The Financial Industry Regulatory Authority (FINRA) is seeking comment with respect to proposed amendments (the “Proposed Amendments”) to FINRA Rule 2210 (Communications with the Public). The Proposed Amendments would create an exception to FINRA’s general prohibition on projected performance and would be applicable to all FINRA-member firms. The Proposed Amendments would allow firms to present to prospective and current customers illustrations that show the projected performance of an asset allocation or investment strategy (although it remains impermissible to present the projected performance of individual securities). Continue Reading
The Securities and Exchange Commission has approved amendments to Financial Industry Regulatory Authority (FINRA) Rule 2232 (Customer Confirmations) that require FINRA-member firms to disclose additional information to retail customers with respect to transactions in certain fixed income securities (the “Final Rules”). The Final Rules require the disclosure in customer confirmations of (1) the mark-up or mark-down applicable to certain transactions in corporate or agency debt securities; (2) a reference and hyperlink (if the confirmation is electronic) to the website established by FINRA, which contains publicly available trade data; and (3) the execution time of the transaction such that a customer may locate its individual transactions when accessing FINRA’s website. Continue Reading
The Financial Industry Regulatory Authority (FINRA) has filed proposed rules with the Securities and Exchange Commission to adopt FINRA Rule 6800 Series, which is designed to implement the compliance rule regarding the National Market System (NMS) Plan Governing the Consolidated Audit Trail.
Pursuant to Regulation NMS, various exchanges have filed with the SEC a plan to create, implement and maintain a consolidated audit trail (CAT) to capture information related to customers and order events for transactions in NMS securities and over-the-counter (OTC) equity securities. The CAT will capture order information across all markets and throughout the life of an order (from inception to execution). Each exchange must enforce compliance with the plan with respect to its members or trading permit holders. Continue Reading
On February 13, the Division of Swap Dealer and Intermediary Oversight (Division) of the Commodity Futures Trading Commission (CFTC) provided time-limited no-action relief for failure of a swap dealer (SD) that does not have a prudential regulator to comply with the CFTC’s variation margin requirements by the March 1 compliance date (March 1 Requirements). (There are now a total of 104 swap dealers registered with the CFTC, and 51 of these have a prudential regulator.) Under the CFTC margin rules, SDs must collect and post variation margin with each counterparty that is an SD, major swap participant or financial end user starting March 1. Continue Reading
On February 9, HM Treasury published its response (Response) to the consultation that ran from March 27, 2015, to June 18, 2015, on the transposition of the revised Markets in Financial Instruments Directive (MiFID II) into UK domestic law. The Response summarizes responses submitted to the consultation by market participants, as well as the government’s position. Continue Reading
On February 9, the European Securities and Markets Authority (ESMA) published a revised draft implementing technical standards (ITS) on position reporting under the revised Markets in Financial Instruments Directive (MiFID II).
The ITS were originally published in 2015. Since then, ESMA has identified a number of technical amendments necessary for the correct functioning of the position reporting of commodity derivatives. This includes amendments to the format of position reports. The changes themselves are highlighted in the revised ITS, which has been sent by ESMA to the European Commission for endorsement.
The revised ITS are available here.
On February 14, the European Securities and Markets Authority (ESMA) published a letter (Letter), dated February 1, to the European Commission (EC) in relation to the systematic internalizer (SI) regime under the revised Markets in Financial Instruments Directive (MiFID II) and the associated Markets in Financial Instruments Regulation (MiFIR). Continue Reading
On February 6, the acting Securities and Exchange Commission Chairman, Michael Piwowar, issued a statement soliciting public comment on “unexpected challenges” that issuers have experienced in anticipation of complying with the pay ratio disclosure rule and directing the SEC staff to reconsider the implementation of the rule. The pay ratio disclosure rule, adopted to implement Section 953(b) of the Dodd–Frank Wall Street Reform and Consumer Protection Act, will require each issuer to disclose the ratio of the compensation of its chief executive officer to the median compensation of all of its employees, as discussed in the August 7, 2015 edition of the Corporate & Financial Weekly Digest. As currently adopted, this rule will first apply with respect to compensation for the company’s first fiscal year beginning on or after January 1, 2017 (for most companies, their proxy statements for their 2018 annual shareholder meetings). Comments are being solicited for 45 days following the announcement. Continue Reading
On February 6, the Division of Market Oversight (Division) of the Commodity Futures Trading Commission issued CFTC Letter No. 17-06, which provides time-limited no-action relief from the requirement that persons relying on certain aggregation exemptions from federal position limit levels must file notice with the CFTC.
Specifically, the Division stated that it would not recommend enforcement action against any person or entity that is eligible to rely on an exemption from aggregation under Commission Regulation 150.4(b) for failure to comply with the notice filing requirements of Commission Regulation 150.4(c) with respect to relying on such exemption.
This no-action relief extends until August 14. Prior to this letter, the aggregation notice filing compliance date was set at February 14.
CFTC Letter No. 17-06 is available here.
On February 8, the UK Financial Conduct Authority (FCA) published a discussion paper (Paper), seeking stakeholder views on open-ended funds investing in illiquid assets.
One of the difficulties highlighted in the Paper is the liquidity mismatch that is created when an investor wishes to withdraw its money on short notice, when illiquid assets cannot be sold to meet such redemption requests. The FCA notes that this can be exacerbated by market triggers, as was seen in relation to real estate funds in the aftermath of the announcement of the result of the Brexit referendum—which led to funds with aggregate assets under management (AUM) in excess of US $23 billion being forced to suspend redemptions. Another issue that the FCA has highlighted is that there are difficulties in pricing interests in funds investing in illiquid assets due to asset valuations for such funds rarely happening on a daily basis. Continue Reading