Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

SEC Commissioners Announce Search for First-Ever Advocate for Small Business Capital Formation

Posted in SEC/Corporate

On September 13, the Commissioners of the Securities and Exchange Commission (SEC) announced the launch of a nationwide search for candidates to fill the new senior executive position of Advocate for Small Business Capital Formation. The position will be responsible for establishing and overseeing a new SEC office—the Office of the Advocate for Small Business Capital Formation. The establishment of this new senior executive position and new SEC office, with “the mission of advocating for the interests of small business and small business investors,” is consistent with the SEC’s recent efforts to facilitate small business capital formation.

The full text of the announcement by the SEC’s commissioners is available here.


SEC Issues Statement on September 5 Implementation of “T+2” Settlement Cycle for Securities Transactions

Posted in SEC/Corporate

As previously discussed in the March 24 edition of the Corporate & Financial Weekly Digest, the Securities and Exchange Commission (SEC), on March 22, adopted an amendment to Rule 15c6-1(a) that has shortened the standard settlement cycle for most broker-dealer securities transactions from three days (known as T+3) to two days (known as T+2), effective September 5. On September 11, the SEC issued a statement regarding the implementation of this shorter settlement cycle. In its statement, the SEC noted the benefits of the shortened settlement cycle, including the likely reduction of credit, market and liquidity risks in the clearance and settlement process, as well as the enhanced efficiency of the US securities markets (for example, because market participants will be able to receive proceeds from securities transactions sooner).

The full text of the SEC’s statement is available here.

New FCA Webpage on Updates to MiFID Notifications Obligations

Posted in UK Developments

On September 11, the UK Financial Conduct Authority (FCA) published a new webpage with an update on MiFID II notification requirements and procedures for certain MiFID-impacted firms in the UK—specifically systematic internalizers (SIs), providers of direct electronic access (DEA) to EU/EEA markets and algorithmic trading firms.

The stated purpose of the webpage is to provide such firms with a summary of updates concerning MiFID II notifications that the FCA has made since January 2017, when the FCA published its MiFID II application and notification user guide. Continue Reading

MiFID II Direct Electronic Access Template Questionnaire Published

Posted in EU Developments

The revised Markets in Financial Instruments Directive (MiFID II) imposes a new regulatory and compliance regime on providers of direct electronic access (DEA) to European trading venues. In particular, the relevant regulatory technical standards (RTS) require investment firms acting as DEA providers to undertake a due diligence review of their DEA clients to ensure that such clients comply with the provisions of the RTS and the rules of the relevant European trading venue. On September 8, the Futures Industry Association’s European E-Trading Committee published a template due diligence questionnaire (Template) to facilitate the reviews that must be undertaken by DEA providers.

The Template requires a DEA client to provide identifying information about itself, such as its name and legal entity identifier, as well as more descriptive information such as the DEA client’s governance, financial and technology arrangements. The Template is also designed to ensure that DEA providers are able to identify where a given DEA client is itself “sub-delegating” DEA to one of its own clients. Completion of the Template is not mandated by law, nor is the order or content of the questions set out in the Template; however the associations believe that generating a reasonably standardized set of questions will facilitate the ability of DEA providers to comply with their obligations under the RTS.

The Template was prepared in cooperation with the Association for Financial Markets in Europe, the Alternative Investment Management Association and the Managed Funds Association.  The Template is available here.

ESMA Publishes Further Guidance on Open Access Transitional Periods

Posted in EU Developments

The Markets in Financial Instruments Regulation (MiFIR) provides for a new “open access” regime between trading venues and central counterparties (CCPs) whereby, subject to meeting certain enumerated conditions, a trading venue may request that a CCP clear trades executed on its platform, and a CCP may request that a trading venue route trades to it for clearing. The new open access framework contains several exemptions. For example, a trading venue that lists exchange-traded derivatives for trading may also file for a limited time, renewable exemption from the open access regime, provided that it trades less than an annual notional amount of €1million in the calendar year preceding entry into force of MiFIR. In addition, given that the European Commission (EC) has determined not to exclude exchange-traded derivatives from the open access regime, trading venues and CCPs are eligible to apply to their national regulator for one, non-renewable, 30-month transitional period from the open access regime.

