The Financial Report - Volume 4, No. 14 • July 2015 (Global)

by DLA Piper


Discussion and Analysis

News from the Americas

News from Asia and the Pacific

News from Europe

Global Regulators

US Securities and Exchange Commission Developments

US Commodity Futures Trading Commission Developments

US Banking and Treasury Department Developments

US Judicial Developments

US Exchanges and Self-Regulatory Organizations

Discussion and Analysis

This week marked the fifth anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most significant and controversial financial reform legislation since the Great Depression. Impacting virtually every aspect of the US financial system, the Act was signed into law by President Barack Obama on July 21, 2010.

Five years after enactment, the effect of the law continues to be hotly debated, largely along partisan lines.

Proponents believe that Dodd-Frank made the financial system safer by making banks less risky and prone to failure. Critics believe, however, that the Act has slowed economic growth due, in part, to its adverse impact on smaller banks. Proponents say it made the financial system safer by making banks less risky. Detractors say the law has hurt smaller banks and hamstrung the economy.

Although many of the rules required by the law have yet to be finalized, and, in some cases, even proposed, supporters suggest that US financial institutions are doing fine and that the American economy has been better than any other economy in the world due to the safeguards instituted under Dodd-Frank.

The Act’s sponsors, former Senator Christopher Dodd (D.-CT) and former US Representative Barney Frank (D-MA), stated this week that the Act’s creation of the Financial Stability Oversight Council, the “too-big-too-fail wind down authority” and the restrictions on residential mortgage lending are among the Act’s biggest accomplishments.

Many Republicans remain critical of Dodd-Frank. Representative Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, has stated: “Five years later the big banks are bigger, the small banks are fewer and the economy remains moribund.”

Senator Richard Shelby (R-AL) spoke this week about the Dodd-Frank Act, arguing that the law needed to be replaced with legislation they say would spur economic growth.

“Dodd-Frank is the absolute epitome of Washington greed,” Hensarling said. He also repeated arguments he made in front of the House Financial Services Committee late last week that the law has imposed barriers on working- and middle-class Americans, who are having more difficulty opening fee-free checking accounts than ever before, and on minorities who he says are now unable to take out mortgages due to the qualified mortgage rules imposed by the legislation.

Hensarling also repeated an often-recited Republican argument that the Act imposes a crippling regulatory burden on community banks, causing one to close every day.

Both Hensarling and Shelby, clearly two of the Dodd-Frank Act’s most outspoken critics, argue that one of the Act’s biggest failures was that it codified “too big to fail” into law by giving big banks the ability to request a government bailout as long as they follow regulations intended to curtail risks in their organizations. They contend that financial institutions should never be allowed a bailout, because overly aggressive attempts to limit risk often lead to the unintended consequence of stymying economic growth.

Shelby, head of the Senate Banking Committee, said “I believe that less systemic risk is a good thing. That does not mean, however, that we should have a system devoid of risk.”

Perhaps the only point on which supporters and critics agree is that it is unlikely the Act will be entirely or substantially repealed any time soon (although Hensarling suggested he is willing to support such a repeal).

When asked the one thing that they would go back and change in the law if they could, Dodd responded that “some on the left didn’t think we went far enough, some on the right think we went way too far. I think we got it about right and a lot of people who complain about this couldn’t organize a two car funeral.” Frank said, “The one major weakness that I’ve seen in the implementation was this decision by the regulators not to impose risk retention on all residential mortgages. I regretted that one, but the banks had help from a lot of my liberal friends.” He added, “Secondly, if I had a magic wand, I would have merged the SEC and the CFTC, but that was never a politically realistic thing to do.”

Whether the debate continues for the next five years likely will be determined both by how the financial system withstands the next financial crisis as well as the outcome of the 2016 federal elections.

