On December 21, 2012, the CFPB issue a proposed amendment to subpart B of Regulation E under the Electronic Fund Transfer Act regarding remittance transfers. The proposed amendment: (i) provides flexibility regarding the disclosure of foreign taxes, as well as fees imposed by a designated recipient’s institution for receiving a remittance transfer in an account; (ii) limits a remittance transfer provider’s obligation to disclose foreign taxes to those imposed by a country’s central government; and (ii) revises the error resolution provisions that apply when a remittance transfer is not delivered to a designated recipient because the sender provided incorrect or insufficient information. Comments must be received within 30 days of publication of the proposed amendment in the Federal Register. CFPB Release. CFPB Proposed Amendment.
Asset Management
SEC No-Action Letter on Definition of “Ready Market” for Foreign Equity Securities
On December 27, 2012, the staff of the SEC Division of Trading and Markets issued a no-action letter setting forth conditions under which broker-dealers may treat certain foreign equity securities as having a “ready market” under the Exchange Act Rule 15c3-1(c)(11)(i). This expands the number of foreign securities eligible as foreign margin stock under Fed Regulation T. SEC No-Action Letter.
FINRA Guidance on Suitability Rule
On December 10, FINRA issued Regulatory Notice 12-55, which provides regulatory guidance in the form of a FAQ regarding customer suitability issues under FINRA Rule 2111. The amendments to the FAQ address the scope of the terms “customer” and “investment strategy.” FINRA Notice.
CFTC No-Action Relief for CPO Registration of Family Offices
On November 30, the CFTC issued a no-action letter stating that the Division of Swap Dealer and Intermediary Oversight will not take enforcement action against the operators of family offices for failure to register as commodity pool operators. CFTC Release. CFTC No-Action Letter.
CFTC No-Action Relief for CPO Registration of Fund of Funds
On November 30, the CFTC issued a time limited no-action letter stating that that the Division of Swap Dealer and Intermediary Oversight will not take enforcement action against the commodity pool operator of a fund of funds for failure to register as such until the later of June 30, 2013, or six months after the effective date (or compliance date, if later) of any revised guidance on the de minimus threshold rules. CFTC Release. CFTC No-Action Letter.
SEC Rule on ’40 Act Exemption for Business and Industrial Development Companies
On November 19, the SEC adopted rule 6a-5 under the Investment Company Act of 1940 to establish a standard of credit-worthiness in place of a reference to credit ratings in section 6(a)(5) of the ’40 Act for debt securities purchased by entities relying on an exemption for business and industrial development companies. The rule implements section 939(c) of the Dodd-Frank Act. The rule will be effective 30 days after publication in the Federal Register. SEC Rule.
SEC Approves Amendments to FINRA Margin Requirements Rule
On October 26, the SEC approved amendments to FINRA Rule 4210 related to option spread strategies, maintenance margin requirements for non-margin eligible equity securities, free-riding, “exempt accounts” and stress testing in portfolio margin accounts. The amendments related to option spread strategies become effective on October 26 and all other amendments become effective on January 23, 2013. FINRA Notice. Amended FINRA Rule.
SEC OCIE Letter on National Exam Program Initiative
On October 9, the SEC’s Office of Compliance Inspections and Examinations (OCIE) sent letters of introduction addressed to the Senior Executives of newly-registered advisers to private funds as part of their nationwide outreach announcing a new initiative under the National Exam Program, in which OCIE will be conducting “focused, risk-based examinations of advisers to private funds.”
Under this initiative, the exam staff will review one or more high-risk areas of a private fund adviser, which could include marketing materials, conflicts of interest in the portfolio management process, such as investment and trade allocations, safety of client assets in the context of the Advisers Act custody rule, and valuation policies and procedures, especially with regard to illiquid or difficult to value instruments. As with all OCIE exams, the outcome of the exam could include no findings, an “examination summary letter” of compliance deficiencies, or a referral to the SEC’s Division of Enforcement or another regulator, such as FINRA or a state. SEC OCIE Letter.
FINRA Rule Requiring Filing of Private Placement Offering Documents
On September 5, the SEC approved new FINRA rule 5123 requiring each member firm that sells an issuer’s securities in a private placement to file with FINRA a copy of any private placement memorandum, term sheet or other offering document within 15 days of the date of sale. The rule exempts some private placements sold solely to qualified purchasers, institutional purchasers and other sophisticated investors. The rule becomes effective on December 3. FINRA Notice and Rule.
SEC Approves New FINRA Communications Rules
On June 14, the SEC approved the adoption by FINRA of final rules governing member firms’ communications with the public. The final rules include general contact standards, such as requiring communications to provide a sound basis for evaluating the facts with respect to a security, as well as content standards that apply to specific issues or securities. The final rules will be effective on February 4, 2013. FINRA Notice. FINRA Rules.