The Financial Report - Volume 4, No. 6 • March 2015 (Global)

by DLA Piper
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IN THIS ISSUE

 

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 Judicial Developments

US Exchanges and Self-Regulatory Organizations

Discussion and Analysis

Recently, my brother-in-law, Brian, went shopping for a new car. As he is in the midst of his first “mid-life crisis,” he had his heart set on a vehicle that was sporty and fun-to-drive. Brian, however, has two elementary-school-aged children and a limited budget to match. Nonetheless, each salesperson he encountered enthusiastically described the merits of whatever luxury sports car Brian was ogling on the showroom floor. They would extol the car’s safety features and rave about how Brian’s overall outlook-on-life-itself would be made immeasurably better if he purchased the hot number. That newly-acquired sunny disposition (fueled by a burst of testosterone) certainly would benefit both him and his family! With the safety features, including air-bags and rear-view cameras, now required or standard in most new vehicles, it would be difficult to argue that any current model automobile is not “suitable” for Brian and his family. Imagine, for a moment however, if car dealers were subject to a fiduciary standard and needed to act in the exclusive best interests of their customers. The salesperson might be required to say, “I’m sorry, sir, we cannot sell you this red Ferrari. It is not appropriate for a family of four with two kids under 8-years old and you can’t really afford it anyway; please see the dealer next door and tell them that I sent you over to buy a minivan” if he believes that that is best for you!

This scenario is, of course, ridiculous. We intuitively understand that the salesperson is selling a product. He or she needs to earn a commission and will make every reasonable (and, often, unreasonable) argument necessary to sell cars. We don’t, even for a second, have any notion that the salesperson is, or should be, looking out for our best interests.

Speaking at the annual Securities Industry and Financial Markets Association conference in Phoenix earlier this week, U.S. Securities and Exchange Commission Chair Mary Jo White said that her agency should adopt uniform fiduciary standards for broker-dealers and investment advisers. Her statement followed the U.S. Department of Labor’s similar proposal to force financial advisers to put client interests ahead of their own when recommending retirement investments.

Some industry observers have suggested that the imposition of a fiduciary standard on brokers could dramatically “reshape the industry.” Under current regulations, brokers must make “suitable” recommendations, meaning that the investments generally have to fit the customer’s needs and tolerance for risk. A number of investor groups say the current rules don’t go far enough to limit conflicts of interests for brokers, who are paid commissions by mutual funds and other companies for selling their products.

Unlike brokers, investment advisers, also supervised by the SEC, already are required to put their clients’ interest first. Although brokers have been receptive to discussing the issue, they still want to be able to charge commissions instead of collecting fees based on asset size, as is the norm for investment advisers.

How could a fiduciary standard possibly be a bad thing? Many Republican congressmen and the SEC’s two Republican commissioners believe that a fiduciary standard will be costly for brokers and could cause them to drop less wealthy clients. Although White’s support for the measures aligns her with the Obama administration, congressional Democrats and the two Democratic SEC commissioners, she acknowledged that it is essential to get the balance right. She said, “At the end of the day, if all we succeed in doing is depriving investors of reliable, reasonably-priced advice, we will have failed in that effort.”

Labor Secretary Tom Perez said in a speech last week that current rules enable biased financial advice by brokers which jeopardizes workers’ nest eggs. He vowed to complete the fiduciary rule before President Barack Obama leaves office.

There’s no assurance, however, that the SEC could complete a final fiduciary rule during that same timeframe. The staff first would need to draft a proposed rule and then open it to several months of public comment. The agency then probably would need to revise the regulation before the Commission would vote on its final form.

For many consumers, a purchase of a large-ticket item, like a car, will be a far more common occurrence, and involve substantially greater amounts spent, relative to the amounts invested in securities recommended by brokers. Is there really that much difference between a car salesperson and a broker representative? I think that most people know when they are being “sold.”

 
 

News from the Americas

A broader insider. Blogging for DealBook, Wayne State University law professor Peter J. Henning summarized two bills recently introduced in the US Congress that would broaden the definition of insider trading. (3/16/2015) A broader insider.

OSC Investor Advisory Panel annual report. The Ontario Securities Commission (OSC) Investor Advisory Panel submitted its 2013-14 annual report. The report summarizes the Panel’s current activities and priorities as well as its recommendations to the Commission on proposals of importance for investor protection. Unaddressed flaws in Canada’s investor protection regime include inadequate and outdated regulatory standards for the provision of advice, particularly with regard to conflict resolution, client risk assessment and reliance on the regulatory tools of disclosure and investor education, and the continuing failure to ensure access to fair, independent complaint handling and binding compensation. (3/10/2015) OSC press release.

