On May 1, the SEC proposed rules and interpretive guidance for parties to cross-border security-based swap transactions. Comments on the proposed rules must be submitted within 60 days of publication in the Federal Register. SEC Release and Fact Sheet.
On April 23, the SEC announced the agency for its Credit Ratings Roundtable which will be held on May 14. The roundtable will consist of three panels: (i) the potential creation of a credit rating assignment system for ABS; (ii) the effectiveness of the SEC’s current system to encourage unsolicited ratings of ABS; and (iii) alternatives to the current issuer-pay business model in which the issuer selects and pays the rating agency. Comments may be submitted prior to the event through the SEC website. SEC Release.
This alert provides an overview of the Staff of the Securities and Exchange Commission’s address of frequently asked questions regarding Rule 15a-6 and foreign broker-dealers. For more information, please click here.
On March 26, the Staff of the Division of Trading and Markets of the SEC provided no-action letter relief from the broker-dealer registration requirements of the Securities Exchange Act of 1934 to FundersClub Inc. and its wholly-owned subsidiary in connection with their internet based, Rule 506 compliant securities offerings. FundersClub and its subsidiary are venture capital fund advisers under Rule 203(l)-(1) of the Investment Advisers Act of 1940. The FundersClub no action relief sets forth the Staff’s interpretation of Section 201 of the JOBS Act, which provides an exemption from broker-dealer registration for persons providing certain services in connection with an offering under Rule 506 of Regulation D. In granting the requested relief, subject to numerous conditions, the Staff noted that FundersClub and its subsidiary comply with the JOBS Act, in part, because they and each person associated with them receive no compensation (or the promise of future compensation) in connection with the purchase or sale of securities (transaction-based compensation), rather they receive compensation for their traditional advisory and consulting services, i.e., carried interest. SEC No Action Letter.
On March 21, the Staff of the Division of Trading & Markets of the SEC published a set of FAQs on Rule 15a-6 under the Securities Exchange Act of 1934, which provides conditional exemptions from Exchange Act broker-dealer registration requirements for foreign broker-dealers that engage in specified activities involving U.S. investors. Among the topics covered are distribution of research to U.S. institutional investors, delivery of confirmations and account statements directly to U.S. counterparties, and the application of prior no-action guidance to chaperoning arrangements with non-affiliated broker-dealers. SEC FAQs.
On March 11, the SEC announced charges against a private equity firm, a former senior executive of the firm and an individual based solely on the allegation that the individual acted as an unregistered broker-dealer in violation of the Securities Exchange Act of 1934. The parties agreed to settle the charges. The significance of this action is that the SEC did not allege that the parties defrauded clients, but rather only that the individual, who purported to be a “finder” (and not a broker-dealer), engaged in activities that went far beyond merely making initial introductions and, therefore, should have been registered. In turn, the SEC’s order found that the private equity firm “caused” the violation and that the former executive who oversaw the marketing efforts “aided and abetted and caused” the individual’s violation of the registration requirements of the Exchange Act. SEC Press Release.
On March 7, the SEC proposed Regulation SCI to require certain SROs, alternative trading systems, disseminators of market data under certain National Market Systems plans and clearing agencies exempt from SEC regulation to have comprehensive policies and procedures in place surrounding their technological systems. The proposed Regulation SCI would replace the current voluntary compliance program with enforceable rules designed to better insulate securities markets from vulnerabilities posed by systems technology issues. Comments must be submitted within 60 days after publication in the Federal Register. SEC Release. SEC Proposed Rules.
On March 4, the SEC issued a Risk Alert on compliance with its custody rule for investment advisers and an Investor Bulletin on the rule which is designed to protect advisory clients from theft or misuse of their funds and securities. The alert comes after a review which identified significant deficiencies in about one-third of firms examined, including: (i) failure to recognize that they have custody; (ii) failure to meet surprise examination requirements; and (iii) failure to satisfy the rule’s qualified custodian requirements. SEC Release.
In its February 28, 2013 Form 10-K filed with the SEC, Bank of America disclosed that it is under investigation by the New York Attorney General over its purchase, securitization and underwriting of home loans and RMBS. According to the filing, Bank of America has received several subpoenas and requests for information, particularly relating to its underwriting and issuance of RMBS and involvement with certain collateralized debt obligation offerings. Additionally, the filing disclosed that the SEC has issued an inquiry to Bank of America regarding the SEC’s investigation of Merrill Lynch’s risk control, valuation, structuring, marketing and purchase of CDOs. Bank of America disclosed that it is providing documents and testimony to the New York Attorney General and the SEC in full cooperation with both investigations. Form 10-K Excerpt.
On February 21, the SEC published its examination priorities for 2013. Priorities in each program area include: (i) for investment advisers and investment companies – presence exams for newly registered private fund advisers and payments by advisers and funds to entities that distribute mutual funds; (ii) for broker-dealers – sales practices and fraud; (iii) for market oversight – risk-based examinations of securities exchanges and FINRA; and (iv) for clearing and settlement – transfer agent exams, timely turnaround of items and transfers, accurate recordkeeping and safeguarding of assets. SEC Release. Examination Priorities.