less than the full amount due are accepted, a statement that the covered person, using the term “lender,” may accept partial payments and apply such payments to the consumer's loan
(ii) If periodic payments that are less than the full amount due are accepted but not applied to a consumer's loan until the consumer pays the remainder of the full amount due, a statement that the covered person, using the term “lender,” may hold partial payments in a separate account until the consumer pays the remainder of the payment and then apply the full periodic payment to the consumer's loan
(iii) If periodic payments that are less than the full amount due are not accepted, a statement that the covered person, using the term “lender,” does not accept any partial payments and
(iv) A statement that, if the loan is sold, the new covered person, using the term “lender,” may have a different policy.
(e) Optional disclosures. In addition to the information required to be disclosed under paragraph (d) of this section, a covered person may, at its option, provide any other information regarding the transaction.
1. Generally. Section 1026.39(e) provides that covered persons may, at their option, include additional information about the mortgage transaction that they consider relevant or helpful to consumers. For example, the covered person may choose to inform consumers that the location where they should send mortgage payments has not changed. See comment 39(b)(1)-1 regarding combined disclosures.
(f) Successor in interest. If, upon confirmation, a servicer provides a confirmed successor in interest who is not liable on the mortgage loan obligation with a written notice and acknowledgment form in accordance with Regulation X, §.32(c)(1) of this chapter, the servicer is not required to provide to the confirmed successor in interest any written disclosure required by paragraph (b) of this section unless and until the confirmed successor in interest either assumes the mortgage loan obligation under State law or has provided the servicer an executed acknowledgment in accordance with Regulation X, §.32(c)(1)(iv) of this chapter, that the confirmed successor in interest has not revoked.
Elements of an FCOI Report
The FCOI regul ation requires institutions to submit the following information when reporting an FCOI:
- The name of the investigator with the FCOI
- The name of the entity with which the investigator has an FCOI
- The nature of the Significant Financial Interest (SFI)
- The value of the financial interest
- Description of how the financial interest relates to the NIH-funded research and why the institution determined that the financial interest conflicts with such research
- Description of the key elements of the institution’s management plan, including other required information
Fund Disclosure at a Glance
The Division of Investment Management’s Disclosure Review and Accounting Office (DRAO) is responsible for reviewing filings such as prospectuses, proxy statements, and shareholder reports for mutual funds, exchange traded funds (ETFs), closed-end funds, variable insurance products, unit investment trusts, and similar investment funds. Millions of Americans use these funds to invest for their retirement, their children’s educations, and other important financial goals. We work to ensure that these investors have the information they need to make informed investment decisions.
Core Disclosure Principles:
Good disclosure should help investors:
- find what they need
- understand what they find
- use what they find to make informed investment decisions
Funds make many filings and their complexity varies. For this reason, DRAO takes a “risk-based” approach in reviewing filings. When reviewing filings, the staff generally places greater focus on:
- filings by novel and complex funds
- new disclosures (such as changes in response to the Commission’s adoption of new rules)
- disclosures that influence investment decisions, such as disclosures regarding strategies, risks, fees, and performance
The Disclosure Review and Accounting Office is pleased to respond to inquiries from investors, registrants, and other market participants and hear feedback on fund disclosure and accounting matters or the disclosure review process.
Registrants can also contact us to determine the identity of the examiner assigned to your filing.
Cortex Secures $2.5M in Funding from Sequoia -- New Reliability as Code Platform Provides Comprehensive Microservices Visibility and Control for Engineering and SRE Teams
SAN FRANCISCO--( BUSINESS WIRE )--Reliability as Code pioneer Cortex today announced that it has secured $2.5 million in seed funding led by Sequoia Capital. The new funds will accelerate development of the Cortex platform, which enables engineering leaders and site reliability engineers (SREs) to move beyond manual processes to gain visibility and control of rapidly expanding microservices. Bogomil Balkansky, a partner at Sequoia, joins the Cortex board of directors. Additional investors in the round include Y Combinator, Scott Belsky, CPO at Adobe Gokul Rajaram, board member of Pinterest and Coinbase Sam Lambert, CPO of PlanetScale Manik Gupta, former CPO of Uber and Mathilde Collin, CEO and founder of Front.
