SEC Launches Municipal Advisor Exam Initiative

On August 19, the SEC Announced a Municipal Advisor Exam Initiative for newly registered municipal advisors.  This “presence” exam initiative appears to be similar in scope and purpose to the “presence” examinations that the SEC has been conducting of investment advisers that were newly registered as a result of the implementation of the Dodd-Frank-Act.

SEC rules that took effect on July 1 generally require municipal advisors to register with the SEC under the final registration process during a four-month phase-in period by October 31. The examinations are designed to establish a presence with the newly regulated municipal advisors.  Over the next two years, the SEC Staff plans to examine a significant percentage of these advisors using an approach that focuses on identified risks.  Areas targeted for scrutiny may include the municipal advisor’s compliance with its fiduciary duty to its municipal entity clients, books and recordkeeping obligations, disclosure, fair dealing, supervision, and employee qualifications and training. Press Release.

SEC Issues Interpretive Guidance on New Municipal Advisors Registration Rule

On January 10, the SEC announced that its Office of Municipal Securities has issued interpretive guidance to address questions from market participants regarding the implementation of new final SEC rules requiring municipal advisors to register with the SEC.

State and local governments frequently use paid advisors to help them decide how and when to issue municipal securities and how to invest proceeds from the sales.  The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act required these advisors to register with the SEC like other market intermediaries.  The SEC’s final rule was adopted in September 2013 and becomes effective on January 13, 2014.  Among the issues addressed in the guidance are:  (i) the advice standard, including the general information exclusion and the treatment of business promotional materials used by underwriters; (ii) the exemption for independent municipal advisors; (iii) the exclusion for registered investment advisers; (iv) the underwriter exclusion, including engagements as underwriters; and (v) the effective date of the final rules and the compliance period for using the final registration forms.  Interpretative Guidance.

The Fed Issues Final Rule on Treatment of Uninsured U.S. Branches and Agencies of Foreign Banks Under Section 716 of Dodd-Frank

On December 24, the Fed issued the final rule clarifying the treatment of uninsured U.S. branches and agencies of foreign banks under Section 716 of the Dodd-Frank Act.  The final rule adopts the interim final rule issued on June 5, 2013Section 716 prohibits the provision of certain types of federal assistance to swaps entities.  Insured depository institutions that are swaps entities are eligible for a transition period of up to 24 months to comply and for certain statutory exceptions.  The final rule clarifies that, for purposes of section 716, uninsured U.S. branches and agencies of foreign banks are treated as insured depository institutionsReleaseFinal Rule.

SEC Removes References to NRSRO Ratings

On December 27, the SEC adopted amendments to eliminate references in certain of its rules and forms to credit ratings.  The changes were mandated by Dodd-Frank.  Rating references were removed from the following rules and forms:

  • Rule 5b-3 under the Investment Company Act;
  • Forms N-1A, N-2, and N-3;
  • Rule 15c3-1 (and certain appendices) under the Securities Exchange Act of 1934;
  • Rule 15c3-3 under the Securities Exchange Act of 1934; and
  • Rule 10b-10 under the Securities Exchange Act of 1934.

Release.  Final Rules #1.  Final Rules #2.

Final Rules on Appraisal Exemptions for Higher-Priced Mortgages

On December 12, the Fed, FDIC, CFPB, FHFA, NCUA and OCC issued a final rule that creates exemptions from certain appraisal requirements for certain higher-priced mortgage loans.  The final rule provides that loans of $25,000 or less and certain “streamlined” refinancings are exempt from the Dodd-Frank Act appraisal requirements, which go into effect on January 18, 2014.  Joint ReleaseJoint Final Rule.

CFTC Staff Issues Advisory on Transaction-Level Requirements in Certain Cross-Border Situations

On November 14, CFTC issued advisory on the applicability of Dodd-Frank transaction-level requirements to swaps between non-U.S. swap dealers (SDs) (whether or not an affiliate of a U.S. person) and non-U.S. persons if the swap is arranged, negotiated or executed by a non-U.S. SD located in the U.S.  Advisory.

SEC Proposes Rules for Pay Ratio Disclosure

On September 18, the SEC voted 3-2 to propose a new rule requiring public companies to disclose the compensation ratio of CEO to the median compensation of its employees, as required by the Dodd-Frank Act.  Under the proposal, companies would have the flexibility to determine the median annual total compensation of its employees in a way that best suits their circumstances.  The proposal will be subject to a 60-day public comment period once it is published in the Federal Register.  Press ReleaseProposal.

Financial Industry Breakfast Briefing: Derivatives Market Update – Where Things Stand

On September 10, Orrick will host a Financial Industry Breakfast Briefing in our New York office.  The briefing will cover the current state of the derivatives market with specific updates on the implementation of Dodd-Frank and recent litigation involving derivatives.  Speakers include partners Steven FinkNikiforos Mathews and Thomas Mitchell.  This course has been approved in accordance with the requirements of the Continuing Legal Education Board for a maximum of 1.0 credit hour.  To register for this event, please click here.