SEC’s Office of Investor Education and Advocacy Provides an Overview of How the Division of Enforcement Conducts Investigations

On October 22, SEC’s Office of Investor Education and Advocacy issued an Investor Bulletin to provide investors with a general overview of how the SEC’s Division of Enforcement conducts investigations.  The Bulletin states that the Division of Enforcement may be more likely to initiate an investigation if the matter:

  • Requires immediate action to protect investors;
  • Relates to conduct that may threaten the fairness or liquidity of the securities markets;
  • Involves individuals with a history of misconduct;
  • Involves a subject matter the SEC or Enforcement has designated as a priority;
  • Fulfills a programmatic goal of the SEC and Enforcement; or
  • Concerns an industry practice that may be widespread and should be addressed.  Bulletin.

Agencies Release Economic Scenarios for 2015 Stress Testing

On October 23, regulators released the economic scenarios that will be used by financial institutions with total assets of over $10 billion for stress tests required under Dodd-Frank. The baselineadverse, and severely adverse scenarios include 28 variables that reflect economic activity, including unemployment, exchange rates, prices, income, interest rates, and other relevant parameters of the economy.  Regulatory review will cover 31 companies that will have to submit their capital plans on or before January 5, 2015.  Fed Release.  FDIC Release.

MSRB Creates Supervision and Compliance Requirements for Municipal Advisors

On October 23, the Municipal Securities Rulemaking Board received approval from the SEC to create the first new rule for municipal advisors since the SEC released its final registration rule for these professionals in September 2013.

The new supervision requirements take effect April 23, 2015, providing firms six months to implement the required policies and procedures. By April 23, 2016, the chief executive officers (or the equivalent) of municipal advisor firms must make the first of their annual certifications in writing that the municipal advisor has in place processes to establish, maintain, review, test and modify written compliance procedures and written supervisory procedures reasonably designed to achieve compliance with applicable rules.  MSRB Rule.

Joint Federal Regulators Approve Final Risk Retention Rules

On October 21 and 22, the Fed, HUD, FDIC, FHFA, OCC, and SEC jointly approved final risk retention rules.  The final rules, which implement Section 941 of Dodd Frank, generally follow the re-proposed rules issued in August 2013, mandating that sponsors retain at least 5% of the credit risk in asset-backed securities transactions.  Generally, risk may be retained by holding either a horizontal or avertical slice of issued securities, while additional options are available for specific types of securitizations.  The rules will apply toresidential mortgage-backed securities one year after publication in the Federal Register, and will apply to all other asset classes two years after publication.  Final Rules.  Joint Release.

Federal Reserve Board and FDIC Welcome ISDA Announcement

On October 11, the Board of Governors of the Federal Reserve System and the FDIC applauded the International Swaps and Derivatives Association (ISDA) for the agreement of a new resolution stay protocol.  The resolution stay amendments of the protocol are intended to facilitate an orderly resolution of a major global banking firm and reduce the potential negative impact of the resolution on financial stability by giving the bankruptcy court or resolution authority the ability to prevent early termination of financial contracts of the firm’s global subsidiaries.  Release.

U.S. and U.K. Officials Meet to Discuss Key Components for the Resolution of a Global Systemically Important Bank

On October 13, the heads of the Treasuries and leading financial regulatory bodies in the United States and United Kingdom participated in an exercise designed to further the understanding, communication, and cooperation between U.S. and U.K. authorities in the event of the failure and resolution of a global systemically important bank, or G-SIB. The exercise demonstrates the continued commitment of the United States and the United Kingdom since the financial crisis to promote a safer and sounder financial system by cooperating to address issues involved in the orderly resolution of large and complex financial institutions without cost to taxpayers.  Release.

The Federal Reserve Bank of New York Releases Survey of Consumer Expectations

On October 14, the Federal Reserve Bank of New York released results from its September 2014 Survey of Consumer Expectations (SCE).  The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing and education to behave.  It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit.  Release.  Survey.

CFTC Staff Announces Self-Executing Registration No-Action Relief for Delegating CPOs

On October 15, CFTC Division of Swap Dealer and Intermediary Oversight (DSIO) announced that it is providing self-executing registration no-action relief for certain commodity pool operators (CPOs) who delegate certain activities (Delegating CPOs) to a registered CPO and meet the conditions specified.  The relief was made available in CFTC Staff Letter 14-126.  Release.  Staff Letter.