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.
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.
On October 1, the SEC fiscal year 2015 started. The SEC will be operating under a continuing resolution that will extend until December 11. Accordingly, the fees paid under Section 31 of the Securities Exchange Act will remain at their current rate until 60 days after the enactment of a regular appropriation for the SEC. Release.
On September 4, the SEC posted the final Regulation AB II rule (non-draft version). Final Rule.
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.
On remand following a Second Circuit decision vacating his June 2011 rejection of a settlement between Citigroup and the SEC, Judge Jed Rakoff of the Southern District of New York approved the settlement, finding that it met the requirements articulated by the Second Circuit. In the settlement, Citigroup has agreed to pay US$285 million to resolve fraud claims stemming from the sale of mortgage-backed securities. Additionally, in its August 1, 2014, Form 10-Q, Citigroup stated that the SEC had advised Citigroup that it had concluded its investigation of Citigroup’s MBS practices and did not intend to recommend an enforcement action. Opinion. 10-Q Excerpt.
On July 31, the SEC announced modifications to its Municipalities Continuing Disclosure Cooperation (MCDC) Initiative that will (i) allow issuers and obligors more time to complete their reporting requirements by extending the deadline to self-report potential violations from September 10, 2014 - December 1, 2014 and (ii) implement a tiered approach to civil penalties for underwriters based on the size of the firm. Release.
On July 23, S&P’s parent company, McGraw Hill Financial Inc., disclosed that it received a Wells notice indicating that the SEC’s enforcement staff had made a preliminary determination to recommend that the SEC institute an enforcement action against S&P alleging violation of federal securities laws with respect to S&P’s ratings of six commercial MBS transactions in 2011 and public disclosures made by S&P regarding those ratings thereafter. S&P will have the opportunity to respond to provide its perspective and to address the issues raised by the enforcement staff before any enforcement proceeding is initiated. Press Release.
On July 23, the SEC re-proposed amendments, initially proposed in March 2011, related to the removal of credit rating references in rule 2a-7 and Form N-MFP of the Investment Company Act. The re-proposed amendments would implement provisions of Dodd-Frank. Comments must be submitted within 60 days of the proposal’s publication in the Federal Register. Proposed Rule.
On July 23, the SEC adopted amendments to the rules that govern money market mutual funds. The new rules require a floating net asset value (NAV) for institutional prime money market funds to fluctuate, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets. This provides non-government money market fund boards with new tools— liquidity fees and redemption gates—to address the problem of investor runs. With a floating NAV, institutional prime money market funds are required to value their portfolio securities using market-based factors and sell and redeem shares based on a floating NAV. Release. Final Rule.