The Financial Report - Volume 3, No. 3 • February 6, 2014 (Global)

by DLA Piper



  • Discussion and Analysis
  • News from the Americas
  • News from Europe
  • Global Regulators
  • US Securities and Exchange Commission Developments
  • US Commodity Futures Trading Commission Developments
  • US Banking Developments
  • US Judicial Developments
  • US Exchanges and Self-Regulatory Organizations

Discussion and Analysis

On April 5, 2013, David W. Blass, Chief Counsel, Division of Trading Markets for the U.S. Securities and Exchange Commission, delivered a speech to the American Bar Association entitled “A Few Observations in the Private Fund Space”. Mr. Blass noted that the SEC staff “has observed that advisers to some funds - for example, advisers to private equity funds executing a leverage buyout strategy - may also collect many other fees in addition to advisory fees, some of which call into question whether those advisers are engaging in activities that require broker-dealer registration. Examples include fees the manager directs a portfolio company of the fund to pay directly or indirectly to the adviser or one of its affiliates in connection with the acquisition or disposition (including an initial public offering) of a portfolio company or a recapitalization of the portfolio company. The fees are described as compensating the private fund adviser or its affiliates or personnel for “investment banking activity,” including negotiating transactions, identifying and soliciting purchasers or sellers of the securities of the company, or structuring transactions.”

Suffice it to say that Mr. Blass’ comments fueled widespread concerns that many private equity advisers and business transaction consulting firms might be regulated as broker-dealers.

In what some are calling a reversal of Mr. Blass’ views, earlier this week the staff of the SEC issued a no-action letter permitting “M&A brokers” to effect securities transactions in connection with the transfer of ownership of a privately-held company without such “M&A broker” registering as a broker-dealer with the SEC pursuant to Section 15(b) of the Securities Exchange Act of 1934. The no-action letter defines an “M&A Broker” as “a person engaged in the business of effecting securities transactions solely in connection with the transfer of ownership and control of a privately-held company... through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company.”

The relief will enable M&A brokers to facilitate mergers, acquisitions, business sales, and business combinations between sellers and buyers of privately held companies. The relief also allows M&A brokers to provide certain advertising relating to the possible sale of a privately held company, and to participate in the negotiation of M&A Transactions. It also permits such M&A brokers to issue securities, or otherwise to effect the transfer of a business by means of securities, or assess the value of any securities sold; and receive transaction-based compensation.

Although there are a number of conditions to the relief, the no-action letter provides some desperately-needed clarity regarding the status of M&A brokers. Of course, interpretive issues regarding compliance with the terms and conditions of the no-action letter still remain. It is difficult, for example, to reconcile the staff’s position with the staff’s prior views regarding potential broker-dealer registration issues raised in connection with the receipt of transaction fees in the private equity fund space. As such, we encourage private equity advisers and other potential M&A brokers to contact us regarding the applicability of broker-dealer regulation to their precise business activities.

News from the Americas

Asset management study defended. According to Reuters, Richard Berner, of the Treasury Department’s Office of Financial Research, defended his office’s report on asset managers in testimony before the Senate subcommittee on economic policy. Berner said that the report’s purpose was to highlight the risks in the industry, not to promote new regulation. (1/29/2014) Defense. See also Berner testimony.

Canadian securities regulators propose changes to the prospectus-exempt distribution of short-term debt and short-term securitized products. The Canadian Securities Administrators published for comment proposed amendments relating to the short-term debt prospectus exemption in National Instrument 45-106 “Prospectus and Registration Exemptions.” The proposals include a new prospectus exemption designed to address the prospectus-exempt distribution of short-term securitized products, primarily asset-backed commercial paper; and amendments to the short-term debt prospectus exemption to address the prospectus-exempt distribution of short-term debt, typically corporate commercial paper. Comments should be submitted by April 23, 2014. (1/23/2014) CSA press release.

News from Asia and the Pacific

ASIC updates investor information on hybrid securities. The Australian Securities & Investments Commission posted updated information on its consumer finance website, MoneySmart, to help investors understand the risks and complexities of hybrid securities. MoneySmart explains the differences between hybrids issued by banks and hybrids offered by other companies and highlights the features and risks of these securities. (2/4/2014) ASIC press release.

