On August 23, the European Securities and Markets Authority (ESMA) published consultation paper ESMA/2011/270 (Consultation on ESMA’s draft technical advice to the European Commission on possible implementing measures of the Alternative Investment Fund Managers Directive in relation to supervision and third countries.)

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On August 11, the financial regulators in Belgium, France, Italy and Spain introduced short selling restrictions on shares of certain named financial institutions and derivatives (e.g., futures) linked to those securities. The restrictions also extend to stock indices of which those securities are components.

The Belgian restrictions apply indefinitely. The three other countries’ restrictions will expire after 15 days, unless extended. Earlier that week, Greece imposed a two-month ban on short sales of all listed securities.

The regulators’ interpretations of their restrictions are constantly evolving. Changes generally are reflected in amendments to published FAQs. The websites below should be consulted for the most up to date information.


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The Securities and Exchange Commission has approved the Financial Industry Regulatory Authority’s proposed rule changes to Rule 5131 that delete paragraph (b)(1) and delay the implementation date of paragraphs (b) and (d)(4) until September 26. Removal of paragraph (b)(1) of Rule 5131, which would have required members to establish, maintain and enforce policies and procedures

Section 403 of the Dodd-Frank Wall Street Reform and Consumer Protection Act repeals, as of July 21, the private adviser exemption in Section 203(b)(3) of the Investment Advisers Act of 1940 and will require advisers relying on that exemption (including advisers to many hedge funds and other private funds) to register with the Securities and Exchange Commission.

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Co-authored by Maxwell Li

On February 8, the U.S. Federal Reserve Board adopted a final rule to implement the conformance period for compliance with the Volcker Rule, which generally prohibits banking entities from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund. The

At its open meeting on February 2, the Securities and Exchange Commission proposed Regulation SB SEF under the Securities Exchange Act of 1934 to implement Section 763 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, it proposed (1) an interpretation of the definition of "security-based swap execution facility" added as Section 3(a)(77) of the Exchange Act by the Dodd-Frank Act; (2) to amend Rule 3a-1 under the Exchange Act to exempt a registered security-based swap execution facility (SB SEF) from regulation as an "exchange"; and (3) to add Rule 15a-12 under the Exchange Act to exempt a registered SB SEF from regulation as a broker-dealer, subject to certain conditions. A security-based swap is broadly defined as a swap over (a) a single security, (b) a loan, (c) a narrow-based group or index of securities, or (d) events relating to a single issuer or issuers of securities in a narrow-based security index.


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In an open meeting scheduled for November 19, the Securities and Exchange Commission will consider proposing rules that would increase the statutory threshold for registration by investment advisers with the SEC, require advisers to hedge funds and other private funds to register with the SEC, and address reporting by certain investment advisers that are exempt

Co-authored by Maxwell Li

The Securities and Exchange Commission filed a complaint on October 19 in the U.S. District Court for the Northern District of Georgia against hedge fund portfolio managers Paul Mannion, Jr. and Andrew Reckles and their investment advisory entities, PEF Advisors LLC and PEF Advisors Ltd., for defrauding investors in the Palisades