On December 19, “[t]he Securities and Exchange Commission (“SEC”) [] voted to propose a new rule and related amendments designed to streamline and enhance the regulatory framework for fund of funds arrangements.” Release. Proposed Rule.
SEC
SEC Proposes Rule Changes for Fund of Funds Arrangements
On December 19, “[t]he Securities and Exchange Commission (“SEC”) [] voted to propose a new rule and related amendments designed to streamline and enhance the regulatory framework for fund of funds arrangements.” Release. Proposed Rule.
SEC Adopts Final Rules to Allow Exchange Act Reporting Companies to Use Regulation A
On December 19, “[t]he Securities and Exchange Commission (“SEC”) adopted final rules to allow reporting companies to rely on the Regulation A exemption from registration for their securities offerings.” Release.
SEC Adopts Rules That Increase the Information Brokers Must Provide to Investors on Order Handling
On November 2, the Securities Exchange Commission (“SEC“) announced that it voted to adopt amendments that require broker-dealers to disclose the way that they handle investors’ orders. The new disclosures will provide customers with information about the average rebates the broker received from, and the fees the broker paid to, treading venues. Release.
Settlements of SEC Registration Charges with Two ICO Issuers Serve as Warning and Compliance Models
On November 16, the Securities Exchange Commission (“SEC“) announced settled charges against two companies that sold digital tokens in initial coin offerings (“ICOs“). According to the Press Release announcing these settlements, these are the Commission’s first cases imposing civil penalties solely for ICO securities offering registration violations. The remedies agreed to include the return of funds to harmed investors, the registration of the tokens as securities under the Securities Exchange Act of 1934, the filing of periodic reports with the Commission, and the payment of $ 250,000 as a monetary penalty. READ MORE
SEC Charges EtherDelta Founder with Operating an Unregistered Securities Exchange
On November 8, the Securities and Exchange Commission (“SEC“) announced that it has settled charges against Zachary Coburn, the founder of EtherDelta, a digital token trading platform. Significantly, this is the SEC’s first enforcement action based on findings that such a platform operated as an unregistered national securities exchange. The SEC has previously brought enforcement actions relating to unregistered broker-dealers and unregistered Initial Coin Offerings (“ICOs“), including some of the tokens traded on EtherDelta.
According to the SEC’s order, EtherDelta is an online platform for secondary market trading of ERC20 tokens, a type of blockchain-based token commonly issued in ICOs. The order found that Coburn caused EtherDelta to operate as an unregistered national securities exchange.
As stated in the Press Release and Order, EtherDelta provided a marketplace for bringing together buyers and sellers for digital asset securities through the combined use of an order book, a website that displayed orders, and a “smart contract” run on the Ethereum blockchain. Most notably, over an 18-month period, EtherDelta’s users executed more than 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities law. Notably, the SEC did not identify the specific tokens it found to be securities or the salient characteristics thereof.
Therefore, EtherDelta acted as an online national securities exchange and was required to register with the SEC or qualify for an exemption.
The SEC’s investigation is ongoing.
SEC Proposed Disclosure Improvements for Variable Annuities and Variable Life Insurance Contracts
On October 30, the Securities Exchange Commission (“SEC“) announced it voted to propose rule changes intended to improve disclosure for investors about variable annuities and variable life insurance contracts. Such improvements would focus on helping investors better understand a contract’s terms, benefits and risks. The proposed rule would permit the satisfaction of prospectus delivery obligations under the Securities Act of 1933 for a variable annuity or variable life insurance contract by sending or giving a summary prospectus to investors and making the statutory prospectus available online. Release.
SEC Issues Statement on Certain Provisions of Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants
On October 31, the Securities Exchange Commission (“SEC“) issued a statement setting forth its position, for a limited time, that certain actions with respect to specific provisions of its Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants will not provide a basis for SEC enforcement action. The statement also addresses the SEC’s position on the ability of parties to security-based swaps to rely on written representations previously provided in relation to swaps. Release.
SEC Awards More Than $54 Million to Two Whistleblowers
On September 6, the SEC issued a statement that it is awarding $39 million to one whistleblower and $15 million to another. The $39 million award is the second-largest in the history of the SEC’s whistleblower program. Release.
SEC Adopts Amendments to Simplify and Update Disclosure Requirements
On August 17, 2018, the Securities and Exchange Commission announced it voted to adopt amendments to certain disclosure requirements that it found have become duplicative, overlapping or outdated in light of other Commission disclosure requirements, U.S. Generally Accepted Accounting Principles (“GAAP“) or changes in the information environment. The Commission also announced it is referring certain disclosure requirements that overlap with, but require information incremental to, GAAP to the Financial Accounting Standards Board for consideration for potential incorporation into GAAP. Press Release. Final Rule.