Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

SEC Approves FINRA Rule Limiting Expungement

Posted in Broker-Dealer

On July 22, the Securities and Exchange Commission authorized the Financial Industry Regulatory Authority, Inc. to implement FINRA Rule 2081 prohibiting brokers from conditioning settlement of customer complaints on (or otherwise compensating customers for not opposing) expungement of the complaint from the Central Registration Depository system. The prohibition will apply to both written and oral agreements entered into during the course of settlement negotiations as well as to any agreements entered into separately. FINRA has stated that the purpose of Rule 2081 is to ensure that arbitrators grant expungement only as an extraordinary remedy in appropriate and narrow circumstances. FINRA will announce the effective date of Rule 2081 in a Regulatory Notice to be published shortly. 

The SEC approval release of FINRA Rule 2081 is available here.

CFTC Issues No-Action Relief from Certain Ownership and Control Reporting Requirements

Posted in CFTC, Derivatives

On November 18, the Commodity Futures Trading Commission adopted rules modifying its ownership and control reporting requirements. Specifically, the CFTC adopted (i) a new Form 71 to collect information regarding omnibus accounts that exceed a specified volume threshold; (ii) a revised Form 40/40S (Reporting Traders); and (iii) a revised Form 102 (Special Accounts), which has three parts: Form 102A (special accounts), Form 102B (volume threshold accounts) and Form 102S (swaps). The new reporting requirements were to be effective August 15, 2014. Continue Reading

SEC Issues Guidance on Proxy Voting

Posted in Investment Companies and Investment Advisers

The Security and Exchange Commission’s Divisions of Investment Management and Corporation Finance issued Staff Legal Bulletin No. 20 (IM/CF) on June 30 (SLB 20). SLB 20 provides guidance regarding proxy voting responsibilities of investment advisers and proxy advisory firms’ exemptions from proxy rules. Rule 206(4)-6 under the Advisers Act requires advisers to have written proxy voting policies and procedures. SLB 20 states that advisers can ensure that proxies are being voted in their clients’ best interests if, for example, they periodically sample proxy votes to review compliance with the advisers’ policies and procedures or sample the voting on certain proposals. In any event, an adviser needs to be analyzing, at least annually, whether its proxy voting policies and procedures continue to be reasonably designed to ensure that proxies are voted in clients’ best interests. Continue Reading

FINRA Proposes to Adopt Rules on Quotation Requirements for OTC Equity Securities

Posted in Broker-Dealer

The Financial Industry Regulatory Authority, Inc. is proposing to adopt rules governing the quotation requirements applicable to over-the-counter (OTC) equity securities. The rules would establish minimum standards for quotations and require fair and non-discriminatory access to member inter-dealer quotation systems. Member inter-dealer systems would be required to adopt and provide to FINRA written (i) policies and procedures on the collection and dissemination of OTC securities quotations, (ii) standards for fair and non‑discriminatory system access and (iii) descriptions of each quotation-related data product along with pricing information. FINRA is also proposing minor amendments to its existing rules on quotation reporting requirements and to delete FINRA Rule 6500 Series governing the operation of the OTC Bulletin Board Service. 

Click here to read the proposed rules.

CFTC Seeks Comment on ICE Clear Europe Portfolio Margining Proposal

Posted in CFTC

The Commodity Futures Trading Commission has requested public comment on a petition submitted by ICE Clear Europe Limited to amend an order issued by the CFTC on May 30. Under the May order, ICE Clear Europe and its clearing members that are registered futures commission merchants (FCMs) are permitted (i) to commingle and hold in segregated funds accounts established pursuant to Section 4d(a) of the Commodity Exchange Act customer funds used to margin, secure or guarantee futures traded on ICE Futures US with customer funds used to margin, secure or guarantee interest rate, energy and financial foreign futures and options traded on ICE Futures Europe and (ii) to provide for portfolio margining of such positions. The May order is available here. Continue Reading

New York DFS Proposes First Comprehensive Regulatory Framework for Virtual Currency Businesses

Posted in Digital Assets and Virtual Currencies

On July 17, the New York State Department of Financial Services (DFS) released the draft “BitLicense,” a proposed regulatory framework to license Virtual Currency Business Activity. The proposed regulations follow DFS hearings held in January 2014 and are intended to promote consumer protection, stability and security in the operation of virtual currency exchanges, among other virtual currency businesses. The DFS regulations would apply to digital assets such as bitcoins and litecoins, but not to digital gaming units (e.g., World of Warcraft gold) or consumer rewards programs (e.g., Starbucks stars). Continue Reading