On September 15, at the ABA Business Law Section Annual Meeting, the Securities and Exchange Commission (SEC) Division of Corporation Finance (Division) Director Bill Hinman provided remarks on various matters, including the Division’s focus on capital formation-related matters. Of particular note, Director Hinman indicated that he expects that Item 402 of Regulation S-K (the Pay Ratio Disclosure Rule) will take effect as planned and, accordingly, will be effective with respect to compensation paid in fiscal years beginning on or after January 1, 2017 (which would be, for calendar year-end issuers, an issuer’s proxy statement for its 2018 annual meeting of stockholders). Also, as indicated by Director Hinman, on September 21, the Division issued further guidance regarding compliance with the Pay Ratio Disclosure Rule, including as to the use of sampling and estimation. We plan to summarize this guidance next week.
The Securities and Exchange Commission’s (SEC) Division of Corporation Finance (Division) recently issued three new Compliance and Disclosure Interpretations (C&DIs) related to so-called “Regulation A+.”
The new C&DIs address the following issues (among others):
C&DI 182.21 provides that a Regulation A issuer that registers a class of its securities pursuant to the Securities Exchange Act of 1934 on a Form 8-A concurrently with (i.e., within five days after) the qualification of a post-qualification amendment to a Form 1-A must include in the post-qualification amendment financial statements that are current at the time the post-qualification amendment is qualified. The full text of this C&DI can be found here. Continue Reading
On September 19, the Financial Industry Regulatory Authority (FINRA) took action to delay until June 25, 2018, the implementation of margin requirements for Covered Agency Transactions under FINRA Rule 4210. As defined in the amendments to FINRA Rule 4210, adopted in 2016, Covered Agency Transactions include (1) To Be Announced (TBA) transactions, inclusive of adjustable rate mortgage (ARM) transactions; (2) Specified Pool Transactions; and (3) transactions in Collateralized Mortgage Obligations (CMOs) issued in conformity with a program of an agency or Government Sponsored Enterprise (GSE), with forward settlement dates. Continue Reading
On September 13, the Division of Swap Dealer and Intermediary Oversight (DSIO or Division) of the Commodity Futures Trading Commission (CFTC or Commission) granted no-action relief from commodity pool operator (CPO) and commodity trading advisor (CTA) registration to a private university, subject to certain conditions. At issue was (1) the university’s collective management of an endowment fund that includes the funds of multiple organizations affiliated with the university (Affiliated Organizations); and (2) the offering, solicitation and operation of multiple planned giving arrangements for donors to the university, which generally provided for a periodic income stream to identified beneficiaries for a specified period of time before the donation reverted wholly to the university’s benefit (Planned Giving Accounts). Continue Reading
The Division of Swap Dealer and Intermediary Oversight (DSIO or Division) of the Commodity Futures Trading Commission (Commission or CFTC) recently granted no-action relief from the reporting requirements of CFTC Rule 4.7(b)(2) to a commodity pool operator (CPO) of two commodity pools, subject to certain conditions. CFTC Rule 4.7(b)(2) places a reporting requirement on a CPO that relies on such rule to distribute quarterly account statements to commodity pool participants within 30 days after the end of each quarter. Continue Reading
On September 18, the UK Financial Conduct Authority (FCA) published the latest edition (Number 53) of its periodic newsletter Market Watch. In it the FCA has included articles and guidance on the following:
MiFID II Legal Entity Identifiers (LEIs): The FCA has reiterated its previous guidance that starting January 3, 2018 (when MiFID II comes into full effect across the European Union and European Economic Area), all firms subject to MiFID II transaction reporting obligations must have an LEI, as must all eligible clients of these firms. The eligibility criteria include those ‘persons’ that are a legal entity or structure, including a company, charity or trust. The FCA reminds firms that there is a requirement to renew their LEIs annually. Continue Reading
On September 20, a senior official in the UK’s Financial Conduct Authority (FCA) opened the door to an informal conformance period for market participants following the implementation of the revised Markets in Financial Instruments Directive (MiFID II), which takes effect on January 3, 2018. The breadth and scope of the new regulatory and compliance requirements under MiFID II have posed serious challenges to market participants and their clients to be ready in time, even following a one-year delay in implementation from January 2017.
In recognition of the uphill battle facing market participants over the next three months, Mark Steward, executive director of enforcement and market oversight at the FCA, confirmed at a conference hosted by the Association for Financial Markets in Europe that the FCA would act “proportionately” in recognition of the significant investments of time and effort already undertaken by firms. Implicitly acknowledging that not all firms will be ready in time, he stated that the test would be whether a firm had taken “sufficient steps” to meet the new MiFID II requirements. By contrast, firms that “have made no real or genuine attempt to be ready or where key obligations are deliberately flouted” would receive “different” treatment.
The drafted version of Mr. Steward’s speech is available here.
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.
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.
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