US Labor Department adopts whistleblower procedure rules. The US Department of Labor’s Occupational Safety and Health Administration adopted new final rules that establish the procedures and time frames for the handling of whistleblower retaliation complaints under the Sarbanes-Oxley Act. The new rules are effective immediately. (3/5/2015) 80 FR 11865.


News from Asia and the Pacific

Singapore market misconduct procedure. Effective immediately, the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department of the Singapore Police Force will jointly investigate market misconduct offences such as insider trading and market manipulation under Part XII of the Securities and Futures Act. (3/17/2015) MAS press release.

ASIC facilitates off-shore firms’ exemption requests. The Australian Securities & Investments Commission (ASIC) clarified the documentation that foreign financial services firms should provide when applying for class order exemptions to conduct business in Australia. (3/13/2015) ASIC press release.

ASIC publishes ninth market supervision report. ASIC published its ninth report on the supervision and surveillance of Australian financial markets and market participants. The report, which covers July to December 2014, discusses the key outcomes of ASIC’s Market and Participant Supervision and Market Integrity Enforcement teams, highlighting ASIC’s direct engagement with market participants to address concerns about market conduct. (3/12/2015) ASIC press release.

Singapore signs MoU with European regulator. MAS and the European Securities and Markets Authority (ESMA) signed a Memorandum of Understanding establishing cooperation arrangements regarding Central Counterparties (CCPs) in Singapore that have applied for recognition under the European Markets Infrastructure Regulation (EMIR). (3/9/2015) MAS press release.


News from Europe

FCA approach to individual responsibility. The FCA confirmed its approach to individual responsibility and accountability in the banking sector. It published feedback which sets out how the Senior Managers Regime (SMR) will be implemented and provided further information on the FCA’s plans for the Certification Regime and new Conduct Rules. The SMR will not apply to non-executive directors who do not perform delegated responsibilities. Under the Certification Regime, relevant firms will be required to assess and certify at least annually the fitness and propriety of employees deemed capable of causing significant harm to the firm or any of its customers or those that could risk the integrity of financial markets. The FCA also announced a consultation on further, more detailed guidance on how the FCA will apply the Presumption of Responsibility. Comments should be submitted by June 16, 2015. (3/16/2015) FCA press release.

UK regulators consult on Senior Managers Regime. The UK Prudential Regulation Authority (PRA) and FCA requested comment on a proposal that would extend and in certain circumstances tailor the Senior Managers Regime, Certification Regime and Conduct Rules to UK branches of overseas banks and PRA designated investment firms. The consultation is in anticipation of secondary legislation which will extend the statutory elements of the above regimes to incoming branches. Comments should be submitted by May 25, 2015. (3/16/2015) Bank of England press release.

FCA consults on performance management. The FCA published proposed guidance concerning the risks to customers posed by inappropriate performance management at firms. Comments should be submitted by May 15, 2015. (3/16/2015) FCA press release.

EBA risk dashboard. The European Banking Authority (EBA) published an update to its periodic risk dashboard summarizing the main risks and vulnerabilities in the EU banking sector. (3/16/2015) EBA press release.

FCA guidance on use of social media. The FCA published guidance on financial promotions in social media. The guidance reminds firms that any form of communication, including through social media, is capable of being a financial promotion if it includes an invitation or inducement to engage in financial activity. All communications, including financial promotions, must be fair, clear and not misleading. (3/13/2015) FCA press release.

ESMA reports on securities market trends. ESMA published a report on the trends, risks and vulnerabilities in the European Union securities markets for the period July to December 2014. (3/11/2015) ESMA notice.

Bank of England annual report on financial market infrastructures. The Bank of England published its annual report on its supervision of financial market infrastructures (FMI). The report highlights significant developments, such as the implementation of EMIR; the adoption of recovery plans by FMIs to ensure the ongoing provision of their critical services should they or their operating companies suffer financial distress; and the reduction in counterparty credit risk by moving trades to settlement after two rather than three days. The report concludes by setting out the Bank of England’s current priorities for supervised UK FMIs in 2015. (3/11/2015) Bank of England press release.

