October 2022 – Global Investment Law Watch

United States: SEC Proposes New Requirements for Adviser Oversight of Service Providers

Oct 31 2022

On October 26, 2022, the Securities and Exchange Commission (the “SEC”) proposed new rule 206(4)-11 and related amendments under the Advisers Act, which would require registered investment advisers to meet certain requirements when outsourcing “covered functions” to service providers. Citing increasing use of third-party service providers, SEC Chair Gary Gensler noted that the proposals are designed to ensure that outsourcing is consistent with the obligations advisers have to their clients. A related fact sheet and the SEC’s press release can be found here and here.

Australia: ASIC releases its first insights from the reportable situations regime

Oct 28 2022

By Jim Bulling and Hugo Chow

In ASIC’s first annual report regarding the reportable situations regime, it noted that there were over 8000 reports made to ASIC by financial services and credit licensees under the regime from 1 October 2021 to 30 June 2022.

Australia: Australian Government abandons introduction of limited partnership structure

Oct 26 2022

By Kane Barnett

The Australian Government has delivered the 2022-23 Federal Budget. One of the announcements relevant to the investment funds industry was that the Government “has reviewed and will not proceed with … the 2016–17 Budget measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles”.

Australia: Regulatory update – 24 October 2022

Oct 24 2022

By Jim Bulling and Hugo Chow

ASIC’s crackdown on product disclosures continues

To date, ASIC has issued 11 design and distribution obligations stop orders, with the first stop orders being issued in July this year.

The latest interim stop order prevent a fund management firm (the Firm) from offering or distributing three funds (the Funds) to retail investors due to the Firm not having compliant target market determinations (TMDs).

Australia: Regulatory update – 17 October 2022

Oct 17 2022

By Jim Bulling and Hugo Chow

ASFI releases its first report on the Australian sustainable finance taxonomy

The Australia Sustainability Finance Institute (ASFI) is working closely with the government and regulators to develop an Australian sustainable finance taxonomy.

The Report outlines the key considerations that will inform the development of an Australian sustainable finance taxonomy that will consist of credible, science-based definitions.

United States: SEC Reopens Comment Period for Eleven Significant Rulemaking Releases

Oct 14 2022

By: Trayne S. Wheeler and Brian Doyle-Wenger

On October 7, 2022, the Securities and Exchange Commission (the “SEC”) announced that, due to a technological error, it was reopening the public comment periods for 11 pending rulemaking releases (“Rulemaking Releases”) and one request for comment. The comment periods will be reopened as of October 7^th and will end 14 days after the publication of the release in Federal Register (if, for example, this release were to be published on October 15, then the comment periods would close on October 29, 2022). The SEC encouraged commenters that submitted a public comment through the internet comment process to check the SEC’s website, SEC.gov, to determine whether their comment was received and posted.

The SEC’s release did not elaborate on nature of the technological error but stated that a number of public comments submitted through the SEC’s internet comment form were not received. The SEC noted the majority of the affected comments were submitted in August 2022, but that the technological error is known to have occurred as early as June 2021.

The impact of the reopening of the public comment periods is not yet known, but will likely result in delaying the release of a number of highly anticipated SEC rules[1]. The Rulemaking Releases include the following proposals and request for comment:

• Reporting of Securities Loans

• Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions

• Money Market Fund Reforms

• Share Repurchase Disclosure Modernization

• Short Position and Short Activity Reporting by Institutional Investment Managers; see also Notice of the Text of the Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data Collection,

• Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure

• Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews

• The Enhancement and Standardization of Climate-Related Disclosures for Investors

• Special Purpose Acquisition Companies, Shell Companies, and Projections

• Investment Company Names

• Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices

• Request for Comment on Certain Information Providers Acting as Investment Advisers

(Certain SRO rules, not covered here, also have comment periods that have been reopened.)

[1] SEC Release, Resubmission of Comments and Reopening of Comment Periods for Several Rulemaking Releases Due to a Technological Error in Receiving Certain Comments, October 7, 2022 (https://www.sec.gov/rules/proposed/2022/33-11117.pdf)

United States: As the WORM Turns: SEC Provides Alternative Recordkeeping Requirements for Brokers

Oct 12 2022

By: Eden L. Rohrer, Chloe Vargas, and Raymond F. Jensen

On October 12, 2022, the SEC voted to adopt new electronic recordkeeping requirements for broker-dealers in an effort to modernize recordkeeping requirements and to allow broker-dealers to use new technologies to satisfy their obligations. The new recordkeeping requirements will amend the Securities Exchange Act of 1934 (“Exchange Act”) Rule 17a-4 (“Rule 17a-4”) for broker-dealers and Exchange Act Rule 18a-6 (“Rule 18a-6”) for Security-Based Swap Dealers, and Major Security-Based Swap Participants.

Significant to broker-dealers is that they will no longer be required to preserve electronic records in a non-rewritable, non-erasable or read once, write many (“WORM”) format. The new rule is technology neutral, allowing broker-dealers to adopt new technologies. The amended rule will eliminate references to outdated technology such as “micrographic media,” “microfilm or microfiche,” and “optical disk technology (including CD-ROM),” in their heyday when the rule was adopted in 1997.

Australia: Regulatory update – 10 October 2022

Oct 10 2022

By Jim Bulling and Hugo Chow

ASIC sues Latitude Finance Australia and Harvey Norman Holdings for allegedly misleading interest free advertising

ASIC is suing Latitude Finance Australia (Latitude) and Harvey Norman Holdings Ltd (Harvey Norman) over the promotion of interest-free payment methods.

ASIC alleges that advertisements which included “no deposit”, “interest free” payment options over specified terms for purchases at Harvey Norman were misleading as they did not disclose that consumers could only use these payment options if they applied for and used a Latitude GO Mastercard, and that Harvey Norman misrepresented the actual costs of these payment options as they did not adequately disclose the establishment fees and monthly account fees.

United States: CFTC Orders 11 Banks to Pay Over $710 Million for Illegal Use of Texting Apps

Oct 03 2022

By: Cheryl L. Isaac and Matthew J. Rogers

On September 27, 2022, the Commodity Futures Trading Commission (“CFTC”) announced the settlement of charges against the swap dealer (“SD”) and futures commission merchant (“FCM”) affiliates of 11 financial institutions totaling more than $710 million. The action, filed and settled on the same day and brought in tandem with a related Securities and Exchange Commission (“SEC”) action, charged the institutions with failing to meet certain CFTC recordkeeping requirements. Specifically, the Commission determined that the SDs / FCMs failed to stop their employees from communicating internally and externally using unapproved communication methods such as WhatsApp or Signal.

Archive:October 2022