“Microservices are becoming ubiquitous because they help engineering teams move faster and with lower risk,” said Balkansky. “But microservices proliferation has side effects: engineering and SRE leaders are challenged to track what services exist, how they depend on one another and what their quality is. The Cortex platform puts all that information at their fingertips, and makes it easy to launch team-wide initiatives to improve service quality.”
“The rapid rate with which we have moved from monolithic application architectures to microservices, and the rapid service ‘sprawl’ that we have seen as a result have left DevOps and SRE teams in precarious positions,” said Torsten Volk, managing research director, Enterprise Management Associates. “The fact is that no organization knows everything that’s going on in their environments. This leads to development inefficiencies, internal conflict, wasted time and high costs. Platforms that give these teams the ability to optimize their microservices mix with Reliability as Code provide strong value in the market today.”
From legacy manual processes to Reliability as Code
Engineering and SRE leaders today depend on tribal knowledge and spreadsheets to track and optimize microservices, leading to surprise outages, security vulnerabilities and loss of time and money. The Cortex Reliability as Code platform is designed to automatically score services against best practices, migrations and SLOs. With the shift from legacy manual processes to Reliability as Code, Cortex provides a single-pane-of-glass for visualization of service ownership, documentation and performance history, giving engineering and SRE teams the visibility and control they need, even as teams shift, people move, platforms change and microservices continue to grow.
"Cortex built bridges among our SRE and our engineering team by providing a single source of truth for Production Readiness Review (PRR) for our microservices," said Riadh Amari, senior SRE manager at Namely. "Now engineering leaders and SREs aren't just constantly reminding people to adhere to best practices. They provide critical data on service performance and improve reliability consistently and with minimal friction. Cortex has completely changed their role and elevated their strategic importance to the entire organization."
“Cortex is a great tool for tracking and managing migrations and best practices. It makes answering complex questions around the number of services and service ownership very simple and a matter of just a few clicks,” said Tanmay Sardesai, software engineer at Clever. “Cortex has also eliminated many spreadsheets that we used to track migrations. It is slowly becoming the one-stop shop for tracking service performance and metadata in our org.”
The Cortex platform features an automatic onboarding workflow that scans all potential microservices sources, discovers the microservices, maps metadata to them and infers critical information such as ownership and on-call rotations. The platform then generates a dashboard illustrating relevant metrics for each of more than 30 third-party tools, including Datadog, Sonarqube, Snyk and PagerDuty. These integrations let engineers quickly access on-call rotations, latency dashboards, open vulnerabilities and more in one searchable dashboard. Each integration includes individual rules that enable users to drill down into specific metrics to grade the quality of their services via customizable “scorecards.” This enables development of production readiness checklists, security audits and evaluations of operation and development maturity.
New capabilities of the platform include:
- Microservices Quality Scorecards keep teams accountable for following best SRE/security/infra best practices by ‘gamifying’ service quality. Scorecards stack-rank services based on detailed performance metrics which motivates service owners to improve either performance, or decommission unused or unmanaged services.
- Cortex Query Language (CQL), a domain-specific language, lets users write granular rules about health of deploys, SLOs, on-call rotations, security vulnerabilities, package versions and more, such as, “if the service is a production service, then there must be an on-call rotation and greater than 85% test coverage.” This enables engineering and SRE leaders to track and enforce service quality across the entire engineering organization. Engineers can set reliability standards across teams and types of services through direct integrations with a variety of tools.
- Initiatives help drive progress towards meeting service metrics over a specified time period, letting users set goals and deadlines in a scorecard, making service quality a moving target for the team. Cortex messages service owners over Slack or email with their action items, which engineers can also see when they login to the Cortex dashboard. Initiatives align the team towards a common goal within a scorecard and help accelerate progress as a result.