News from the Americas

US lawmakers seek push out details. US Senators Elizabeth Warren and Elijah Cummings sent a letter to the country’s banking regulators asking for information concerning the effect of an amendment to the Dodd-Frank act which partially repealed the “swaps push-out rule,” which had required banks to “push-out” certain swaps trading activities to non-federally insured subsidiaries. (7/16/2015) Warren press release.

US regulators report on US Treasury trading volatility. The US Department of Treasury, Federal Reserve Board, Federal Reserve Bank of New York, Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) jointly reported on the significant volatility which occurred in the market for US Treasuries on October 15, 2014. A number of developments most likely contributed to the volatility, including changes in global risk sentiment, a decline in order book depth and changes in order flow and liquidity provision. (7/13/2015) Joint press release. Separately, SEC Commissioner Luis A. Aguilar called for a full examination of the regulatory framework for US Treasuries. The examination should consider the development of a mechanism similar to the consolidated audit trail that equity market participants are creating that will give regulators the ability to properly monitor the Treasury market; the development of market safeguards such as circuit breakers; and measures to improve price transparency. (7/14/2015) Aguilar statement.

Results of CSA continuous disclosure review. The Canadian Securities Administrators (CSA) published “Staff Notice 51-344 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2015,” which summarizes the results of the CSA’s continuous disclosure review program. The Staff Notice includes detailed examples of common deficiencies the CSA identified during its review of financial statements, management’s discussion and analysis and other regulatory disclosure. It also provides reporting issuers with practical guidance and suggestions for improving their disclosure. (7/16/2015) CSA press release.

OSC Corporate Finance Branch annual report. The Ontario Securities Commission (OSC) published “OSC Staff Notice 51-725 Corporate Finance Branch 2014-2015 Annual Report,” which provides key information to the individuals and entities the OSC regulates, as well as their advisers, to help them comply with regulatory obligations. It contains observations and guidance from compliance work conducted by the Corporate Finance Branch in fiscal 2015 in several areas, including continuous disclosure and prospectus reviews. (7/14/2015) OSC press release.

News from Asia and the Pacific

Japan’s plan for vitalizing the capital and financial markets. Japan’s Panel for Vitalizing Financial and Capital Markets has summarized the medium-term policy direction and the focused measures for vitalizing the financial and capital markets in Japan. The Panel has evaluated the progress of measures in various areas of the financial and capital markets in Japan and reexamined the policy for 2020, as well as compiled the Statement for Vitalizing Financial and Capital Markets regarding issues that need to be further developed, including new issues considered to be crucial for vitalizing the financial and capital markets in Japan. (7/21/2015) FSA press release.

Hong Kong fund activity reaches new high. The Hong Kong Securities and Futures Commission (SFC) released its annual Fund Management Activities Survey, which found that the combined fund management business in Hong Kong increased to a record high of HK$17,682 billion. (7/21/2015) SFC press release.

Online banking guidelines issued by China’s central bank. Reuters reported that guidelines for internet financing, including online banking, insurance and securities, have been issued by the Peoples Bank of China. (7/18/2015) Online finance.

Hong Kong SFC proposes changes to financial resources rules. The Hong Kong SFC opened a consultation on proposed changes to the Securities and Futures (Financial Resources) Rules (FRR) relating to capital and other prudential requirements for licensed corporations engaged in over-the-counter derivatives activity. The consultation paper also proposes certain changes to non-over-the-counter derivatives-related FRR requirements. Comments should be submitted by October 16, 2015. (7/17/2015) SFC press release.

Synopsis of China-Hong Kong mutual recognition of funds symposium. The SFC posted a synopsis of the July 3, 2015 symposium on Mainland China and Hong Kong mutual recognition of funds. (7/17/2015) Synopsis.

MAS publishes revised Code for collective investment schemes. The Monetary Authority of Singapore published a revised “Code on Collective Investment Schemes.” The revised code sets out the best practices on management, operation and marketing of schemes that managers and approved trustees are expected to observe. The Code is effective January 1, 2016. (7/14/2015) Code.

