Responses to Frequently Asked Questions Regarding the Commission’s Rule under Section 13 of the Bank Holding Company Act (the “Volcker Rule”)

The Staff of the SEC Division of Trading and Markets, Investment Management, and Corporate Finance provided updated guidance on June 12, 2015 in response to frequently asked questions (“FAQs”) regarding the SEC’s final rule implementing section 13 of the Bank Holding Company Act of 1956, commonly referred to as the “Volcker Rule.”  The responses to these FAQ’s address a broad range of issues arising under the restrictions imposed by the Volcker Rule on banking entities proprietary trading activities and the ownership, sponsorship and management of “covered funds.”  FAQ Responses.

SEC and FINRA to Hold National Compliance Outreach Program for Broker-Dealers

On May 12, the SEC and FINRA announced the opening of registration for their 2015 National Compliance Outreach Program for Broker-Dealers.  The program is intended to provide an open forum for regulators and industry professionals to discuss compliance practices and exchange ideas on compliance structures.  Release.

SEC Adopts Updated EDGAR Filer Manual

On April 13, the SEC adopted revisions to EDGAR Filer Manual and related rules to reflect updates to the EDGAR system. The updates are being made primarily to support the 2015 US GAAP financial reporting and 2015 EXCH taxonomies; add new form types for registration of Security-based swap data repositories (SDR); revise the Form ID Application Confirmation screen; remove references to the Paper Form ID; and revise Item 1 on submission form type MA-A.  Final Rule.

SEC Proposes Rule to Require Broker-Dealers Active in Off-Exchange Market to Become Members of National Securities Association

On March 25, the SEC proposed to narrow Rule 15b9-1 under the Securities Exchange Act, which exempts certain brokers or dealers from membership in a registered national securities association, in an effort to enhance regulatory oversight of active proprietary trading firms, such as high frequency traders.  ReleaseProposed Rule.

SEC Adopts Rules to Facilitate Smaller Companies’ Access to Capital

On March 25, the SEC adopted final rules updating and expanding Regulation A, which provides an exemption from registration for smaller issuers of securities, to implement Title IV of the Jumpstart Our Business Startups (JOBS) Act.  The updated exemption (referred to as Regulation A+) will enable smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements.  ReleaseFinal Rule.

SEC Issues Guidance Regarding Standards Applicable to Waivers of Disqualification under Regulation A and Rules 505 and 506 of Regulation D

The disqualification provisions of Rules 262 and 505 under the Securities Act make the exemptions from registration under Regulation A and Rule 505 of Regulation D unavailable for an offering if, among other things, an issuer, any of its predecessors, or any affiliated issuer is subject to certain administrative orders, industry bars, an injunction involving certain securities law violations or specified criminal convictions. Disqualification also occurs if any of the issuer’s directors, officers, general partners, 10 percent beneficial owners of any class of the issuer’s equity securities, or promoters, underwriters, persons compensated for soliciting purchasers, or any of the underwriters’ or paid solicitors’ partners, directors, or officers, is subject to administrative orders, injunctions, associational bars or specified convictions.

On March 13, the SEC clarified that it may waive Regulation A or Regulation D disqualifications upon a showing of good cause that it is not necessary under the circumstances that the exemptions be denied.  A waiver could include conditions or limitations. The SEC has delegated authority to grant these waivers to the Director of its Division of Corporation Finance.

SEC Proposes New Rules for Security-Based Swap Information Reporting

On February 11, the SEC issued proposed new rules and rule amendments to Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information.  New rules would require platforms to report to a registered security-based swap data repository (“registered SDR”) a security-based swap executed on such platform, would require a registered clearing agency to report to a registered SDR any security-based swap to which it is a counterparty, and certain other changes. Comments must be received within 45 days after the proposal is published in the Federal Register.  Proposed Rule.

 

SEC Proposes Rules for Disclosure of Hedging Policies

On February 9, the SEC issued proposed rules that are intended to enhance disclosure of company hedging policies for directors and employees, as mandated by Dodd-Frank. The proposal would require disclosure about whether directors, officers and other employees are permitted to hedge or offset any decrease in the market value of equity securities held, directly or indirectly, by employees or directors. The proposed rules would require disclosure in proxy and information statements for the election of directors and apply to companies subject to the federal proxy rules, including smaller reporting companies, emerging growth companies, business development companies, and registered closed-end investment companies with shares listed and registered on a national securities exchange.  ReleaseProposed Rule.

The SEC’s Office of Compliance Inspections and Examinations (OCIE) Publishes Risk Alert On Addressing Cybersecurity Issues for Broker-Dealers and Investment Advisers

On February 3, the SEC’s Office of Compliance Inspections and Examinations (OCIE) published a Risk Alert that contains observations based on examinations of more than 100 broker-dealers and investment advisers.  The examinations focused on how these firms:

  • Identify cybersecurity risks
  • Establish cybersecurity policies, procedures, and oversight processes
  • Protect their networks and information
  • Identify and address risks associated with remote access to client information, funds transfer requests, and third-party vendors
  • Detect unauthorized activity

A second publication, an Investor Bulletin issued by the SEC’s Office of Investor Education and Advocacy (OIEA), provides core tips to help investors safeguard their online investment accounts, including:

  • Pick a “strong” password
  • Use two-step verification
  • Exercise caution when using public networks and wireless connections

Risk AlertInvestor BulletinPress Release.