ASIC report on regulating complex products. The Australian Securities & Investments Commission published Report 384 “Regulating complex products” (REP 384). The report outlines the risks posed by complex products to retail investors, sets out ASIC’s recent and current work on complex products, including considering the whole of the product lifecycle - development, distribution, sale, and post-sale, and identifies opportunities for further work, including working with industry. Comments should be submitted by March 31, 2014. ASIC press release.

ASIC report on relief applications. The Australian Securities & Investments Commission released its latest report outlining decisions on relief applications covering the period June 1, 2013, to September 30, 2013. The report summarizes examples of situations in which ASIC has exercised, or refused to exercise, its exemption and modification powers under the Corporations Act and the licensing and responsible lending provisions of the National Credit Act. The report also highlights instances in which ASIC has considered adopting a no-action position regarding specified non-compliance with statutory provisions. The report also provides examples of decisions that demonstrate how ASIC has applied its policy in practice. (1/28/2014) ASIC press release.

Hong Kong proposes amendments to REIT Code. The Hong Kong Securities and Futures Commission opened a one-month consultation on proposals to amend the Code on Real Estate Investment Trusts to introduce flexibility in the investment scope of real estate investment trusts. The proposals seek to introduce flexibility for REITs to invest in properties under development or engage in property development activities; and invest in financial instruments, including listed securities, unlisted debt securities, government and other public securities, and local or overseas property funds. Comments should be submitted by February 26, 2014. (1/27/2014) SFC press release.

License applications for RQFII available. The Monetary Authority of Singapore announced that eligible financial institutions can submit applications for the Renminbi Qualified Foreign Institutional Investor license that will enable these institutions to offer RMB investment products and invest offshore RMB into China’s securities markets. The applications are to be made to the China Securities Regulatory Commission via approved custodian banks. All Singapore-incorporated financial institutions that are approved by MAS to conduct fund management activities may apply for the license. (1/24/2014) MSA press release.

News from Europe

EU approves market abuse directive. The European Parliament approved the European Commission’s proposed market abuse legislation, including a directive on criminal sanctions. (2/4/2014) EC press release.

The big bang for swaps. Bloomberg discussed the issues facing the European swaps market as February 12, 2014 approaches. That is the date on which purchasers and sellers of swaps in all asset classes must begin reporting their derivatives trading. (2/3/2014) Big bang.

EU publishes first anti-corruption report. The European Union published its first Anti-Corruption Report, which describes the nature and level of corruption, and the effectiveness of measures taken to fight it, in each member country. (2/3/2014) EC press release.

ECB update on comprehensive assessment. The European Central Bank summarized the progress made in its on-going comprehensive assessment. It also confirmed that it will apply the parameters for the stress test released by the European Banking Authority. Together with the asset quality review, the stress test forms part of the comprehensive assessment. The assessment aims to enhance the transparency of the balance sheets of significant banks and to rebuild investor confidence. (2/3/2014) ECB press release.

UK mortgage market review. The UK Financial Conduct Authority has made available a webcast of its mortgage market review and collated the most frequently asked questions from the workshops. (2/3/2014) FCA notice.

EBA stress test components. The European Banking Authority announced the key components of the forthcoming 2014 EU-wide stress test that will be conducted on a 124 EU banks. (1/31/2014) EBA press release.

FCA rules on payments by discretionary investment managers. The UK Financial Conduct Authority issued new final rules as part of the Retail Distribution Review. The rules ban new referral payments by a discretionary investment manager (DIM) to an adviser when the adviser recommends that a client place additional money with the same DIM from whom they receive payments following a pre-RDR referral. They also ban referral payments where an adviser firm does not provide personal recommendations to particular clients, but provides other services to them. The new rules are effective December 31, 2014. (1/31/2014) FCA press release.

FCA rules on primary information providers. The UK Financial Conduct Authority issued new final rules on primary information providers, formerly known as regulated information services. The new rules are based largely on the existing framework for regulated information services. (1/31/2014) FCA press release.