ASIC report on financial benchmarks. The ASIC released “Report 440 Financial benchmarks,” which highlights the importance of key indices to Australia’s markets and the broader economy. The report describes the regulatory reforms and other responses that have occurred internationally and in Australia in response to concerns about poor conduct in connection with financial benchmarks. It also makes a number of recommendations for market participants, including measures they should adopt to avoid conduct issues. (7/8/2015) ASIC press release.

News from Europe

ESMA publishes accounting enforcement extracts. The European Securities and Markets Authority (ESMA) published extracts from the European Enforcers Coordination Sessions confidential database of enforcement decisions on financial statements in order to provide issuers and users of financial statements with relevant information on the appropriate application of the International Financial Reporting Standards. (7/21/2015) ESMA notice.

ESMA updates AIFMD guidance. ESMA published updated guidance in the form of frequently asked questions and answers regarding the Alternative Investment Fund Managers Directive. The updates concern the calculation of the total value of assets under management. (7/21/2015) ESMA notice.

EBA publishes report on macroprudential policy measures. The European Banking Authority (EBA) published a report on macroprudential policy measures across the EU. (7/21/2015) EBA press release.

PRA updates on the Capital Requirements Directive IV and GABRIEL. The UK Prudential Regulation Authority (PRA) published Supervisory Statement 29/15 “CRD IV: Interim LCR Reporting,” which describes the specific liquidity coverage requirement (LCR) reporting arrangements which the PRA expects firms to follow on an interim basis in the period between October 1, 2015, the date the LCR standard applies in accordance with the European Commission’s delegated act, and the introduction of mandatory reporting of the new LCR return following adoption of the amending implementing technical standard (ITS) on liquidity reporting by the EC. The PRA also issued an update, including tips, for firms regarding the GABRIEL reporting peak in early August 2015 as a large number of firms are expected to report on the FCA’s GABRIEL reporting system. (7/20/2015) PRA press release.

PRA updates depositor protection rules. The PRA updated Supervisory Statement 18/15. The update revises Section 12 regarding the requirement to notify depositors of changes in the limits for depositor protection. (7/20/2015) PRA press release.

EBA updates status of liquidity monitoring metrics. The EBA published an update on the application date of its final draft ITS on additional liquidity monitoring metrics. It is highly likely that the application date, which will be specified once the ITS are published in the EU Official Journal, will be postponed by at least three months. (7/17/2015) EBA press release.

Responses to consultation on clearing obligation. ESMA published the responses it received to its consultation on central party clearing obligations. (7/17/2015) Consultation page.

Redemption restrictions under consideration. According to The Wall Street Journal, international regulators and industry participants are urging the consideration of redemption restrictions or limitations as fears of a liquidity shortfall in certain European bond fund asset classes grow. (7/17/2015) Liquidity concerns.

EBA technical amendments to two RTS. The EBA issued technical amendments to the adopted Regulatory Technical Standards (RTS) on the treatment of non-delta risk of options in the standardized market risk approach and to the RTS on the criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile. (7/16/2015) EBA press release.

FCA regulation round-up. The FCA published the July 2015 issue of Regulation round-up, which provides regulatory updates by sector. (7/16/2015) Regulation round-up.

EC consults on the impact of capital requirements. The European Commission opened a consultation on the effect of stricter capital requirements for banks. The consultation seeks feedback on issues including proportionality and the impact on smaller business. Comments should be submitted by October 7, 2015. (7/15/2015) EC press release.

FCA guidance on its competition authority. On April 1, 2015, the FCA received the authority to enforce the competition law, conduct market studies and to refer markets to the Competition and Markets Authority (CMA) for in-depth investigation with regard to financial services. The FCA has now published the final guidance on its concurrent competition powers along with a policy statement setting out its responses to feedback received during the consultation period for the guidance. (7/15/2015) FCA press release.