UK supervision of markets and market infrastructures. The FCA and the Bank of England, including the PRA, signed a Memorandum of Understanding that sets out how they cooperate with one another in relation to the supervision of markets and market infrastructure. (3/11/2015) FCA press release.

FCA occasional paper on consumer assistance efforts. The FCA published an occasional paper on the impact of previous initiatives aimed at helping customers manage their accounts. The paper found that annual summaries have no effect on consumer behavior in terms of incurring overdraft charges, altering balance levels or switching to other current account providers. In contrast, signing up to text alerts or mobile banking apps reduces the amount of unarranged overdraft charges and signing up to both services has an additional effect. This research reinforces the importance of testing disclosures beforehand to help ensure that they effectively achieve their intended outcomes. The paper discusses wider implications for the role of regulation, how to design effective disclosure rules, and incentives for innovation. (3/11/2015) FCA press release.

EBA publishes revised list of validation rules. The EBA issued a revised list of validation rules in its Implementing Technical Standards on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering information technology problems. (3/10/2015) EBA press release.

MiFID II/MIFR comments. ESMA published the comments it received in response to its consultation on MiFID II/MIFR. (3/10/2015) ESMA notice.

PRA proposes administrative corrections. The PRA is consulting on non-substantive corrections to the PRA Handbook and Rulebook. Comments should be submitted by March 24, 2015. (3/10/2015) PRA press release.

European long-term investment funds. The European Parliament endorsed long-term investment funds which would invest in illiquid assets. The new funds will be available to all types of investors across Europe, subject to certain requirements, including investor protection measures. (3/10/2015) EC press release.

EBA proposes requirements for business reorganization plans. The EBA launched a public consultation on draft Regulatory Technical Standards (RTS) for business reorganization plans and guidelines on the assessment of these plans. Comments should be submitted by June 9, 2015. (3/9/2015) EBA press release.

ESMA revised opinion on IRS clearing. ESMA published a revised opinion on its draft RTS on the clearing obligation for Interest Rate Swaps. The revised opinion does not introduce material changes. (3/9/2015) ESMA notice.

FCA policy statement on benchmarks. The FCA published a Policy Statement for regulating and supervising seven additional benchmarks. Those benchmarks are: Sterling Overnight Index Average; Repurchase Overnight Index Average; ISDAFIX (soon to be replaced by the ICE Swap Rate); WM/Reuters London 4pm Closing Spot Rate; London Gold Fixing (soon to be replaced by the LBMA Gold Price); LBMA Silver Price; and ICE Brent Index. The provisions are effective April 1, 2015. (3/9/2015) FCA press release.

European regulators consult on credit assessments. The Joint Committee of the three European Supervisory Authorities (EBA, European Insurance and Occupational Pensions Authority and ESMA) launched a consultation on draft ITS on the allocation of External Credit Assessment Institution to an objective scale of credit quality steps under Solvency II. Comments should be submitted by April 10, 2015. (3/6/2015) ESMA notice.

EBA consults on records of financial contracts. The EBA launched a public consultation on draft RTS on detailed records of financial contracts of institutions or relevant entities. Under the Bank Recovery and Resolution Directive, Resolution Authorities may temporarily suspend the termination rights of any party to a contract with an institution under resolution. In order to ensure the successful application of this power, the EBA may specify the information on financial contracts that should be kept. Comments should be submitted by June 6, 2015. (3/6/2015) EBA press release.

EBA advises on bank resolution procedures. The EBA issued advice to the European Commission on the resolution framework for EU banks. The advice covers the definition of critical functions and core business lines, as well as rules for the exclusion of liabilities from the application of the bail-in tool. (3/6/2015) EBA press release.

FCA Quarterly Consultation. The FCA launched its Quarterly Consultation on proposed miscellaneous amendments to its Handbook that would make minor amendments to CASS and CONC; make changes to the remuneration reporting submission method; and make changes that impact AIFMs and AIF depositaries. Comments should be submitted by April 6, 2015. (3/6/2015) FCA press release.

Bank of England working paper on Value-at-Risk models. The Bank of England published a working paper which explores the properties of various historical Value-at-Risk (VaR) simulation models. The paper explains how these models are constructed and illustrate their performance, examining in particular how filtering transforms various properties of return distribution. (3/6/2015) Bank of England press release.

ESMA signs MoU with Reserve Bank of Australia. ESMA and the Reserve Bank of Australia (RBA) signed a Memorandum of Understanding that will allow RBA to have access to data held in European Trade repositories. (3/5/2015) ESMA notice.

