Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

SEC-Proposed Amendments to Modernize, Simplify and Increase the Accessibility of Required Disclosure

Posted in SEC/Corporate

As previously reported in the October 13, 2017 edition of Corporate & Financial Weekly Digest, on October 11, the Securities and Exchange Commission proposed amendments (the Proposal) to modernize and simplify disclosure requirements in Regulation S-K, and related rules and forms. The Proposal is intended to reduce registrants’ burden and costs to comply with the SEC’s disclosure requirements, while making public filings easier for investors to read, navigate and understand, including by discouraging repetitive disclosure and the disclosure of immaterial information. Continue Reading

FINRA Publishes Regulatory Notice Regarding Sales Practice Obligations for Volatility-Linked Exchange-Traded Products

Posted in Broker-Dealer

On October 16, the Financial Industry Regulatory Authority (FINRA) published Regulatory Notice 17-32 (Notice), which reminds FINRA member firms of their sale practice obligations related to the sale of volatility-linked exchange-traded products (ETPs), which are designed to track Chicago Board Options Exchange Volatility Index (VIX) futures. Based on the high likelihood that such instruments may lose value over time, FINRA notes that volatility-linked ETPs may not be suitable for certain retail investors, in particular those who use them as part of a buy-and-hold strategy; and that because of the complex nature of these instruments, it is possible that investors and registered representatives may not understand the risks of the product. Based on the risk profile of these investments, the Notice reminds member firms of the need to (among other things) (1) perform reasonable diligence to determine whether there is a reasonable basis to believe that each such ETP is suitable for at least some investors prior to recommending the ETP; (2) form a reasonable belief that a recommended volatility-linked ETP is suitable for particular investors to whom it is recommended; (3) provide investors with fair and accurate communications with respect to these products; and (4) consider implementation of heightened scrutiny and supervision to ensure that registered representatives and supervisors understand the risks of the instruments and comply with applicable suitability and communications obligations.

A copy of the Notice is available here.

Three Developments Concerning EU-US Cross-Border Swaps

Posted in CFTC, Derivatives, Dodd-Frank Developments, EU Developments

On October 13, the Commodity Futures Trading Commission and the European Commission (EC) made three announcements that are significant for cross-border swap activity between the United States and Europe.

  1. CFTC Margin Rule Comparability Determination.

The CFTC has made a determination that the margin rules for uncleared swaps that apply in the European Union are comparable to the CFTC’s margin rules. This determination activates the substituted compliance provisions found in Section 23.160(b)(2)(iii) of the CFTC margin rules that until now have not been available to EU entities registered as swap dealers. Continue Reading

CFTC Clarifies That Variation Margin Constitutes Settlement

Posted in CFTC, Derivatives

The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has issued an interpretive letter clarifying that payments of variation margin, price alignment amounts and other payments in satisfaction of outstanding exposures on a counterparty’s cleared swap positions constitute “settlement” under the Commodity Exchange Act (CEA) and CFTC Regulation 39.14. The CEA and CFTC Regulation 39.14 provide that a derivatives clearing organization (DCO) must effect a settlement at least once each business day and ensure that settlements are final when effected. Continue Reading

CFTC Conducts DCO Liquidity Stress Tests

Posted in CFTC, Derivatives

The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has issued a report summarizing stress tests conducted by three derivatives clearing organizations (DCOs): the Chicago Mercantile Exchange (CME), ICE Clear US (ICUS) and LCH Ltd (LCH). During the stress tests, DCR evaluated whether each DCO could obtain, in a timely manner, the funds necessary to meet the settlement obligations resulting from the simultaneous default of two large clearing members. DCR also evaluated whether the need for liquidity at multiple DCOs under such circumstances might have systemic implications. Continue Reading

CFTC Issues Primer on Cryptocurrencies

Posted in CFTC

The Commodity Futures Trading Commission’s LabCFTC has issued a primer on cryptocurrencies and distributed ledger technology. The primer is the first in a series that is intended to provide the public with educational information on financial technology innovation.

In the primer, LabCFTC highlights various risks inherent in cryptocurrencies, including operational risks, cybersecurity risks, speculative risks and fraud and manipulation risks.

LabCFTC’s primer is available here.


FCA Launches Asset Management Authorization Hub

Posted in Brexit/UK Developments, Financial Markets, UK Developments

On October 16, the UK Financial Conduct Authority (FCA) launched the asset management authorization hub (Hub), a new section of its website. The Hub is designed to support new entrants to the UK asset management industry from start-up, through authorization and into the early stages of supervision. Continue Reading

FCA Issues MiFID Passporting Reminder

Posted in Financial Markets, UK Developments

On October 16, the UK Financial Conduct Authority (FCA) reminded firms via email of changes to the process for the submission of passporting notifications under the Markets in Financial Instruments Directive (MiFID I) and the revised Markets in Financial Instruments Directive (MiFID II). Continue Reading

FCA Opens Commodity Derivatives Position Limit Exemption Applications

Posted in Financial Markets, UK Developments

On October 18, the UK Financial Conduct Authority (FCA) published the necessary forms for firms to apply for position limits exemptions under the revised Markets in Financial Instruments Directive (MiFID II). Continue Reading

EU Begins Infringement Proceedings Against 19 Member States Failing to Implement MiFID II

Posted in EU Developments, Financial Markets

The European Commission has launched infringement proceedings against 19 member states of the European Union whom it states are failing in transposing the revised Markets in Financial Instruments Directive (MiFID II) into local law. MiFID II is due to go into effect on January 3, 2018, and the deadline for transposition into local law was July 3, 2017. Continue Reading