EBA updates information on upcoming stress tests. The EBA published a tentative sample of banks taking part in the 2015 transparency exercise, together with the draft templates illustrating the type of data that will be disclosed. In addition, the EBA released the key features and a tentative calendar of the 2016 EU-wide stress test. (7/15/2015) EBA press release.

EBA oversight and governance requirements for retail banking products. The EBA published final guidelines on product oversight and governance arrangements for retail banking products. The guidelines set out requirements for manufacturers and distributors when designing and bringing to market mortgages, personal loans, deposits, payment accounts, payment services and electronic money. The guidelines are effective January 3, 2017. (7/15/2015) EBA press release.

ECB Q2 bank lending survey results. The European Central Bank (ECB) published the results of its July 2015 bank lending survey. The survey found continued net easing of credit standards on loans to enterprises; net easing of credit standards on loans to households for house purchases; and further improvement in net demand for loans to enterprises and loans for house purchases. It also found that additional liquidity from the targeted longer-term refinancing operations continues to be used for granting loans. (7/14/2015) ECB press release.

FCA proposes disclosure rules for non-ring fenced firms. The FCA opened a consultation on draft rules for non-ring fenced bodies (NRFBs). The proposed rules would specify the information that an NRFB must provide to individuals with financial assets of at least £250,000 that are account holders or that have applied to open an account, including joint accounts, with an NRFB. Comments should be submitted by November 13, 2015. (7/14/2015) FCA press release.

Bank of England Q2 reviews. The Bank of England published the results of its 2015 second quarter survey of bank liabilities. The survey covers developments in the volume and price of bank funding; developments in the loss-absorbing capacity of banks as determined by their capital positions; and developments in the internal price charged to business units within individual banks to fund the flow of new loans. (7/13/2015) Bank of England bank liabilities press release. The Bank of England also published its assessment of the latest trends in the conditions of bank funding and household and corporate credit. The assessment is based mainly on long-established official data sources, such as the existing monetary and other financial statistics collected by the Bank, and other data sources such as surveys of businesses and data from other organizations. (7/13/2015) Bank of England credit conditions press release. See also Bank of England credit conditions survey (7/13/2015).

ESMA updates CCP list. ESMA published an updated list of central clearinghouses authorized under the European Markets Infrastructure Regulation (EMIR) and the Public Register for the Clearing Obligation. The update concerns Eurex Clearing AG, which has extended its activities and services. (7/13/2015) ESMA notice.

FCA enforcement referral criteria. The FCA updated the criteria and outlined the process it uses when deciding whether to refer a firm or individual to its enforcement division for a formal investigation. The publication clarifies how the FCA decides which regulatory tool is the most likely to fulfil its objectives in each individual case. (7/10/2015) FCA press release.

CRA registration approved. ESMA formally approved the registration of modeFinance S.r.l. as a credit rating agency (CRA) under Article 16 of the CRA Regulation. The registration is effective immediately. (7/10/2015) ESMA notice.

EBA streamlines intra-group financial support for banking institutions. The EBA published final draft RTS and Guidelines on the provision of group financial support, as well as final draft ITS detailing the disclosure requirements of these activities. These Technical Standards and Guidelines specify the conditions under which one entity of a banking group can provide support to another entity of the same group in financial difficulties. (7/9/2015) EBA press release.

EBA technical standards and guidelines on simplified obligations. The EBA published its final Guidelines and final draft ITS for determining whether an institution is eligible for simplified recovery planning, resolution planning and resolvability assessments under the Bank Recovery and Resolution Directive (BRRD). The EBA also issued final draft ITS on the procedures, forms and templates for submitting information on resolution plans under the BRRD. (7/7/2015) EBA press release.

Global Regulators

Basel Committee guidelines on weak banks. The Basel Committee on Banking Supervision (Basel Committee) published the final “Guidelines for identifying and dealing with weak banks.” (7/16/2015) BIS press release.