FCA guidance on alternative investment fund manager remuneration. The UK Financial Conduct Authority provided general guidance on the AIFM Remuneration. The guidance explains how an alternative investment fund manager (AIFM) should take into account proportionality, consider payments made to partners if the AIFM is structured as a partnership and pay its relevant staff in units, shares or other instruments. (1/31/2014) FCA notice.

FCA consults on listing rules and prospectus rules. The UK’s Financial Conduct Authority published a consultation paper proposing amendments to the Listing Rules and Guidance on sponsor competence and seeking market views on joint sponsor arrangements. The consultation also includes two other proposals, a proposal to remove a Listing Rule requirement for a premium listed issuer to prepare a 28-day circular and a proposal to create new Prospectus Rules that would make an applicant responsible for submitting a compliant and factually accurate prospectus. Comments should be submitted by April 30, 2014. (1/30/2014) FCA announcement.

ESMA proposes conditional equivalence for Japanese regulatory regime. The European Securities and Market Authority has published a supplement to its advice to the European Commission on the equivalence of the Japanese regulatory regime for central counterparties (CCPs) with the European Markets Infrastructure Regulation (EMIR). This supplement concerns the equivalence between the Japanese regulatory regime for commodity CCPs and the regulatory regime for CCPs under EMIR. ESMA considers that the Japanese regulatory regime for commodity CCPs contains legal provisions and involves supervision and enforcement similar to that of EMIR. (1/30/2014) ESMA notice.

PRA responds to comments. The UK’s Prudential Regulation Authority published its response to comments received concerning its consultation on miscellaneous and minor changes to the PRA rules, including further rule amendments related to CRD IV, and material on the PRA’s proposals to create a Rulebook. (1/30/2014) PRA press release.

EC proposes proprietary trading ban. The European Commission published proposed rules intended to stop the biggest and most complex banks from engaging in proprietary trading. The new rules would also give supervisors the power to require those banks to separate certain potentially risky trading activities from their deposit-taking business. The Commission has also adopted accompanying measures aimed at increasing transparency of certain transactions in the shadow banking sector. (1/29/2014) EC press release.

EBA draft standards for investment firms. The European Banking Authority published final draft Regulatory Technical Standards (RTS) on own funds requirements for investment firms based on fixed overheads. The RTS harmonize the calculation of capital requirements for those investment firms that have limited authorization to provide investment services, as well as the conditions under which competent authorities can make adjustments to such requirements. The final draft RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonization in the banking sector in Europe. Comments should be submitted by September 30, 2014. (1/29/2014) EBA press release.

EBA recommendations on the use of LEIs. The European Banking Authority published a recommendation on the use of unique identification codes for supervisory purposes for every credit and financial institution in the European Union. (1/29/2014) EBA press release.

ECB credit terms results. The European Central Bank published the results of the December 2013 survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets. Among other things, the survey found that price terms tightened, especially for banks, dealers and insurance companies; terms offered to hedge funds and non-financial corporations eased overall; demand by counterparties for funding of all types of collateral increased; and, taken in isolation, implementation of leverage, liquidity coverage and net stable funding ratio regulatory initiatives is expected to lead to no more than a 25 percent decrease of securities financing books. (1/28/2014) ECB press release.

Regulators voice concern for proposed accounting reforms. The three European Supervisory Authorities sent a joint letter to the European Commissioner for the Internal Market, Michael Barnier, on the Philippe Maystadt report “Should IFRS standards be more European?” in order to share their concerns on the potential implications of that report. (1/24/2014) ESMA notice.

European Court of Justice dismisses UK Challenge to Short Selling Regulation. The European Court of Justice dismissed the UK’s challenge to the Short-Selling Regulation (SSR). The UK was challenging the power of ESMA to adopt emergency measures under the SSR, which in their view went against general EU principles. The ECJ rejected the challenge, finding that the SSR and the powers given to ESMA are compatible with EU law. (1/22/2014) ECJ press release; ESMA notice.

Global Regulators

IOSCO report on the protection of client assets. The International Organization of Securities Commissions published the final report on “Recommendations Regarding the Protection of Client Assets,” which seeks to help regulators improve the supervision of intermediaries holding client assets. (1/29/2014) IOSCO press release.

