regulations – Page 3 – Global Investment Law Watch

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 The amended rule will eliminate references to outdated technology such as “micrographic media,” “microfilm or microfiche,” and “optical disk technology (including CD-ROM),” in their heyday when the rule was adopted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.

United States: 10 Impactful Provisions of the Lummis-Gillibrand Bill

Jun 09 2022

By: Andrew M. Hinkes, Eden L. Rohrer, and Judie Rinearson

The “Lummis-Gillibrand Responsible Financial Innovation Act” lays out a bold agenda for legal reform related to digital assets. Although a detailed summary of Bill is still forthcoming, here’s an abbreviated summary of 10 impactful provisions. For a more fulsome summary, see our full posting on the K&L Gates FinTech Law Blog.

Applies generally to incorporated and licensed entities, but unincorporated DAOs, users of digital assets, and DeFi protocols would not be affected.
Excludes a gain or loss of $200 or less in transactions for “goods or services” from gross income for federal income tax purposes.
Requires regulated entities to make certain transaction-specific disclosures to consumers.
Introduces the “ancillary asset” concept that splits the digital asset from any promises made in an investment contract, and delegates jurisdiction over ancillary assets to the CFTC.
Authorizes spot crypto asset exchanges to register with the CFTC.
Corrects the provision of the 2021 Infrastructure Investment and Jobs Act (HR 3684) that expanded the tax law definition of Broker to include any “person who… is responsible for … effectuating transfer of digital assets on behalf of another person.”
Clarifies that staking proceeds are not a part of gross income until the taxpayer “exercises dominion” over them.
Permits depository institutions to issue payment stablecoins subject to specific reserve and redemption requirements.
Prohibits banks from using reputation risk in its examination ratings and requires appropriate reasons for requesting the termination of a customer account.
Directs state regulators to adopt uniform money transmitter license requirements for digital asset transactions.

This Bill would radically change the way that regulated entities interact with digital assets in the U.S.. While the Bill is unlikely to pass this year, it is the product of significant bipartisan effort, and will likely lead to significant regulation of digital assets in the coming years.

Stay tuned for more in-depth coverage of the securities law and commodities law implications of amendments suggested in the Lummis-Gillibrand Bill.

United States: All Square: Amended CFTC “Block Trade” Definition Officially Effective

May 31 2022

By: Cheryl L. Isaac and Michael G. Lee

On 25 May 2022, the U.S. Commodity Futures Trading Commission’s (CFTC) block trade no-action relief, provided in CFTC No-Action Letter (NAL) 20-35, expired. As of that day, all swap execution facilities (SEFs) are required to comply with the amended definition of “block trade” provided under CFTC Regulation 43.2.

“Block trades” are large, privately negotiated (either directly or through a broker) swap transactions that meet certain quantity thresholds. Block trades must qualify for execution apart from the SEF’s order book or trading platform in accordance with the relevant SEF’s rules, pursuant to CFTC Regulations.

Australia: A Proxy Advice Regulation Rollercoaster

Feb 16 2022

By: Jim Bulling and Phoebe Naylor

Controversial regulations seeking to govern the provision of proxy advice services were introduced by the Government in late December 2021. The Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021 (the Regulations) introduced a definition of “proxy advice” and prescribed it as a financial service. In summary, proxy advice was defined as an offer of voting recommendations to specified entities, in relation to the exercise of their voting rights attached to securities or interests.

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