Basel Committee proposes updates to account opening guide. The Basel Committee issued for comment a revised version of the “General guide to account opening,” which was first published in February 2003. The guide is intended to support the Financial Action Task Force standards. Comments should be submitted by October 22, 2015. (7/16/2015) BIS press release.

ISDA makes FpML recommendations. The International Swaps and Derivatives Association (ISDA) issued its recommendation for financial products markup language (FpML) version 5.8. (7/15/2015) ISDA press release.

Basel Committee progress report for supervisory colleges. The Basel Committee issued “Progress report on the implementation of principles for effective supervisory colleges.” The report found considerable progress in the functioning of supervisory colleges in recent years but notes continued challenges faced by supervisors in running effective supervisory colleges. (7/15/2015) BIS press release.

ISDA EMIR classification letter. A new classification letter to help counterparties notify each other of their status for clearing and other regulatory requirements under EMIR has been issued by ISDA. (7/14/2015) ISDA press release.

Financial market infrastructure assessment. The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) announced that they have started the first Level 3 assessment of the implementation of the Principles for financial market infrastructures (PFMI), the international standards for financial market infrastructures (FMIs). This review will examine consistency in the outcomes of PFMI Principles implementation and is part of the CPMI-IOSCO’s monitoring of full, timely and consistent implementation of the PFMI. The review will focus on a subset of requirements under the PFMI that relate to financial risk management by central counterparties including certain practices related to governance, stress-testing, margin, liquidity, collateral, and recovery. (7/9/2015) Joint press release.

IOSCO reports on SME financing. The IOSCO published “SME Financing through Capital Markets,” which provides recommendations for regulators to facilitate capital raising by small and medium sized enterprises (SME) in emerging markets. The report identifies the challenges facing SMEs in accessing market-based financing, and examines some of the successful measures implemented by regulators and other policymakers to assist SMEs in tapping capital markets. (7/9/2015) IOSCO press release.

FSB interim progress report on interest rate benchmark reforms. The Financial Stability Board (FSB) published an interim progress report on reforms to existing major interest rate benchmarks (such as LIBOR, EURIBOR and TIBOR) and in the development and introduction of alternative near risk-free interest rate benchmarks. (7/9/2015) FSB press release.

Basel Committee revises corporate governance principles. The Basel Committee issued “Corporate governance principles for banks,” revised guidance which emphasizes the importance of effective corporate governance for the safe and sound functioning of banks. It stresses the importance of risk governance as part of a bank’s overall corporate governance framework and promotes the value of strong boards and board committees together with effective control functions. (7/8/2015) BIS press release.

Single-name CDS roll recommendation. ISDA recommended an amendment to the single-name credit default swap (CDS) roll frequency. Under the recommendation, single-name CDS transactions would roll to a new “on-the-run” contract on a semiannual, rather than quarterly, basis. (7/8/2015) ISDA press release.

US Securities and Exchange Commission Developments

New Final Rules

Implementing the Freedom of Information Act. The SEC published new final rules revising how it implements the Freedom of Information Act (FOIA). The new rules permit the agency to collect fees that reflect its actual costs when responding to FOIA requests, add an appeals time frame and clarify other issues. The new rules are effective August 14, 2015. (7/8/2015) SEC Release No. 34-75388.

Staff Interpretations and Exemptive Actions

Relief from risk retention rules granted. The Division of Corporation Finance granted no-action relief to Crescent Capital Group LP if Crescent Capital does not retain an eligible risk retention interest under Section 15G of the Securities and Exchange Act in connection with a refinancing of collateralized loan obligations that were issued in a transaction priced prior to the December 24, 2014 publication of the Credit Risk Retention Final Rules. (7/17/2015) No-action letter.

Updated Volcker Rule guidance. New guidance on the application of the Section 13 of the Bank Holding Company Act, better known as the Volcker Rule, has been issued by federal financial regulators. The updated guidance states that during its seeding period, a registered investment company or foreign public fund generally will not be subject to the Volcker Rule’s requirements. (7/16/2016) Guidance.