“Cortex is working to address the pains and pressures that we and our colleagues at other leading tech companies felt when we were in the DevOps and SRE trenches and that are leading to burnout across these teams all over the world,” said Anish Dhar, CEO and co-founder, Cortex. “The rapid sprawl of microservices, combined with the archaic processes currently being applied to their management, are creating an unsustainable future for SREs and for the cloud. We are very pleased to have brought this much-needed Reliability as Code platform to market and are looking forward to seeing what our users will be able to achieve by leveraging the platform.”
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The Urban Institute strives to meet the highest standards of integrity and quality in its research and analyses and in the evidence-based policy recommendations offered by its researchers and experts. The organization’s reputation for integrity and quality is our most valuable asset, which we seek to protect and enhance.
The principles described below are designed to help us advance our mission and the objectives of funders through consistent application of these values. This is a living document that will be regularly reviewed and updated as necessary and as we learn from experience.
WE BELIEVE THAT OPERATING CONSISTENT WITH THE VALUES OF INDEPENDENCE, RIGOR, AND TRANSPARENCY IS ESSENTIAL TO ACHIEVING OUR SHARED GOALS.
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Adding to public understanding and sharing of ideas
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Diversity of thought
We welcome and celebrate the diversity of our staff members and partners across many dimensions, including the range of academic disciplines and issue areas represented, the variety of research and analytic methods used, the breadth of modes of inquiry followed, and the unique experiences and perspectives that each employee brings. We believe diversity spurs innovation while improving the quality of our work. We are comfortable when different Urban Institute experts, examining the same or related questions, reach different conclusions provided that they are transparent about their methods and the work meets our standards of quality.
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What International Relationships and Activities Must Be Disclosed?
Disclosures to UF
All UF employees are required to report any outside activity related to their University expertise, whether domestic or foreign, and coinciding with the term of their UF appointment, for review and approval via the UF outside activity disclosure process. For more information about what and how to disclose to UF, please visit the COI program website at https://coi.ufl.edu/.
Disclosures to Sponsors
Federal sponsors generally require broader disclosure than UF. Outside and inside activities must be reported to federal sponsors. All federally sponsored investigators and key personnel must report any activity that supports their research endeavors to sponsors, regardless of: (1) whether it is an activity conducted within the scope of their UF job (i.e., an “inside activity”) or conducted in their private capacity (i.e., an “outside activity”) and (2) whether it coincides or not with the term of their UF appointment.
Foreign Government Talent Recruitment Programs
As part of the national discussion of inappropriate foreign influence on U.S. research, many federal sponsors, including NIH and NSF, have cited foreign talent recruitment programs as posing a particular threat to the U.S. research community. Participation in foreign government talent recruitment programs (FGTRP) often involves academic or research affiliations with foreign institutions, financial or other in-kind support for a U.S. researcher’s program, and commitments of time and resources from the U.S. researcher.
Both UF and federal sponsors require disclosure of participation in FGTRP. Additionally, activities similar to those described above but not labeled as a foreign talent recruitment program must be disclosed (i.e., affiliations or appointments at another institution, whether or not remuneration is received, and whether full-time, part-time, or voluntary—including adjunct, visiting, or honorary). Additional information about these programs can be found at _FBI PSA 20200716-2_.
Other Foreign Engagement Examples
Within the context of foreign engagements, the examples below illustrate activities one would disclose to UF and federal sponsors if performed in a private capacity. If performed within the scope of one’s UF job, these activities would need to be reported to federal sponsors only. Note that the below list is not exhaustive, but represents the types of engagements that must be disclosed.
- Academic, research, or administrative appointments at a foreign institution, even if the appointment is uncompensated. This includes appointments that are full-time, part-time, honorary, adjunct, or voluntary.
- Any agreement with a foreign university for which the UF faculty member directs non-UF students, postdocs, or other personnel affiliated with that university.
- Any foreign affiliation that is included in any publication by the UF faculty member.
- Any contractual agreement with a foreign institution, company, or government agency.
- Any non-UF agreement in which foreign funds or other resources are provided to the faculty for activities either at UF or at a foreign institution.
- Any agreement or relationship that assigns intellectual property (IP) rights to the foreign institution.