FCA studies structured deposits. The FCA published an occasional paper concerning consumer confusion over structured deposits. (3/5/2015) FCA press release.

EBA consults on remuneration policies. The EBA launched a consultation on guidelines for remuneration policies. The draft guidelines set out the governance process for implementing sound remuneration policies across the EU, as well as the specific criteria for mapping all remuneration components into either fixed or variable pay. Guidance is also provided on the application of deferral arrangements and the pay-out instruments ensuring that variable remuneration is aligned with an institution’s long-term risks and that any ex-post risk adjustments can be applied as appropriate. The Guidelines also clarify the process for identifying those categories of staff whose professional activities have a material impact on an institution’s risk profile. (3/4/2015) EBA press release. See also FCA statement (encouraging public comment).

FCA consults on pension transfer rules. The FCA opened a consultation on proposed changes to implement a proposed amendment to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 that will make advising on the conversion or transfer of safeguarded pension benefits into flexible benefits a regulated activity. The FCA is also consulting on related changes to the Conduct of Business Sourcebook rules to require that all pension transfers advice be provided or checked by a Pension Transfer Specialist, regardless of when the transferred benefits are being accessed. Comments should be submitted by April 15, 2015. (3/4/2015) FCA press release.

EBA proposals for improving IRB models. The EBA launched a discussion paper on the regulatory measures needed to ensure a robust and clear framework for Internal Ratings Based models. The discussion paper seeks feedback on how to implement the necessary measures in a consistent way and how to bring forward future changes to the current approach. In addition, an overview of the regulatory measures that are under way is provided. Comments should be submitted by May 5, 2015. (3/4/2015) EBA press release.

Bank of England confirms SFO investigation. The Bank of England confirmed that it has commissioned Lord Grabiner QC to conduct an independent inquiry into liquidity auctions during the financial crisis in 2007 and 2008. Following the conclusion of that initial inquiry, the BoE referred the matter to the UK Serious Fraud Office on November 20, 2014. (3/4/3015) Bank of England press release.

ECJ limits ECB authority. The General Court of the European Union ruled that the European Central Bank lacks the authority to require central counterparties settling euro-denominated transactions be incorporated in the euro area. (3/4/2015) ECJ press release.


Global Regulators

Basel Committee assessments of Hong Kong and Mexico. The Basel Committee on Banking Supervision published reports assessing the implementation of the Basel risk-based capital framework and the liquidity coverage ratio (LCR) for Hong Kong and Mexico. Overall, the assessment outcomes for both Hong Kong and Mexico are positive and reflect various amendments to the risk-based capital and LCR rules undertaken by the authorities during the assessment. The Basel Committee noted that several aspects of the domestic rules in both countries are more rigorous than required under the Basel framework. (3/16/2015) BIS press release.

IASB considers hybrid pensions. Reuters reported that the International Accounting Standards Board is developing new pension accounting standards that would address “hybrid” pensions -- pension plans with both defined benefit and defined contribution characteristics. (3/12/2015) Hybrid accounting.

Review of CCP stress testing. The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) announced that they are conducting a review of stress testing by CCPs. The review is intended to identify how the relevant Principles for Financial Market Infrastructure standards are being implemented and whether additional guidance is needed. (3/11/2015) IOSCO press release.

Non-bank SIFI proposal. The Financial Stability Board and IOSCO published a second public consultation on the “Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions.” Comments should be submitted by May 29, 2015. (3/4/2015) FSB press release.


US Securities and Exchange Commission Developments

Selected Enforcement Actions

Investment advisor settles conflicts of interest charges. The SEC instituted settled administrative proceedings against PageOne Financial, Inc., a registered investment adviser, and its sole owner and principal, for failing to disclose serious conflicts of interest to their advisory clients in connection with recommending investments in three private investment funds (the “Private Funds”). Without admitting or denying the allegations, respondents consented to the entry of an order finding that they failed to tell their clients that one of the Private Funds’ managers was in the process of acquiring at least 49 percent of PageOne for approximately US$2.7 million; that, as part of that acquisition, the sole owner and principal had agreed to raise millions of dollars for the Private Funds from his advisory clients; and that the fund manager was paying for the acquisition in installments that were partially tied to respondents’ ability to direct client money into the Private Funds. In addition, the disclosures made in respondents’ Form ADV materially misrepresented both the nature and amounts of the fund manager’s payments to the sole owner and principal. Additional proceedings will be conducted to determine the disgorgement and penalties, if any, respondent will pay. (3/10/2015) In the Matter of Edgar R, Page, SEC Release No. IA-4044.