However, neither MiFIR nor the relevant regulatory technical standards establish a timeframe or format for making these filings. On September 12, the European Securities and Markets Authority (ESMA) updated its questions and answers on market structures topics to provide additional guidance on these matters. In both cases, ESMA recommends that the relevant applications be filed before the end of September.

ESMA’s updated questions and answers on market structure topics is available here.

NYSE Issues Proposed Amendment to Limit Issuance of Material News After Market Close

Posted in SEC/Corporate

On August 18, the New York Stock Exchange (NYSE) issued a proposed amendment to Section 202.06 of the NYSE Listed Company Manual, which would prohibit the issuance of material news by a listed company between the official closing time of the NYSE’s trading session until the earlier of the publication of such company’s official closing price or five minutes after the NYSE’s official closing time. In explaining the purpose of the proposed amendment, the NYSE noted that, because trading can occur after 4:00 p.m. ET (the NYSE’s official closing time) on other markets “if a listed company released material news immediately after 4:00 p.m., but before the closing auction on the NYSE is completed, there can be a significant price difference in nearly contemporaneous trades on other markets and the closing price on the [NYSE].”

The full text of the proposed amendment is available here.


2017 Amendments to the Delaware General Corporation Law

Posted in SEC/Corporate

In its most recently completed session, the Delaware state legislature adopted amendments to various provisions of the Delaware General Corporation Law (DGCL). These amendments became effective August 1. While many of the amendments were technical in nature (e.g., amendments to the merger provisions of DGCL §§ 252, 253, 258 and 267 to consistently use the term “foreign corporation” when referring to corporations organized under the laws of any jurisdiction other than the State of Delaware), others are of more significance to practitioners. Continue Reading

Second Circuit Issues Key Ruling Regarding Personal Benefit Requirement for Insider Trading Liability

Posted in SEC/Corporate

In United States vs. Martoma, issued on August 23, the Second Circuit reexamined its standard for evaluating liability for insider trading under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. In particular, the Second Circuit clarified the personal benefit requirement for a finding of tippee liability. A tippee violates Section 10(b) and Rule 10b-5 when he or she makes a purchase or sale based on material, nonpublic information received from a tipper, such as a corporate insider, where the tippee knew or should have known that the tipper breached a fiduciary duty, and where the tipper received a personal benefit from the disclosure. Continue Reading

Federal Reserve Restricts Termination of Qualified Financial Contracts

Posted in Banking

On September 1, the Board of Governors of the Federal Reserve System adopted a final rule that will affect the rights of counterparties that enter into Qualified Financial Contracts (QFC) (e.g., derivatives, stock loans and repurchase agreements) with banks that have been designated as global systemically important banking organizations (GSIBs). This rule, which was proposed in 2016, would prohibit US GSIBs and their subsidiaries, and the US subsidiaries, branches, and agencies of foreign GSIBs, from entering into a QFC unless the counterparty to the contract has agreed contractually:

  • to abide by the 48-hour stay of QFC termination found in Title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act;
  • to allow transfer of the QFC in the event of a resolution of its counterparty; and
  • to refrain from exercising cross-default termination rights arising from the resolution of an affiliate of its GSIB counterparty.

Continue Reading

FDIC Issues Revised Guidelines for Appeals of Material Supervisory Determinations

Posted in Banking

On September 6, the Federal Deposit Insurance Corporation (FDIC) issued revised guidelines entitled “Guidelines for Appeals of Material Supervisory Determinations”, which govern appeals by all FDIC-supervised institutions to Division Directors and the Supervision Appeals Review Committee. These revised guidelines expand the circumstances under which banks may appeal a material supervisory determination, enhance consistency with the appeals processes of other federal banking agencies, and include other limited technical and conforming changes. Continue Reading