- Any agreement or relationship with a foreign entity in which the UF faculty member receives payments for salary, stipends, or living expenses.
- Any consulting agreements with a foreign entity.
- Holding a position such as founder, partner, employee, or board member at a company, non-profit, governmental agency, or other foreign entity.
- Receiving living/lodging funds or reimbursements.
- Having significant ownership interest in a foreign company related to your UF role/responsibility.
- Financial interests in a foreign entity that does business with or competes with UF (including seeking research funding).
- Receiving travel funds or reimbursements from a foreign entity.
- Receiving an honorarium from a foreign entity.
Disclosing Foreign Activities to NIH
For NIH, the disclosure of foreign activities should be included in Other Support, Foreign Component, Facilities and Resources, and/or Biosketch. All communications with NIH must be routed through DSP prior to submission to NIH.
Disclosing Foreign Activities to NIH as Other Support
NIH Definition of Other Support – NIH requires senior/key personnel to disclose all resources made available to them in support of or related to all of their research endeavors, regardless of whether or not they have monetary value and regardless of the performance site of the research. Even if the researcher performs the activity outside of the researcher’s UF appointment period (e.g., a nine-month faculty member conducts the activity during the summer months) or at a location other than UF, the researcher must disclose the activity.
Examples of Other Support include, but are not limited to, the following when they are in support of an investigator’s research endeavors:
- Domestic and foreign grants and contracts, whether provided through UF, another institution, or to the researcher directly
- Financial support for laboratory personnel (e.g., students, postdocs, or scholars working in a researcher’s lab at UF and who are supported by a foreign entity either through salary, stipend, or receipt of living or travel expenses)
- Provision of lab space at another institution, foreign or domestic
- Provision of scientific materials that are not freely available for use at UF or another institution where the faculty is working (e.g., biologics, chemical, model systems, technology, equipment, etc.)
- Travel expenses directly paid or reimbursed by an outside entity
- Living expenses directly paid or reimbursed by an outside entity and
- Other funding (e.g., salary, stipend, honoraria, etc.) paid to a UF researcher by an outside entity.
NIH requires Other Support to be submitted as part of the Just-in-Time procedures. All other support indicated above must be included in that process. Researchers are responsible for promptly notifying NIH of any substantive changes to previously submitted Just-in-Time information up to the time of award. Submission of JIT or any changes must be routed through UF’s DSP.
See Protecting U.S. Biomedical Intellectual Innovation for additional information on Other Support.
After the initial NIH award, researchers must disclose changes in other support in the annual research performance progress report (RPPR). Additionally, for post-award disclosures of other support, recipients must address any substantive changes by submitting a prior approval request to NIH in accordance with the NIHGPS section on “Administrative Requirements—Changes in Project and Budget—NIH Standard Terms of Award.”
Disclosing Foreign Activities to NIH as Foreign Component
NIH defines “foreign component” as the performance of any significant scientific element or segment of a project outside of the U.S., either by the recipient (including any UF employee), by a subrecipient or by a researcher employed by a foreign entity, whether or not grant funds are expended. There is a 2-part test for determining whether an activity meets the definition of foreign component: (1) whether a portion of the project will be conducted outside of the U.S. and (2) whether that portion of the project is significant. Some examples of activities that may be considered a significant element of the project include, but are not limited to:
- Collaborations with investigators at a foreign site anticipated to result in co-authorship
- Use of facilities or instrumentation at a foreign site or
- Receipt of financial support or resources from a foreign entity.
At the time of application submission, if there is an anticipated foreign component, researchers must check yes to question 6 on the “R&R Other Project Information” form “Does this project involve activities outside of the United States or partnerships with international collaborators?” and include a “Foreign Justification” attachment in Field 12 “Other Attachments.” The Foreign Justification should describe the special resources or characteristics of the research project (e.g., human subjects, animals, disease, equipment, and techniques), including the reasons why the facilities or other aspects of the proposed project are more appropriate than a domestic setting. This information must match the information provided in the UFIRST Proposal on page 3.0.
