Investment Management Legal + Regulatory Update - February 2015

by Morrison & Foerster LLP
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In This Issue:

- SEC Proposes Rule Requiring Hedging Disclosure

- SEC Reports the Result of its Cybersecurity Sweep of Broker-Dealers and Investment Advisers

- House Passes Bill to Ease Volcker Rule and Other Regulatory Requirements

- OCIE Publishes Exam Priorities for 2015

- Heightened Scrutiny of Brokers – SEC Approves FINRA’s Proposed Background-Check Rule

- FINRA Issues a Packed Priorities Letter for 2015

- FSOC, At It Again, Places Asset Managers in Its Crosshairs

- CFTC Staff Grants Family Offices No-Action Relief From Registration as Commodity Trading Advisors

- SEC to Require Living Wills and Stress-Testing for Investment Advisers

- Former Investment Management Director Offers Top 10 Lessons Learned in 2014

- Enforcement + Litigation SEC Charges Alt Fund Adviser With Custody Violations

- FINRA Sanctions Member Firm for Failure to Deliver ETF Prospectuses

- SEC and PCAOB Combine Their Focuses on Broker-Dealer Audits and Independence in Settlements With Fifteen Audit Firms

- Tidbits

- Excerpt from SEC Proposes Rule Requiring Hedging Disclosure:

On February 9, 2015, the Securities and Exchange Commission (SEC) proposed amendments to its rules to implement Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which added Section 14(j) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Section 14(j) directs the SEC to require each issuer to disclose, in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer, whether any employee or member of the board of directors of the issuer, or any designee of such employee or member, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities: (1) granted to the employee or member of the board of directors by the issuer as part of the compensation of the employee or member of the board of directors; or (2) held, directly or indirectly, by the employee or member of the board of directors. As noted in the report issued by the Senate Committee on Banking, Housing, and Urban Affairs at the time of adopting Section 955 of the Dodd-Frank Act, this additional disclosure would serve to “provide transparency” to shareholders “to know if executives are allowed to purchase financial instruments to effectively avoid compensation restrictions that they hold stock longterm, so that they will receive their compensation even in the case that their firm does not perform.”

Please see full issue below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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