SEC Proposes Amendments to Implement JOBS Act Mandate for Exchange Act Registration Requirements

As mandated by the Jumpstart Our Business Startups Act (JOBS Act), on December 17 the Securities and Exchange Commission approved the issuance of proposed amendments to revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act of 1934.

Among other things, the proposal would:

  • Amend Exchange Act Rules 12g-1 through 4 and 12h-3 which govern the procedures relating to registration, termination of registration under Section 12(g), and suspension of reporting obligations under Section 15(d) to reflect the new thresholds established by the JOBS Act
  • Apply the definition of “accredited investor” in Rule 501(a) under the Securities Act of 1933 to determinations as to which record holders are accredited investors for purposes of Exchange Act Section 12(g)(1).  The accredited investor determination would be made as of the last day of the fiscal year.

The JOBS Act revised Exchange Act Section 12(g) to raise the threshold at which an issuer is required to register a class of equity securities.  Under the revised threshold, an issuer that is not a bank or bank holding company is required to register a class of equity securities under the Exchange Act if it has more than $10 million of total assets and the securities are “held of record” by either 2,000 persons, or 500 persons who are not accredited investors

The SEC will seek public comment on the proposed rule amendments for 60 days following their publication in the Federal Register.

SEC Extends Expiration of Rule 206(3)-3T, Regarding Principal Trades, to December 31, 2016

On December 17, the Securities and Exchange Commission amended Rule 206(3)-3T under the Investment Advisers Act of 1940 to extend the expiration date of the Rule from December 31, 2014 to December 31, 2016.  Rule 206(3)-3T is a temporary rule that establishes an alternative means for investment advisers that are registered with the Commission as broker-dealers to meet the requirements of Section 206(3) of the Advisers Act when they act in a principal capacity in transactions with certain of their advisory clients.  Report.

SEC Issues Revisions to Regulation AB Telephone Interpretations

On December 9, the SEC issued Compliance and Disclosure Interpretations (“C&DIs”) that comprise the SEC’s interpretations of the rules adopted under Regulation AB II and the Securities Act and the Exchange Act.  The new C&DIs replace the interpretations published in the Regulation AB Manual of Publicly Available Telephone Interpretations. C&DIs update previously-issued telephone interpretations to reflect the final Regulation AB IIRelease.

SEC Adopts Rules to Improve Systems Compliance and Integrity Rules to Strengthen Technology Infrastructure of Securities Markets

On November 19, the Securities and Exchange Commission voted to adopt new rules designed to strengthen the technology infrastructure of the U.S. securities markets. The rules – together comprising Regulation Systems Compliance and Integrity (Regulation SCI) – impose requirements on certain key market participants intended to reduce the occurrence of systems issues and improve resiliency when systems problems do occur.  ReleaseRuleSEC Staff Guidance.

SEC Releases Accounting Bulletin to Update Guidance on Pushdown Accounting

On November 18, the SEC released a Staff Accounting Bulletin (SAB) to rescind portions of the interpretive guidance included in its SAB Series for what is known as pushdown accounting. The new bulletin brings existing guidance into conformity with Accounting Standards Update No. 2014-17 – Business Combinations (Topic 805).  ReleaseBulletin.

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.

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.

SEC Announces its Reg AB II Registration Statement Pilot Program

On October 6, the SEC announced its Regulation AB II pilot program for registration statements relating to asset-backed securities. The SEC will begin accepting email requests to participate at 9 am ET on October 20. The SEC will select at least two issuers per asset class (on a first-come-first-served basis), and the deadline for draft registration statements is expected to be in February 2015. The SEC plans to make the draft registration statements and staff comments available to the public.  Announcement.