On December 21, 2018, the Division of Market Oversight (DMO) of the Commodity Futures Trading Commission issued Letter 18-33 responding to a request for relief from compliance with certain position aggregation requirements under CFTC Regulation 150.4(b)(2)(i)(D).

CFTC Regulation 150.4(b)(2) provides an owned-entity exemption from aggregation. Any person with an ownership or equity interest in an owned entity of 10 percent or greater generally need not aggregate the accounts or positions of the owned entity with any other account or position such person is required to aggregate, provided that such person and the owned entity meet the conditions (A) through (E) of 150.4(b)(2)(i) (firewall conditions). Subparagraph (D) of the regulation prohibits the sharing of employees that control the trading decisions of either the person or the owned entity.
Continue Reading CFTC Issues No-Action Relief From Certain Position Aggregation Requirements

On December 10, the National Futures Association (NFA) submitted to the Commodity Futures Trading Commission a proposed Interpretive Notice to NFA Compliance Rule 2-9, which would provide commodity pool operators with guidance on designing and implementing an adequate system of internal controls.

On January 31, the NFA issued Notice I-19-03 announcing the recent adoption of

On December 20, the Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission announced its 2019 examination priorities. This year, OCIE’s examination priorities are divided into six categories:

  1. examining compliance and risk in registrants responsible for critical market infrastructure;
  2. protecting retail investors, including seniors and those saving for retirement;
  3. continuing oversight

On December 20, the Financial Industry Regulatory Authority filed a proposed rule change with the Securities and Exchange Commission to amend various FINRA Code of Arbitration Procedure Rules that govern objections in arbitration proceedings to subpoenas, orders of appearance of witnesses and production of documents by non-parties. Since non-parties to a FINRA arbitration do not have access to FINRA’s Dispute Resolution Party Portal, they currently are served using other, slower methods, including first class mail. Untimely delivery of subpoenas and orders can result in a non-party waiving its ability to object to such subpoena or order. In the event a non-party fails to make a timely objection, it must respond to the subpoena or order or risk incurring sanctions or disciplinary action.
Continue Reading FINRA Files Proposed Rule Change Regarding Arbitration Subpoenas, Orders of Appearance of Witnesses and Production of Documents

On November 28, the Financial Industry Regulatory Authority filed a proposed change to Rule 4512(a)(3) (Customer Account Information) with the Securities and Exchange Commission. FINRA Rule 4512(a)(3) currently requires member firms to obtain the “wet” signature of each named, natural person authorized to exercise discretion in an account. Members have stated that the requirement to obtain a “wet” signature raises operational costs without providing meaningful investor protections and that the requirement puts members at a competitive disadvantage to investment advisers (who are allowed to obtain electronic signatures).
Continue Reading FINRA Proposes Rule Change Relating to Rule 4512 (Customer Account Information)

The Nasdaq Stock Market LLC (Nasdaq) has filed a proposed change to Nasdaq Rule 4756(c)(2) with the Securities and Exchange Commission. Rule 4756(c)(2) provides that, for each security listed on Nasdaq, the aggregate size of all quotes and orders at the best price to buy and sell will be transmitted for display to the appropriate network processor, unless the aggregate size is less than one round lot.
Continue Reading SEC Proposed Rule Change To Amend Nasdaq Rule 4756(c)(2)

On November 30, the Securities and Exchange Commission adopted new Rule 139b under the Securities Act of 1933. Rule 139 currently provides a safe harbor for the publication or distribution of research reports concerning one or more issuers by a broker-dealer participating in a registered offering of a covered issuer’s securities. However, Rule 139’s safe harbor does not extend to the publication or distribution of research reports by a broker-dealer with respect to registered investment companies or business development companies.
Continue Reading SEC Adopts Securities Act Rule 139b To Promote Research Reports on Investment Funds

On October 31, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission issued Letter No. 18-26 to provide continuing relief to a futures commission merchant (FCM) from certain requirements regarding the holding of customer-owned securities as margin for trading on foreign futures and foreign options markets. This letter supersedes CFTC Letter No. 16-88 and was issued to address certain changes in European law with regard to the clearing of positions of clearing members’ indirect clients.
Continue Reading CFTC Issues No-Action Relief Regarding FCM’s Deposit of Customer-Owned Securities

On October 31, the Commodity Futures Trading Commission’s Office of the Chief Economist issued a report on “Phase 5” of the uncleared margin rules (UMR). The purpose of the report is to provide a guide to regulators in their responses to requests for relief from various industry representatives.
Continue Reading CFTC’s Office of the Chief Economist Issues Report on Initial Margin Phase 5

On September 12, the National Futures Association issued Notice I-18-15, announcing that the amendments to NFA’s Interpretive Notice entitled NFA Compliance Rule 2-30(b): Risk Disclosure Statement for Security Futures Contracts (Interpretive Notice) will become effective on October 12.
Continue Reading NFA Issues Notice of Effective Date for Amendments to Security Futures Contracts’ Risk Disclosure Statement