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.

SEC Publishes Risk Alert and FAQs Reminding Broker-Dealers of their Obligations In Unregistered Transactions

On October 9, the SEC announced publication of a Risk Alert and FAQs to remind broker-dealers of their obligations when they engage in unregistered transactions on behalf of their customers. The publication of the staff guidance was accompanied by the announcement of an enforcement action against two firms for improperly selling billions of shares of penny stocks through such unregistered offerings. The Risk Alert summarizes deficiencies that were discovered by the SEC’s Office of Compliance Inspections and Examinations (OCIE) during a targeted sweep of 22 broker-dealers frequently involved in the sale of microcap securities. Announcement. Risk Alert.