Indonesia signs MMoU. The International Organization of Securities Commissions announced that the Indonesian Financial Services Authority became the 100th signatory to the IOSCO Multilateral Memorandum of Understanding on cooperation and exchange of information. The MMoU is the instrument used by IOSCO to combat cross-border financial services misconduct. (1/24/2014) IOSCO press release.

Basel Committee consults on supervisory colleges. The Basel Committee on Banking Supervision issued a consultative document on “Revised good practice principles for supervisory colleges.” Comments should be submitted by April 18, 2014. (1/23/2014) BIS press release.

US Securities and Exchange Commission Developments

Division of Corporation Finance Guidance

Proxy voting. The Division issued three Compliance and Disclosure Interpretations (CDIs) regarding Securities Exchange Act Rule 14a-4(a)(3) on the unbundling of matters that are submitted to a shareholder vote by a company or any other person soliciting a proxy. The CDIs are located at Questions 101.01 through 101.03. (1/24/2014) Proxy voting.

General solicitation. Two CDIs were issued on Securities Act Rule 506(c) concerning the use of general solicitation in private offerings. The CDIs are located at questions 260.33 and 260.34.

Selected Enforcement Actions

Parking violations. The SEC instituted partially settled administrative proceedings against two brokers involved in a fraudulent “parking” scheme in which one temporarily placed securities in the other’s trading book to avoid penalties that would affect his year-end bonus. The SEC alleges that Thomas Gonnella solicited the assistance of Ryan King to evade a policy at his firm that penalizes traders financially if they hold securities for too long. Gonnella arranged for King, who worked at a different firm, to purchase several securities with the understanding that Gonnella would repurchase them at a profit for King’s firm. King, who has cooperated with the SEC investigation, agreed to settle the charges by disgorging his profits and being barred from the securities industry with the right to reapply after three years. The action against Gonnella continues. (2/4/2014) SEC press release.

Two finance professors charged with improper naked short selling. The SEC instituted settled administrative proceedings against two Florida State University finance professors, Gonul Colak and Milen Kostov. Without admitting or denying the allegations, Colak and Kostov consented to the entry of an order finding that they engaged in a manipulative naked short selling scheme that used multiple brokerage accounts to disguise sham transactions. They moved a short position from one brokerage firm to another every few days in order to spread their failures to deliver across multiple firms in an effort to avoid detection. Colak agreed to pay US$285,600 in disgorgement, US$21,957 in prejudgment interest, and a US$150,000 penalty. Kostov agreed to pay US$134,400 in disgorgement, US$10,340 in prejudgment interest, and a penalty of US$70,000. (1/31/2014) SEC press release.

Brokers disgorge profits from illegal markups. The SEC announced that a US District Court entered judgments against Marek Leszczynski, Benjamin Chouchane, and Henry Condron in an SEC fraud case. The judgments permanently enjoin Leszczynski, Chouchane, and Condron and ordered Leszczynski to disgorge US$1,500,000; Chouchane to disgorge US$2,007,408 plus prejudgment interest of US$442,169; and Condron to disgorge US$168,336 plus prejudgment interest of US$39,339. The SEC alleged that the brokers, who formerly worked on the cash desk at a New York-based broker-dealer, illegally overcharged customers US$18.7 million by using hidden markups and markdowns and secretly keeping portions of profitable customer trades. The brokers made their scheme difficult for customers to detect because they deceptively charged the markups and markdowns during times of market volatility. The SEC further alleged that when a customer placed a limit order seeking to purchase shares at a specified maximum price, the brokers filled the order at the customer’s limit price but used opportune times to sell a portion of that order back to the market to obtain a secret profit for the firm. They falsely reported back to the customer that they could not fill the order at the limit price. Defendants also pleaded guilty to related criminal proceedings. (1/28/2014) SEC v. Leszczynski, Lit.Rel.No. 22912.