Master-feeder BDC receives no-action relief. The Division of Investment Management granted the no-action request submitted by Carey Credit Income Fund and Carey Credit Income Fund 2015 T. The application sought relief for feeder funds which elect to be regulated as business development companies if each feeder fund looks to its proportionate ownership interest in the assets of the master fund, and for the master fund if the master fund repurchases master fund shares in a planned liquidation of a feeder fund. (7/15/2015) No-action relief.

Pay-to-play exemption requested. Crescent Capital Group, L.P. has requested an exemptive order under Section 206A of the Advisers Act and Rule 206(4)-5(e) to be allowed to receive compensation from a government entity client for investment advisory services provided to the government entity within the two-year period following a contribution by a covered associate of Crescent to an official of the government entity. (7/14/2015) SEC Release No. IA-4140.

Distributions by closed-end fund. The Division of Investment Management issued an exemptive order allowing certain registered closed-end investment companies to make periodic distributions of long-term capital gains with respect to their outstanding common stock as frequently as twelve times in any one taxable year. (7/7/2015) Order.

Selected Enforcement Actions

US$3 million whistleblower award announced. The SEC announced a whistleblower award of more than US$3 million, the third highest award to date under the SEC’s whistleblower program. The whistleblower’s specific and detailed information comprehensively disclosed a fraudulent scheme which otherwise would have been very difficult for investigators to detect. The whistleblower’s initial tip also led to related actions that increased the whistleblower’s award. (7/17/2015) SEC press release.

Speeches and Statements

Chair White recognizes Dodd-Frank anniversary. On the five-year anniversary of the Dodd-Frank Act, Chair Mary Jo White issued a statement noting the SEC’s efforts to implement the Act. (7/16/2015) White statement. Attached to the statement is an SEC graphic showing the status of the SEC’s Dodd-Frank Act rulemaking. (7/16/2015) Graphic.

Shortening the securities settlement cycle. Commissioner Luis A. Aguilar released a statement describing the benefits of a shortened securities settlement cycle and praising efforts to develop a plan that would implement a two-day settlement cycle. (7/16/2015) Aguilar statement.

Compliance outreach program for broker-dealers. In her opening remarks before the SEC’s Compliance Outreach Program for Broker-Dealers, SEC Chair Mary Jo White stressed that the agency does not bring cases against compliance personnel for their good faith judgments. However, the agency will institute enforcement proceedings when a compliance officer’s action, or inaction, crosses a clear line that deserves sanction. The Chair also discussed the SEC’s examination priorities. (7/14/2015) White statement.

Other Developments

Mutual fund fees and referrals. According to The Wall Street Journal, SEC staff are beginning to make enforcement referrals stemming from the agency’s investigation into mutual fund fee disclosures. (7/16/2015) Referrals.

Meeting of the Advisory Committee on Small and Emerging Businesses. The discussion topics for the July 15, 2015 meeting of the Advisory Committee on Small and Emerging Businesses concerning finders and other intermediaries in small-business capital raising has been released by the SEC (7/15/2015) Discussion topics. The outline for the Advisory Committee’s discussion on disclosure effectiveness has also been made available. (7/15/2015) Outline.

Staff announcements. The SEC announced the promotion of Michele Anderson to the position of Associate Director in the agency’s Division of Corporation Finance. (7/17/2015) SEC press release.

US Chamber of Commerce calls for enforcement reforms. The US Chamber of Commerce published “Examining U.S. Securities and Exchange Commission Enforcement: Recommendations on Current Processes and Practices.” The paper recommends improvements to the SEC’s enforcement process, including the agency’s enforcement policies, Commission oversight of the enforcement program, and SEC investigation processes and practices. The study additionally calls for the adoption of due process reforms concerning the use of administrative proceedings. (7/15/2015) US Chamber of Commerce Press Release.

