United States – Page 9 – Global Investment Law Watch

United States: SEC Proposes Regulation Best Execution

Dec 16 2022

By: Stacy L. Fuller and Nicholas O. Ersoy

On December 14, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed Regulation Best Execution (“Regulation Best Ex”) under the Securities Exchange Act of 1934, as amended. Regulation Best Ex would generally impose requirements on broker-dealers to use reasonable diligence to ascertain the best market for a security transaction and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions, subject to certain exemptions. For over half-of-a-century most broker-dealers have been subject to the Financial Industry Regulatory Authority’s best execution rule 5310, but if Regulation Best Ex is adopted, the SEC would begin to regulate best execution directly.

United States: SEC Throws a Flag on Red Flags Programs

Dec 06 2022

By: Jessica D. Cohn and Keri E. Riemer

On 5 December 2022, the staff of the Division of Examinations (Staff) of the Securities and Exchange Commission (SEC) issued a risk alert identifying practices that are inconsistent with Regulation S-ID, thereby exposing retail customers to potential identity theft.

Regulation S-ID, which applies to SEC-regulated entities that are financial institutions or creditors under the Fair Credit Reporting Act (including most registered broker-dealers, registered investment companies and registered investment advisers), requires the establishment of programs designed to detect, prevent, and mitigate identity theft in connection with covered accounts (each, a Program). Programs must include reasonable policies and procedures to identify, detect, and respond to red flags relevant to identity theft.

Australian Regulatory Update – 14 November 2022

Nov 22 2022

By Jim Bulling and Anabelle Weinberg

1. Bitcoin plunges as FTX Trading files for bankruptcy – calls for more transparency from crypto exchanges

Bitcoin has plunged following the fall of FTX Trading (FTX). It remains unclear when or if traders will be able to recoup their money from FTX.

In response to the collapse of FTX and in an effort to retain confidence in their platforms, a number of large crypto exchanges have published Proof of Reserves showing that the levels of assets that they hold match their liabilities to customers.

United States: A Record Year: SEC FY 2022 Enforcement Actions Bring Big Penalties

Nov 16 2022

By: Keri E. Riemer, Michael W. McGrath, Neil T. Smith, Hayley Trahan-Liptak, and Christopher F. Warner

On 15 November 2022, the U.S. Securities and Exchange Commission (SEC) announced its enforcement statistics for its 2022 fiscal year (FY 2022), noting that it filed 760 total enforcement actions — a 9% increase over fiscal year 2021. This total was comprised of 462 new actions, 169 “follow-on” actions, and 129 actions for delinquent filings. Money obtained in SEC actions, comprising civil penalties, disgorgement, and pre-judgment interest, totaled a record-breaking $6.439 billion (compared to $3.852 billion in fiscal year 2021). Civil penalties, totaling $4.194 billion, were also the highest on record.

United States: SEC Adopts Expanded Proxy Voting Reporting by Registered Funds and New Reporting of Executive Compensation Votes by Form 13F Filers

Nov 07 2022

By: Lynn A. Schweinfurth, Kathy Kresch Ingber, and Crystal Liu

On November 2, by a vote of 3 to 2, the Securities and Exchange Commission adopted, largely as proposed, amendments to Form N-PX under the Investment Company Act of 1940 and new Rule 14Ad-1 under the Securities Exchange Act of 1934 (Amendments). The Amendments expand the proxy voting information that registered investment companies (Funds) report on Form N-PX, and require, for the first time, Form 13F filers (Managers) to report annually on Form N-PX how they voted proxies concerning certain shareholder advisory votes on executive compensation (“say-on-pay” votes).

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

Oct 31 2022

By: Megan W. Clement

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.

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.

United States: CFTC Proposes New Rules for Derivatives Clearing Organizations

Aug 23 2022

By: Cheryl L. Isaac and Matthew F. Phillips

On July 27, 2022, the Commodity Futures Trading Commission (“CFTC”) proposed a series of amendments to the Commodity Exchange Act (the “Exchange Act”) designed to enhance its governance standards for Derivatives Clearing Organizations (“DCOs”).

United States: CFTC Extends Position Limits Aggregation Relief

Aug 23 2022

By: Cheryl L. Isaac and Michael G. Lee

On August 10, 2022, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) issued a no-action letter (NAL), CFTC Staff Letter No. 22-09 (NAL 22-09), temporarily extending relief regarding certain position aggregation requirements until the earlier of either August 12, 2025 or the effective date of any relevant rulemaking. This relief was first provided in CFTC Staff Letter No. 17-37 (NAL 17-37) on August 10, 2017, and subsequently extended in CFTC Staff Letter No. 19-19 (NAL 19-19) on July 31, 2019. The extended relief provided by NAL 19-19 was set to expire on August 12, 2022, two days before the issuance of NAL 22-09. The DMO stated that it would use the newly extended time to assess the impact of the relief, including whether it hinders the CFTC staff’s ability to conduct market surveillance, particularly in light of so many new contract markets and market participants becoming subject to the Position Limits for Derivatives Final Rule. The CFTC will also consider a rulemaking process to codify the relief set forth in NAL 22-09.

Tag:United States

1. Bitcoin plunges as FTX Trading files for bankruptcy – calls for more transparency from crypto exchanges