Brokerage settles failure to supervise matter. The SEC instituted settled administrative proceedings against H.D. Vest for failing to adequately supervise registered representatives who misappropriated customer funds. Without admitting or denying the allegations, H.D. Vest agreed to settle the matter by paying a US$225,000 penalty and retaining an independent consultant. (3/4/2015) SEC press release. See also Waiver letter (Division of Corporation Finance letter determining that H.D. Vest has demonstrated good cause for waiver of the “bad actor” automatic disqualification requirement of Rule 506(d)(2)(ii)).

Speeches, Testimony and Presentations

Chair White’s views on disqualification waivers. Chair Mary Jo White discussed the administrative waiver of automatic disqualifications. Each waiver request should be reviewed individually and rigorously with the purpose of the disqualification at issue considered. Waivers should not be viewed as an additional enforcement tool or as an unjustified deterrence mechanism. Charging individuals, not the refusal to grant a waiver is a more effective deterrence tool. (3/12/2015) White speech.

Division of Trading and Markets Director testifies about venture exchanges. Stephen Luparello, Director of the Division of Trading and Markets, testified before the Senate Banking Committee regarding the market structure issues facing smaller companies and how the SEC plans to address those issues. (3/10/2015) Luparello Testimony.

Fixed income market reforms. Commissioner Daniel M. Gallagher noted his concern over the growing lack of liquidity in the fixed income markets and the steps that should be taken to address those concerns. (3/10/2015) Gallagher speech.

Investment manager compliance. Acting Director of the Division of Investment Management, Dave Grim, spoke at the Investor Advisor Association compliance conference. Grim discussed enhanced data reporting for both registered funds and investment advisers; portfolio composition risks; and the need to plan for market stress events. (3/6/2015) Grim speech.

SEC Advisory Committee on Small and Emerging Companies. The SEC’s Advisory Committee on Small and Emerging Companies met on March 4, 2015. Commissioners Daniel M. Gallagher and Luis A. Aguilar presented their views on venture exchanges, secondary market trading venues for the shares of small and emerging companies. The Advisory Committee submitted its recommendations to the SEC concerning the revision of the “accredited investor” definition. Presentations were also given by private groups concerning secondary trading developments; the need for Venture Exchanges; market infrastructure for private and unregistered securities; and a multistate coordinated review program.

Other Developments

A uniform approach. The Wall Street Journal reported that SEC Chair Mary Jo White supports a uniform fiduciary duty standard for investment advisors and broker-dealers. (3/17/2015) Uniformity.

Questionable logic. The remarks of SEC Commissioner Michael Piwowar before the Investment Company Institute were summarized by Reuters. (3/16/2015) Questionable logic.

Going private. Bloomberg discussed what some of the largest money market funds are doing in anticipation of new SEC rules that require them to adopt floating net asset values. (3/15/2015) Going private.

Waiver guidance. The Division of Corporation Finance published guidance concerning the circumstances under which it will grant a waiver from the automatic disqualification provisions of Securities Act Regulation A and Regulation D. The Commission has delegated authority to grant these waivers to the Director of the Division of Corporation Finance, although the Commission retains authority to consider waiver requests and review actions taken pursuant to this delegated authority. The Division will consider, among other facts and circumstances, whether a party seeking a waiver has shown good cause that it is not necessary under the circumstances that the exemptions be denied; whether the violation involved the offer and sale of securities; and whether the conduct involved a criminal conviction or scienter based violation. No single factor is dispositive and the burden will be on the waiver applicant to show good cause. The focus of the Division’s analysis will be on how the identified misconduct bears on the applicant’s fitness to participate in exempt offerings. (3/13/2015) Guidance.

Draft EDGAR documentation. The SEC published draft EDGAR Filer Manual (Volume I) - General Information (Version 20); draft EDGAR Filer Manual (Volume II) - EDGAR Filing (Version 30); and draft EDGAR Form SDR-XML Technical Specification (Version 1.0).

Money market data. Money market fund data as of January 31, 2015, was released by the Division of Investment Management. (3/11/2015) Data.

Registered ATS. The SEC has made available a list of alternative trading systems that as of March 1, 2015, have filed effective Form ATS registrations with the agency. (3/4/2015) List.


