On November 14, 2016, the SEC hosted a Fintech Forum at its headquarters in Washington, D.C. to explore the securities law disclosure, investor protection, capital formation and other implications of robo-advising, distributed ledger technology and blockchain, crowd funding and marketplace lending.
To learn more, please visit Orrick’s Website for our webinar reviewing the matters discussed at the Forum.
On October 26, 2016, the Securities and Exchange Commission adopted rules designed to modernize intrastate and small offerings by companies while maintaining investor protections. Among the changes is the adoption of Securities Act Rule 147A, a new intrastate offering exemption that “further accommodates offers accessible to out-of-state residents and companies that are incorporated or organized out‑of‑state.” Press Release.
On October 13, 2016, the Securities and Exchange Commission adopted rules to implement modern reporting and disclosure requirements for registered investment companies and open‑end funds. Press Release.
On October 24, Staff in the Office of Compliance Inspections and Examinations (the “Staff”) issued a National Exam Program Risk Alert announcing that it is examining registered investment advisers and registered broker-dealers compliance with key whistleblower provisions arising out of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Commission recently has brought several enforcement actions charging violations of Rule 21F-17 of the Commission’s whistleblower regulations.
The Staff now is routinely reviewing, among other things, compliance manuals, codes of ethics, employment agreements, and severance agreements to determine whether provisions in those documents pertaining to confidentiality of information and reporting of possible securities law violations may raise concerns under Rule 21F-17.
Section 21F of the Securities Exchange Act of 1934 was added by the Dodd-Frank Act. To implement Section 21F, among other things, the Commission adopted Rule 21F-173 thereunder which provides that “no person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”
The Staff highlighted that “Recent enforcement actions have identified certain provisions of confidentiality or other agreements required by employers as contributing to violations of Rule 21F-17 because they contained language that, by itself or under the circumstances in which the agreements were used, impeded employees and former employees from communicating with the Commission concerning possible securities law violations. This potential chilling effect can be especially pronounced when such documents (e.g., severance agreements) provide that an employee may forfeit all benefits if he or she violates any terms of the agreement.” Alert.
On October 3, 2016, the Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”)’s Office of Investor Education and Advocacy issued an Investor Alert announcing a new National Market System (NMS) Plan that will implement a Tick Size Pilot Program (the “Pilot”) that will widen the minimum quoting and trading increment – sometimes called the “tick size” – for some small capitalization stocks. The goal of the Pilot is to study the effect of tick size on liquidity and trading of small capitalization stocks.
The Pilot has been implemented pursuant to the Jumpstart Our Business Startups Act which, among other things, directed the SEC to conduct a study and report to Congress on how decimalization affected the number of initial public offerings, and the liquidity and trading of securities of smaller capitalization companies.
Under the Pilot, the tick size will be widened from a penny ($0.01) to a nickel ($0.05) for specified securities listed on national securities exchanges (“Pilot Securities”). For some Pilot Securities, only quoting will need to occur in $0.05 increments, while for others, both quoting and trading generally will need to occur in increments of a nickel.
The Pilot will include a specified subset of the exchange-listed stocks of companies that have $3 billion or less in market capitalization, an average daily trading volume of one million shares or less and a volume-weighted average price of at least $2.00 for every trading day. There will be a control group of approximately 1,400 securities and three test groups, each with approximately 400 securities selected by a stratified sampling.
The Plot will run for a two-year period that will commence on October 3, 2016.
The data collected from the Pilot will be used by the SEC, national securities exchanges and FINRA to assess whether wider tick sizes enhance the market quality of these stocks for the benefit of issuers and investors—such as less volatility and increased liquidity.
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On September 28, 2016 the Securities and Exchange Commission (“SEC”) voted to adopt new rules to establish “enhanced standards for the operation and governance of securities clearing agencies that are deemed systematically important or that are involved in complex transactions, such as security-based swaps.” In addition, the SEC has proposed to apply these new standards to additional categories of securities clearing agencies, including all SEC-registered central counterparties. The rules will become effective sixty days after their publication in the Federal Register. Press release.
On August 31, 2016, the Securities and Exchange Commission proposed amendments that would require hyperlinks to exhibits in specified types of filings with the Securities and Exchange Commission. Press release. Proposed rule.
On August 29, 2016, the Securities and Exchange Commission amended a rule designed to provide access for regulators to data in the security-based swap market. The amendments were enacted to make the sharing of information more secure and efficient. Press release,
On August 25, 2016, the Securities and Exchange Commission adopted amendments to rules and forms designed to improve disclosures provided by investment advisers to investors and the Securities and Exchange Commission. Press release.
On August 25, 2016, the Securities and Exchange Commission requested “public comment on disclosure requirements in Subpart 400 of Regulation S-K, including those relating to management, certain security holders, and corporate governance matters.” Press release.