Failing to respond to SEC subpoenas leads to arrest. The SEC announced that a man who is the subject of an agency investigation has been held in contempt of court and arrested for failing to comply with subpoenas requiring him to produce documents and give testimony. The SEC filed a subpoena enforcement action against Anthony Coronati, the founder of a business known as The Commission alleges that Coronati solicited investments relating to the securities of sought-after private companies and used that money to pay personal expenses. Coronati was released on a US$50,000 bond and his travel was restricted to the Southern and Eastern Districts of New York. (1/23/2014) SEC v. Coronati, Lit.Rel.No. 22907.

Other Developments

Strategic plan. The SEC published for comment its draft strategic plan, which outlines the agency’s strategic goals for fiscal years 2014 to 2018. Comments should be submitted by March 10, 2014. (2/3/2013) SEC press release.

Added interest. Investment News discussed the added interest that the SEC and the Financial Industry Regulatory Authority have in alternative investments and complex products. (2/2/2014) Added interest. Separately, Investment News reported that FINRA has submitted to the SEC proposed rules that would require broker-dealers to choose one of two methods for estimating the value of non-traded real estate investment trusts. (2/3/2014) Non-traded REITs.

Price spreads. Bloomberg reported that the SEC’s Investor Advisory Committee will not recommend the testing of wider price spreads for small stocks. (1/30/2014) Price spreads.

Cyber security. The remarks of Jane Jarcho of the Office of Compliance Inspections and Examinations were summarized by Reuters. The Office will be reviewing the cyber security policies of advisory firms, noting that OCIE “will be looking at policies on IT training, vendor access and vendor due diligence, and what information you have on any vendors.” (1/30/2014) Cyber security.

SEC enforcement chief interviewed. In the Washington Post’s interview of Andrew Ceresney, the Director of the SEC’s Division of Enforcement, a broad array of subjects were discussed including the agency’s new policy regarding admissions and the SEC’s enforcement focus. (1/29/2014) Interview.

Exchange-traded funds. According to ETF Trends, the SEC has delayed a decision on whether to permit active exchange traded funds to hold derivatives. (1/29/2014) ETFs.

Risk alert. The SEC’s Office of Compliance Inspections and Examinations issued a risk alert concerning the due diligence processes that investment advisers employ when recommending or placing client assets in alternative investments such as hedge funds, private equity funds, or funds of private funds. The alert describes current industry trends and practices in advisor due diligence and notes deficiencies OCIE has found at advisory firms. (1/28/2014) SEC press release.

SEC Chair discusses analytical tools. SEC Chair Mary Jo White discussed the agency’s new analytical tools. The National Exam Program has developed “NEAT,” the National Exam Analytics Tool which allows SEC examiners to quickly access and analyze large amounts of trading data. NEAT can search for evidence of potential insider trading and other manipulative trading practices. White also summarized SEC enforcement efforts, and changes in its settlement policies. (1/27/2014) White speech.

Commissioner Piwowar on the SEC’s mission. SEC Commissioner Michael Piwowar commented on the two outside forces he believes are threatening the SEC’s mission. The first is special interests who seek to co-opt the SEC’s corporate disclosure regime for their own purposes. The second is banking regulators trying to impose the banking regulatory construct on SEC-regulated firms and investment products. With respect to money market funds, Piwowar believes that more should be done to mitigate the first mover-advantage enjoyed by investors who run during times of heavy redemptions and that there is a need to provide investors with more timely information about fund holdings. (1/27/2014) Piwowar speech.

Regulatory Flexibility Act agenda. The SEC published a list of the rules that it will review in accordance with the Regulatory Flexibility Act. Comments should be submitted within 30 days after publication in the Federal Register, which is expected shortly. (1/23/2014) SEC Release No. 33-9516.

US Commodity Futures Trading Commission Developments

Exemptive Relief

Reporting relief. The Division of Swap Dealer and Intermediary Oversight granted a commodity pool operator’s request for exemptive relief from the annual report requirement in Regulation 4.7(b)(3), so that it could file an annual report for three pools for the period from their inception of trading on November 1, 2013 to December 31, 2014. The CPO submitted waivers from all of the pools’ participants evidencing their consent to the relief requested. (1/23/2014) CFTC Letter No. 14-06.