US Commodity Futures Trading Commission Developments

Futures prospects. The Financial Times discussed the prospects for the “futurization” of swaps. (3/16/2015) Future prospects.

Market Risk Advisory Committee. On April 2, 2015, the CFTC’s Market Risk Advisory Committee will meet to discuss derivatives clearing organization risk management and how the derivatives markets are changing. Comments should be submitted by April 9, 2015. (3/13/2015) 80 FR 13352.

Comment period regarding remanded swaps-related rules. The CFTC requested public comment in accordance with the US District Court for the District of Columbia’s remand order in Securities Industry and Financial Markets Association v. Commodity Futures Trading Commission. The request for comment clarifies the CFTC’s consideration of costs and benefits of swaps-related rulemakings subject to the Court’s order. The CFTC explains that its consideration of costs and benefits in the rulemaking proceedings reflected all evidence of costs and benefits in the administrative record, whether relevant to domestic activity, overseas activity, or both. The CFTC is soliciting public comment on which of the costs and benefits identified similarly apply to the rules’ extraterritorial applications, and what differences, if any, exist. Comments should be submitted by May 11, 2015. (3/10/2015) CFTC press release.


US Judicial Developments

District court improperly dismissed securities fraud complaint. A divided panel of the US Court of Appeals for the Fourth Circuit vacated the dismissal of a class action securities fraud lawsuit, finding that the district court erred in considering SEC documents which defendant had appended to its motion to dismiss in an effort to establish that none of defendants’ officers sold the issuer’s stock during the period at issue and therefore lacked scienter. The Court of Appeals found that the documents were not integral to the complaint since plaintiffs made no allegations concerning executive stock sales. Moreover, the submitted documents did not establish that no stock sales occurred. Because the district court found that the lack of stock sales “tipped the balance” in defendants’ favor, its reliance on the documents was not harmless. The Court of Appeals found further that plaintiffs’ allegations, when considered as a whole, permit a strong inference that defendants either knowingly or recklessly misled investors by failing to disclose critical information from the FDA while releasing less damaging information that they knew was incomplete. (3/16/2015) Zak v. Chelsea Therapeutics International, Ltd.

Shareholder proposal notice procedure. Plaintiffs submitted to Southern Michigan Bancorp a shareholder proposal concerning compensation clawbacks for inclusion on Bancorp’s annual proxy ballot. Michigan law requires annual meeting notices to include notice of shareholder proposals. While Bancorp’s notice advised that a shareholder proposal had been submitted, it did not include the proposal’s subject matter. The US Court of Appeals for the Sixth Circuit held that Bancorp’s notice was insufficient. Michigan’s “purpose-notice” requirement is designed to help shareholders study a proposal, arrive at a position, and either oppose it or support it. (3/13/2015) Gwyn R. Hartman Revocable Living Trust v. Southern Michigan Bancorp, Inc.

SEC whistleblower rules entitled to deference. Petitioner Larry Stryker petitioned for review of an SEC order which denied his claim for a whistleblower award. Stryker sought the award under the Dodd-Frank Act (DFA) based on information he supplied to the SEC, which the agency used to obtain a successful enforcement result. The SEC denied the award because the information was submitted prior to the adoption of the DFA and, under its DFA whistleblower rules, such information is ineligible for an award. On appeal, the US Court of Appeals for the Second Circuit concluded that the SEC’s interpretation of the DFA was within the SEC’s authority and consistent with the legislation. It therefore affirmed the SEC’s order denying the award. (3/11/2015) Stryker v. SEC.


US Exchanges and Self-Regulatory Organizations

NFA’s EasyFile registration system. Beginning March 9, 2015, swap dealers (SD) and major swap participants (MSP) are able to view in the National Futures Association (NFA) EasyFile system all NFA written communications regarding SD and MSP submissions to the CFTC regarding Commodity Exchange Act Section 4s compliance. (3/5/2015) NFA Notice I-15-11.

Background checks. The SEC has approved FINRA’s proposed rule change relating to background checks on registration applicants. The SEC has also approved FINRA’s proposed establishment of a temporary program that will issue a refund to members of Late Disclosure Fees under certain conditions. (3/6/2015) FINRA Regulatory Notice 15-05.

Listing Standards for managed fund shares. NYSE Arca filed with the SEC a proposal to adopt generic listing standards for Managed Fund Shares. Comments should be submitted on or before March 31, 2015. (3/4/2015) SEC Release No. 34-74433.

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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