If researchers want to add a foreign component to an ongoing NIH award, UF must receive prior approval before adding the foreign component. To seek prior approval, researchers must submit their request through UFIRST as an Award Modification and must include information to allow DSP to support the process identified in NIHGPS Section 8.1.2.
Disclosing Foreign Activities to NSF, DOE, DOD, and Most Other Federal Agencies
For NSF, DOE, DOD, and other non-NIH agencies, the disclosure of foreign activities should be done within Current and Pending Support and/or the Biosketch.
Disclosing Foreign Activities as Current and Pending Support
For many agencies, the term “current and pending support” refers to the types of “other support” described above for NIH. NSF has developed an electronic format and fillable PDF for the disclosure of current and pending support information effective October 5, 2020. These approved formats must be used by PIs and Co-PIs in proposals. NSF has also established a new requirement for the post-award disclosure of current support and in-kind contribution information, effective October 5, 2020. If a PI or co-PI on an active NSF award failed to disclose current support or in-kind contribution information as part of the proposal submission process, the university must submit the information to NSF within 30 calendar days of the identification of the undisclosed support. NSF will determine the impact of the information and any appropriate action, if necessary. See UF’s guidance for this on the NSF Updates page.
Current and pending support includes all resources made available to an individual in support of and/or related to all of his/her research efforts, regardless of whether or not they have monetary value. Current and pending support also includes in-kind contributions (such as office or laboratory space, equipment, supplies, employees, or students). See also the NSF FAQs related to reporting Current and Pending support.
For other agencies, including DOE and DOD, investigators should list foreign engagement activities with the “current and pending support” construct.
Disclosing Foreign Affiliations in Biosketch
Researchers should include all affiliations on their Biosketch. This includes any titled academic, professional, or institutional position, foreign or domestic, whether full time, part time, or voluntary, and whether or not compensation is received (including adjunct, visiting, or honorary). For NSF, these affiliations must be listed under the Appointments section in one of the approved formats effective October 5, 2020. Additionally, some affiliations or participation in foreign talent recruitment programs may also meet the definition of other support. If so, researchers should disclose the activity as described in the “current and pending” section above as well.
Prior to accepting any affiliation with another institution that requires a commitment of time or resources, and irrespective of whether the affiliation is compensated or not, UF faculty need to disclose the activity to the University and receive approval. This includes participation in foreign talent recruitment programs or other affiliations/appointments at another institution. Disclosure to UF requires that UF faculty use UF’s electronic system for disclosures, UFOLIO. Additional information on UF’s disclosure of outside activities process is within UF’s “Policy on Conflicts of Commitment and Conflicts of Interest.”
An Overview of the Regulatory Framework
The Securities Act and the Exchange Act are federal laws that provide for private causes of actions under which investors may recover for fraud and certain violations of the registration and disclosure processes mandated by the federal securities laws.
The Exchange Act created the Securities and Exchange Commission(SEC), a federal agency with the authority to regulate the securities industry. The SEC has power to promulgate rules pursuant to the federal securities acts, and to enforce federal law and its own rules. Under the Exchange Act, the SEC has the authority to register, regulate and discipline broker-dealers, regulate the securities exchanges, and review actions of the securities exchanges' self-regulatory organizations (SROs).
Long before Congress enacted the federal laws, most states also had their own securities laws, which today are known as blue sky laws. Congress drafted the federal securities laws against the backdrop of pre-existing state regulation. In interpreting the federal securities laws, courts often reach back into relevant state law to interpret definitions or concepts that Congress used when drafting federal law. State law and federal law do not, however, correspond perfectly. Although there is some overlap, state law may provide for causes of action unavailable under federal law and vice-versa. State laws can be very different from state-to-state, and from federal law. Key differences are: (1) the kinds of products and transactions covered by the laws (2) the registration requirements for brokers, dealers, and issuers and (3) the breadth and causes of action available under anti-fraud provisions. For example, New York's securities law, the Martin Act, permits only the Attorney General to bring a suit for violations. In New York, individual investors must bring private suits for common-law fraud law in order to recover. In many cases, federal law preempts state blue sky laws, requiring investors to sue in federal court and under federal law.