Other Developments

ICAP seeks registration as SEF. According to Bloomberg, ICAP Plc has filed with the CFTC an application for registration as a swap execution facility (SEF). ICAP is the first large SEF to seek US approval for an off-shore unit. (1/31/2014) SEF registration.

Make available to trade determinations. The Division of Market Oversight (DMO) announced that trueEX, LLC’s self-certification of available-to-trade determinations for certain interest rate swap (IRS) contracts is deemed certified. The self-certification includes certain IRS contracts made available to trade via an earlier determination that was deemed certified on January 16, 2014, as well as additional swap contracts. The additional swaps in this determination will become subject to the trade execution requirement under Section 2(h)(8) of the Commodity Exchange Act on February 21, 2014. (1/23/2014) CFTC truEX press release. DMO also announced that TW SEF LLC’s (Tradeweb) self-certification of available-to-trade determinations for certain IRS and credit default swap (CDS) contracts is deemed certified. The self-certification includes certain IRS contracts made available to trade via earlier determinations that were deemed certified on January 16, 2014 and January 22, 2014, respectively; additional IRS contracts; and certain CDS contracts. As a result of this certification, transactions involving certain IRS contracts and CDS contracts will be subject to the trade execution requirement, effective February 26, 2014, in addition to the IRS contracts that will be subject to the trade execution requirement on February 15, 2014 and February 21, 2014, respectively. (1/28/2014) CFTC Tradeweb press release. Finally, DMO announced that MarketAxess SEF Corporation’s (MarketAxess) self-certification of available-to-trade determinations for certain CDS contracts is self-certified. The CDS contracts included in MarketAxess’ MAT Determination are those submitted by Tradeweb. These CDS contracts will become subject to the trade execution requirement on February 26, 2014. (1/30/2014) CFTC MarketAxess press release.

Committee will discuss cross-border guidance. The Global Markets Advisory Committee will meet on February 12, 2014, to discuss the CFTC staff advisory issued on November 14, 2013, regarding the agency’s cross-border guidance. CFTC press release.

CFTC roundtable on “package transactions.” The CFTC’s Division of Market Oversight will hold a public roundtable on February 12, 2014, to discuss the application of the Commodity Exchange Act’s trade execution requirement to “package transactions.” The roundtable will discuss the definition of package transactions, whether such transactions pose challenges in clearing or execution that are distinct from those applicable to the clearing or execution of stand-alone swaps subject to the trade execution requirement and potential solutions for trading package transactions on or pursuant to the rules of a derivative clearing member or swap execution facility. CFTC press release.

Upcoming Technology Advisory Committee meeting. The Technology Advisory Committee will hold its rescheduled public meeting on February 10, 2014. The meeting will focus on issues related to swap data reporting, the CFTC’s concept release on automated trading environments, and swap execution facilities. CFTC press release; Agenda.

US Judicial Developments

Dismissal of short-swing profits action affirmed. Dismissal of a complaint seeking disgorgement of short-swing profits was affirmed by the US Court of Appeals for the Second Circuit. Defendant allegedly was required by Section 16(b) of the Securities Exchange Act and Rule 16b-6(d) to disgorge short-swing profits derived from writing call options on stock. Adopting the SEC’s interpretation, the Court held that for purposes of Section 16(b), the expiration of a call option within six months of its writing is a deemed purchase by the option writer, to be matched against the sale deemed to occur when that option was written. Dismissal of the complaint was proper, however, because defendant was not an insider at the time of both the purchase and sale, as required by Section 16(b). Defendant was a statutory insider only when the options were written (the deemed sale), not when they expired (the deemed purchase). (1/29/2014) Roth v. The Goldman, Sachs Group, Inc.

US Exchanges and Self-Regulatory Organizations

SEC approves new FINRA financial and operational rules. The Financial Industry Regulatory Authority announced the SEC approved FINRA’s proposed rule change to adopt additional financial and operational rules for the consolidated FINRA rulebook. FINRA Rules 4314, 4330 and 4340 are new consolidated rules governing securities loans and borrowings, permissible use of customers’ securities and callable securities. The new rules are effective May 1, 2014. (2/3/2014) FINRA Regulatory Notice 14-5.

