Following the increase in the number of special purpose acquisition companies (SPACs) and the related business combinations between SPACs and private target businesses (commonly referred to as “de-SPAC” transactions), an increase in regulatory scrutiny, particularly from the Securities and Exchange Commission, is emerging. As discussed below, in the last week the SEC has issued two statements — one related to the accounting treatment of warrants and one related to liability risk — that have attracted considerable attention from SPACs and other stakeholders. Continue Reading SEC Statements Regarding SPACs Address Warrants and Projections

Earlier this month, the Securities and Exchange Commission approved amendments (the Amendments) to New York Stock Exchange (NYSE) rules that require listed companies to obtain shareholder approval of certain private placements and equity issuances to “related parties,” as well as requirements related to transactions between a listed company and certain related parties. In particular, the Amendments, which were initially proposed in December 2020 and subsequently modified, modified Sections 312.03, 312.04 and 314.00 of the NYSE Listed Company Manual. According to NYSE, the Amendments to Sections 312.03 and 312.04 are intended to more closely align shareholder approval requirements applicable to NYSE listed companies with comparable requirements for companies listed on Nasdaq or NYSE American and, in doing so, provide greater flexibility to NYSE-listed companies seeking to raise capital. The flexibility provided by such Amendments tracks, in various respects, the flexibility provided through temporary rules adopted by NYSE in response to the COVID-19 pandemic, which are being terminated by the Amendments. The amendments to Section 314.00 clarify the role of the audit committee in approving related party transactions, and expand the scope of transactions to which related party transaction rules apply. Continue Reading SEC Approves Amendments to NYSE Shareholder Approval Rules for Certain Equity Issuances and Requirements for Related Party Transactions

On April 9, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 21-15 (Notice) in response to the recent increase in the number of customers seeking to open brokerage accounts and trade options. Continue Reading FINRA Reminds Members About Options Account Approval, Supervision and Margin Requirements

On April 12, the Financial Industry Regulatory Authority (FINRA) filed a proposed rule change with the Securities and Exchange Commission pursuant to Section 19(b)(3) of the Securities Exchange Act of 1934 to extend its time to announce the implementation schedule for FINRA’s corporate bond new issue reference data service.

On January 15, the SEC approved a proposed rule change allowing FINRA to establish a new issue reference data service for corporate bonds. FINRA noted at the time of submitting the proposed rule change it would announce the effective date in a Regulatory Notice within 90 days of SEC approval, and that effective date would be within 270 days of SEC approval. FINRA has now requested an extension of time to establish and announce the effective date, and indicated it will provide market participants with enough time to prepare for implementation.

The proposed rule change would not alter any existing FINRA rule.

SR-FINRA-2021-007

 

On April 13, the Financial Industry Regulatory Authority (FINRA) issued answers to several Frequently Asked Questions to aid members with their reporting obligations under FINRA Rule 4521(d) (the Rule).

The Rule provides that each member carrying margin accounts for customers must submit, on a settlement date basis, as of the last business day of the month: 1) the total of all debit balances in securities margin accounts; and 2) the total of all free credit balances in all cash accounts and all securities margin accounts. Continue Reading FINRA Publishes Answer to Frequently Asked Questions Under Rule 4521(d) on Margin Balance Reporting

On April 8, the Market Participants Division (MPD), Division of Clearing and Risk (DCR), Division of Data (DOD) and Division of Market Oversight (DMO) of the Commodity Futures Trading Commission jointly issued no-action relief, effective immediately, to maintain the regulatory status quo for swap dealers (SD) following the withdrawal of the United Kingdom from the European Union. The no-action letter provides relief to SDs from certain transaction-level requirements for certain swaps between their foreign branches and non-US persons. MPD also provided no-action relief to SDs from the comparability determination requirement by allowing them to utilize existing relief provided in CFTC Staff Letter No. 20-39.

Staff Letter 21-09 and Press Release

On April 14, the Commodity Futures Trading Commission’s Market Participants Division (MPD) and Division of Market Oversight (DMO) jointly issued CFTC Staff Letter 21-10 to extend, for a limited time, parts of the temporary no-action relief granted in response to the COVID-19 pandemic, which expired on April 15. Continue Reading CFTC Staff Issues Continuation of Certain No-Action Relief to Market Participants in Response to COVID-19

On April 13, the National Futures Association (NFA) issued Notice I-21-15 advising members firms that new NFA Compliance Rule 2-50 and its related Interpretive Notice become effective June 30. (The proposal of the new rule and Interpretive Notice was discussed in the March 12, 2021 edition of Corporate & Financial Weekly Digest.) Continue Reading NFA Issues Notice Regarding Effective Date of NFA’s Rules Regarding CPO Notice Filing Requirements

On March 31, the staff of the Division of Corporation Finance (the Staff) of the Securities and Exchange Commission issued a staff statement (the Staff Statement) relating to accounting, financial reporting and governance issues for private companies to consider before engaging in a business combination with a special purpose acquisition company (SPAC). Continue Reading SEC Corp Fin Staff Issues Statement on SPAC Transactions

On April 5, the Securities and Exchange Commission voted to take two actions in the implementation of security-based swap regulation under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Continue Reading SEC Issues Notice of Substituted Compliance Application and Proposed Substituted Compliance Order for United Kingdom and Reopens Comment Period for Notice and Proposed Substituted Compliance Order for France