Pay ratio disclosure rules analysis released. A memo published by the Securities and Exchange Commission (SEC) from the Division of Economic and Risk Analysis (DERA) considered the potential effects of excluding different percentages of employees from the pay ratio calculation. (6/4/2015) SEC press release.
SEC proposes changes to Form ADV and investment company disclosures.The SEC announced proposed rules that would result in amendments to Form ADV and new monthly and annual reporting forms for mutual funds, ETFs and other registered investment companies. Release No. IA-4091 would require advisors to disclose on Form ADV information regarding assets (including swaps and exchange-traded funds) and use of borrowings and derivatives in separately managed accounts. Release No. 33-9776 would see ETFs and other registered investment companies report census-type information in two new forms. (5/20/2015) SEC press release.
Final rule adopting revisions to the EDGAR filer manual. The SEC has published updates to the EDGAR Filer Manual, primarily to support the submission form types for Regulation A. (5/26/2015) Final rule.
Statements and Speeches
Future prospects of IFRS. James Schnurr, Chief Accountant, Office of the Chief Accountant (OCA), spoke at the 34th Annual SEC and Financial Reporting Institute Conference on his key priorities, namely: IFRS, the new revenue recognition standard, a future concept release on Audit Committees, and the PCAOB’s standard setting activities. (6/5/2015) SEC press release.
SEC sends brokers and advisors back to school. Amy Starr, Chief of the Office of Capital Market Trends, at the Structured Products Americas Conference on May 14, 2015, asked whether brokers or advisors selling linked securities, such as structured notes, were able to adequately explain to investors the terms of the securities and how the payout related to the particular referenced index or instrument. (6/5/2015) Starr remarks.
Chair White’s Commission round up before SEC alumni. Chair White spoke before the SEC Historical Society, briefly sharing some of the Commission’s current initiatives: post-2008 crisis rulemaking, changing the no admit-no deny settlement protocol and recent proposed rules. (6/4/2015) White remarks.
Chair White applauds the Commission in opening remarks for adopting Regulation A+. Chair White’s initial comments before the SEC Advisory Committee on Small and Emerging Companies applauded the Commission for adopting Regulation A+, while focusing the majority of her remarks on intrastate crowdfunding legislation. (6/3/2015) White remarks.
John P. Wheeler Veterans Charity Award. Chair White in her opening remarks and Commissioner Daniel M. Gallagher spoke in tribute to former SEC Secretary, John P. Wheeler, III and announced the first recipient of the "Wheeler Award."Inaugural recipient. (5/20/2015)
Advancing and defending the SEC’s core mission. Commissioner Michael S. Piwowar delivered prepared remarks at the Exchequer Club of Washington, D.C in which he attacked the Federal Reserve’s call for the development of “prudential market regulation” asserting, “It is the Commission, not the banking regulators that should be regulating the capital markets. Period.” (5/20/2015) Piwowar remarks.
Selected Enforcement Actions
ALJ dismisses allegations brought against investment advisors regarding adequacy of disclosures made to clients. Administrative Law Judge (ALJ) James E. Grimes dismissed allegations against Houston-based investment advisors, which have approximately US$150 million in assets under management and manage around 350 separate accounts, regarding the adequacy of certain disclosures that they made to their clients. The ALJ had to specifically determine whether payments made under a revenue sharing agreement gave rise to an actual or potential material conflict of interest and, if so, whether the advisors properly disclosed that conflict to their clients. The ALJ held that the Division of Enforcement (DOE) failed to show that the advisors violated the Investment Advisers Act of 1940, finding that they reasonably believed that the payments were 12b-1 fees or commissions, and that they properly established that they relied in good faith on compliance professionals. The ALJ added that the DOE failed to show that the advisors were reckless or negligent, or had any knowledge of wrongdoing. (6/4/2015) In the Matter of the Robare Group Ltd.
Investment advisers charged with fraud, breach of fiduciary duty for improper recommendation of pension funds. Pursuant to anti-fraud provisions of the federal securities laws, the SEC brought administrative proceedings against Georgia-based Gray Financial Group, Inc. and two of its senior executives. The SEC contended that Gray sold improper funds to public pension fund clients, which included police, firefighter, and transit workers, despite the fact that Gray knew or should have known that these investments did not comply with state restrictions on alternative investments. The SEC alleged that Gray acted in willful or reckless violation of its fiduciary duties and added that the investments sold, which were actually Gray’s own fund of funds, netted Gray US $1.7 million in fees. (5/21/15) In the Matter of Gray Financial Group Inc. ; See also SEC press release.
Federal agencies issue standards for assessing diversity in regulated entities.The SEC was among a host of federal agencies to issue an interagency diversity policy mandated by the Dodd-Frank Act. The policy provides a framework for regulated entities to create and strengthen their diversity policies and practices. The agencies consulted to gain a greater understanding of the issues confronting minorities and women in obtaining employment and business opportunities within the financial services industry. (6/9/2015) SEC press release.
SEC to release registration “no-review” letters. The SEC Division of Corporation Finance announced that in the interests of transparency they will begin releasing correspondence with issuers relating to registration statements that are not selected for review. (6/8/2015) SEC announcement.
Draft recommendation regarding the Section 4(a)(1½) exemption. The SEC Advisory Committee on Small and Emerging Companies formally submitted to the Commission a recommendation regarding formalizing the exemption commonly known as “Section 4(a)(1½).” (6/3/2015) Letter of recommendation.
Charting the mass of regulatory spaghetti. Commissioner Daniel M. Gallagher released the final update, “Inclusion of FINRA rules implemented since July 2010,” to his chart originally published on March 2, 2015. The chart lays bare the regulations that have been imposed on US financial services firms since the enactment of the Dodd-Frank Act in 2010. (6/3/2015) Chart.
Advisory Committee on Small and Emerging Companies minutes published.The SEC published the minutes of the March 4, 2015, Advisory Committee on Small and Emerging Companies meeting. The Committee discussed state preemption in the context of Regulation A+ and a recommendation regarding the definition of “accredited investor” for submission to the Commission. (6/1/2015)Minutes’ notice. Transcript.
OIG Semiannual Report to Congress. The report covering October 1, 2014, to March 31, 2015, has been published by the SEC Office of the Inspector General (OIG). The OIG Report was followed by the accompanying Management report.(5/26/2015)
SEC publishes Final Report of the SEC Government-Business Forum on Small Business Capital Formation. The SEC has published the Thirty-Third Annual Final Report of the SEC Government-Business Forum on Small Business Capital Formation. The Forum focused on secondary market liquidity for securities of small businesses and revision of the “accredited investor” definition. (5/22/2015) Final report.
SEC announces new chief of staff. Andrew J. “Buddy” Donohue has been named the agency’s chief of staff. Mr. Donohue will replace Lona Nallengara, who will leave the agency in June. (5/28/2015) SEC press release.
Staff announcements. The SEC announced that Jessica Kane has been named the director and Rebecca J. Olsen the deputy director of the Office of Municipal Securities. (5/20/2015) Additionally, the SEC announced that it has named Daniel R. Gregus as the Associate Director for the broker-dealer examination program in its Chicago Regional Office. (6/5/2015) The SEC has also named Richard R. Best as Regional Director of its Salt Lake office. (6/8/2015)