ISDA credit derivative definitions. The International Swaps and Derivatives Association announced that the 2014 ISDA Credit Derivatives Definitions will be effective September 2014. (2/3/2014) ISDA press release.

FINRA ADF amendments approved. The Financial Industry Regulatory Authority announced that the SEC has approved amendments to FINRA rules governing registration in and participation on the Alternative Display Facility (ADF). The amendments add new requirements to the application that prospective ADF market participants must submit to FINRA prior to submitting quotes on and reporting trades to the ADF. As part of the application process, the amendments require prospective ADF market participants to submit a deposit into escrow. The amendments also set forth the framework pursuant to which an ADF market participant may earn back some or all of its ADF Deposit Amount, enumerate additional documents that a firm seeking registration as an ADF market participant must execute, and clarify the process by which a firm’s registration as an ADF market participant becomes effective. The amendments were effective February 3, 2014. (1/31/2014) FINRA Regulatory Notice 14-4.

Account Type Indicators. The New York Stock Exchange will temporarily suspend implementing the Account Type Indicators (ATI) phase-in while it assesses the list of ATIs. Members may continue using the ATIs the Exchange proposed eliminating until further notice. (1/30/2014) NYSE Information Memo 14-4.

Amendments to FINRA Rule 2251. The Financial Industry Regulatory Authority amended the provisions of FINRA Rule 2251 regarding rates of reimbursement for expenses incurred in processing and forwarding of proxy and other issuer-related materials. The amendments also establish a specified success fee for the development of qualified Internet platforms for proxy voting purposes. The amendments were effective January 1, 2014. (1/30/2014) FINRA Regulatory Notice 14-03.

Margin requirements proposed for TBA market. The Financial Industry Regulatory Authority seeks comment on proposed amendments to FINRA Rule 4210, which would establish margin requirements for transactions in the To Be Announced market. Comments should be submitted by February 26, 2014. (1/27/2014) FINRA Regulatory Notice 14-02.

CFTC authorizes NFA to receive SAR data. The CFTC has provided the National Futures Association with a letter that formally requests all FCMs and IBs to make certain suspicious activity report filing information available to NFA, if requested by NFA. (1/27/2014) NFA Notice I-14-04.

Enhanced brokers’ internet platform fees. NYSE Regulation issued an Information Memo concerning an amendment to Rule 451 of the NYSE Rulebook, which was effective January 1, 2014. The amendment permits member organizations to charge issuers a new fee in relation to the establishment of an Enhanced Brokers’ Internet Platform. (1/24/2014) NYSE Regulation Information Memo 14-3.

NYSE DMM amendments. NYSE Euronext advised members that Rule 104 (Dealings and Responsibilities of DMMs) has been amended to add new section (j). The amendment codifies certain traditional Trading Floor functions that may be performed by DMMs; provides DMMs with access to certain market information; and amends Exchange rules governing the ability of DMMs to provide market information to Floor brokers. The amendments were implemented on January 27, 2014. (1/23/2014) NYSE Information Memo 14-2.

FINRA investor alert. The Financial Industry Regulatory Authority issued an investor alert entitled “The IRA Rollover: 10 Tips to Making a Sound Decision.” The alert helps investors determine whether an IRA rollover is appropriate for them. (1/23/2014) FINRA press release.

NFA studies capital requirements and customer protection measures. The National Futures Association is reviewing the current regulatory structure applicable to CPO and CTA operations. NFA is studying ways to strengthen the regulatory structure governing CPO operations to provide greater protection for customer funds. NFA is also exploring ways to ensure that CPOs and CTAs have sufficient assets to operate as a going concern. Comments should be submitted by April 15, 2014. (1/23/2014) NFA Notice to Members I-14-03.

ISDA recommendation for FpML version 5.6. The International Swaps and Derivatives Association has published the Recommendation for Financial products Markup Language version 5.6. This version allows the industry to fulfill reporting requirements in jurisdictions where reporting to trade repositories is expected to begin in 2014. (1/22/2014) ISDA press release.



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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In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

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