Legislation to raise SEC penalties introduced. Senators Charles Grassley and Jack Reed introduced the “Stronger Enforcement of Civil Penalties Act of 2015.” If enacted, the new legislation would increase the limits on civil monetary penalties that the SEC could impose, link civil penalties to the scope of harm and investor loss and triple the penalties which could be imposed against recidivists. (7/9/2015) Grassley press release.

US Commodity Futures Trading Commission Developments

Legal entity identifiers. The CFTC extended the designation of the utility operated by DTCC-SWIFT as the provider of legal entity identifiers. (7/20/2015) CFTC press release.

Meeting of the Energy and Environmental Markets Advisory Committee. The Energy and Environmental Markets Advisory Committee will meet on July 29, 2015. The Committee is scheduled to consider the CFTC’s proposed rules on position limits and trade options, and the agency’s final interpretation concerning forward contracts with embedded volumetric optionality. (7/14/2015) CFTC press release.

Position limit proposal stayed. The CFTC has stayed ICE Futures U.S. Inc.’s amendments to Resolution No. 2 of Chapter 18 of its rulebook. The amendments would have increased position limits, single month accountability levels, and all month accountability levels for eight financial power futures. Comments on the amendment should be submitted by August 6, 2015. (7/7/2015) CFTC press release.

US Banking and Treasury Department Developments

Amendments to capital planning and stress test rules proposed. The Federal Reserve Board proposed a rule that would modify its capital planning and stress testing regulations. The proposed rule would modify the timing for several requirements that have yet to be integrated into the stress testing framework. Comments should be submitted by September 24, 2015. (7/17/2015) FRB press release.

Office of Financial Research analyzes Form PF data. The Treasury Department’s Office of Financial Research published “Private Fund Data Shed Light on Liquidity Funds,” which studies the data collected by the SEC Form PF filings of liquidity funds. (7/9/2015) Data study.

US Judicial Developments

Associational bars aren’t retroactive. A petition challenging a SEC administrative enforcement action against an investment adviser and its principal for “marking the close,” buying and selling shares immediately before the stock markets’ close in order to increase the share price, was partially granted by the US Court of Appeals for the DC Circuit. Affirming in part the SEC order, the Court found that petitioners manipulated the market. However, the Court vacated that portion of the SEC’s order which barred the adviser’s principal from associating with municipal advisers and rating organizations. The Court held that the SEC impermissibly applied the provision of the Dodd-Frank Act, which authorized the SEC to impose municipal adviser and rating organization associational bars. Petitioners’ activities occurred in 2009 but the Act wasn’t adopted until 2010. The imposition of those associational bars was therefore impermissibly retroactive. (7/14/2015) Koch v. Securities and Exchange Commission. See also SEC v. Koch, Lit.Rel.No. 23308.

US Exchanges and Self-Regulatory Organizations

FINRA proposes new academic TRACE data set. The Financial Industry Regulatory Authority (FINRA) requested comment on a proposal to create a new academic Trade Reporting and Compliance Engine (TRACE) data set that would be available to institutions of higher education. The new Academic TRACE Data set would include masked market participant identifiers. Comments should be submitted by September 14, 2015. The Municipal Securities Rulemaking Board is also soliciting comment on a similar proposal that would apply to municipal securities transaction data. (7/16/2015) FINRA press release.

CPOs making consolidated filings. The National Futures Association (NFA) requested that commodity pool operators that make consolidated filings under CFTC Regulation 4.22 and/or 4.27 notify the NFA of that status by July 31, 2015. (7/13/2015) NFA Notice I-15-17.

Bond liquidity investor alert. An Investor Alert entitled “Bond Liquidity-Factors to Consider and Questions to Ask” has been published by FINRA. The Alert warns investors about bond liquidity and possible investment losses for those who sell their bonds before maturity. (7/10/2015) FINRA 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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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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