United States – Page 10 – Global Investment Law Watch

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

May 31 2022

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.

United States: What’s in a Name? SEC Proposes Amendments to Fund Names Rule & ESG Disclosure Requirements

May 26 2022

By: Clair Pagnano

In a significant departure from the SEC’s long-standing position on the use of fund names, the SEC is proposing amendments to Rule 35d-1 that would expand the Names Rule to include terms denoting strategies, thereby subjecting funds that use the terms “Growth,” “Value,” and funds that use ESG-related terms in the fund’s name to the rule. It would also prohibit funds from using ESG-related terms in their names if ESG factors are considered to the same extent as other screening factors in the management of the fund (so-called “integration” funds). These and other key aspects of the proposed rule include:

United States: MNPI (aka, “My Next Possible Investigation”): The SEC’s Scrutiny of MNPI Compliance Programs

May 11 2022

By: Keri E. Riemer

The SEC’s Division of Examinations recently released a risk alert describing a pattern of deficiencies relating to investment advisers’ use of material non-public information (MNPI). The Staff highlighted the following as areas of concern:

Alternative Data. Advisers that used data from non-traditional sources beyond company financial statements, filings, and press releases appeared to not have adopted or implemented written policies and procedures reasonably designed to address the potential risk of receiving and using MNPI through such sources.
“Value-Add Investors”. Advisers did not have—or did not appear to implement—adequate policies and procedures related to investors who are more likely to possess MNPI (e.g., officers or directors of a public company, asset management firm principals or portfolio managers, and investment bankers).
Expert Networks. Advisers did not appear to adequately track calls with expert network consultants, retain detailed notes from the calls, and monitor trading activity related to companies in industries similar to those discussed during the calls.
Deficiencies related to Access Persons. The Staff identified advisers who failed to correctly identify “access persons” (as defined in Rule 204A-1(c) under the Investment Advisers Act), ensure that those access persons obtain pre-approval for investments in IPOs and other similar offerings, and maintain adequate records of the holding and transactions of access persons.

The Staff also encouraged industry participants to review their practices, policies, and procedures regarding the topics addressed above. We recently issued a client alert which describes the risk alert in greater detail and provides takeaways for industry participants.

Europe: FCA Challenge to UK Fund Service Providers

May 09 2022

By: Andrew Massey and Melissa Vance

Fund managers can expect changes to custodian and other fund service provider practices in response to regulator challenge, and should review their due diligence of service providers.

In a letter on 23 March 2022, the FCA instructed the Chief Executive and Boards of third-party custodians, depositories for authorised and non-authorised funds, and third-party administrators to review key risks identified by the FCA, including the following:

United States: Private Funds and SEC Crypto Regulation

Apr 19 2022

By: Rob Weiss

Fund sponsors continue to search for ways to get their investors exposure to cryptocurrencies.

For sponsors able to offer registered fund products, exchange-traded products (ETPs) are attractive: available to retail investors, highly liquid, and without a fixed term, ETPs check several boxes for sponsors and investors alike. However, while the SEC has authorized listing of ETPs that trade in bitcoin futures regulated by the CFTC, the SEC has not authorized listing of ETPs that trade directly in spot cryptocurrency. We recently wrote an article on this point, which can be accessed here.

United States: Being a SPAC is No Fun(d): SEC Proposes “Safe Harbor” Exclusion for SPACs

Apr 14 2022

By: C. Todd Gibson

Last year, a number of lawsuits were filed against SPACs and their sponsors challenging (in part) their status under the U.S. Investment Company Act of 1940 (“1940 Act”) arguing that SPACs are essentially unregistered investment companies. A brief filed by two professors supported this notion on the basis that SPACs typically hold government securities until a target company is acquired (and thus, such SPACs are investment companies required to be registered). In an unusual move to provide SPAC market participants with some comfort on this issue, a number of law firms joined together refuting this position in a joint public statement outlining legal practioners’ historic view that SPACs are not investment companies.

Australia: Russian Sanctions and Fund Managers

Apr 08 2022

By: Jim Bulling and Kithmin Ranamukhaarachchi

As Russia’s invasion of Ukraine continues, global economic sanctions have evolved into a complex web of restrictions and prohibitions with limited exceptions. As a result, asset managers have more layers of regulation to navigate in relation to current holdings and future investments in virtually all markets directly or indirectly connected to Russia, Belarus and Ukraine (Region).

Europe: Divergence Between UK and EU Priips Disclosures Set to Add Complexity for Managers

Mar 29 2022

By: Andrew Massey

On 25 March 2022, the FCA confirmed new requirements for the key information document (KID) required for package retail and insurance-based investment products (PRIIPs) in the UK: policy statement 22/2. Investment funds are generally categorised as PRIIPs, although UK UCITS and UK non-UCITS retail schemes are exempted from the PRIIPs KID requirement until 31 December 2026.

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.

United States: Reporting of U.S. Ownership on TIC form SHC Due by March

Feb 15 2022

By: Todd Gibson

It’s time again for the U.S. Department of the Treasury’s mandatory five-year benchmark survey of the ownership of foreign securities by U.S. residents. All U.S. custodians and end-investors that exceed the applicable reporting threshold of reportable foreign must complete Form SHC and file it electronically or by email with the Federal Reserve Bank of New York no later than 4 March 2022.

Interested in learning more? Our recent alert provides details about who is required to report, the structure and purpose of the form, which securities are reportable, the penalties for noncompliance, and the confidentiality of data. The alert also provides a links to the Federal Register notice announcing the survey and instructions for Form SHC on the Department of Treasury website.

Read Full Alert

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