New Final and Proposed Rules
Swaps rules. The SEC voted to adopt two new rules for security-based swaps. Regulation SDR will require swap data repositories (SDRs) to register with the SEC and enumerates the requirements with which SDRs must comply. New Regulation SBSR specifies the reporting requirements for each security-based swap transaction. Regulation SBSR also addresses cross-border security-based swap activity and will permit market participants to satisfy their Regulation SBSR obligations through compliance with the comparable regulation of a foreign jurisdiction. In addition to the adoption of the two new rules, the SEC voted to propose for comment new rules, amendments and guidance for the reporting and public dissemination of security-based swap transaction data. (1/14/2015) SEC press release.
Selected Enforcement Actions
Investment adviser failed to disclose conflicts of interest. The SEC instituted settled administrative proceedings against Shelton Financial Group, Inc. (SFG), a registered investment adviser, and Jeffrey Shelton, the founder, owner, and president of SFG, for failing to disclose compensation it received through an arrangement with a registered broker-dealer and conflicts arising from that compensation. The broker agreed to pay SFG for all client assets that were invested in certain mutual funds. In exchange, SFG agreed to provide certain custodial support services to the broker. The agreement created incentives for SFG to favor particular mutual funds over other investments and to favor the broker over other brokers when giving investment advice to its clients. SFG initially did not disclose this arrangement and the resulting conflict of interest to its clients. When SFG did disclose the arrangement, its description was inadequate. To settle this matter SFG and Shelton agreed to pay disgorgement and interest, and to a number of undertakings. (1/13/2015) In the Matter of Shelton Financial Group, Inc., SEC Release No. IA-3993.
Shareholder proposals. SEC Chair White has directed SEC staff to review the scope of Securities Exchange Act Rule 14a-8(i)(9), which allows a company to exclude a shareholder proposal that “directly conflicts” with a management proposal. As a result, the Division of Corporation Finance will express no views on the application of Rule 14a-8(i)(9) during the current proxy season. (1/16/2015)SEC statement.
Fee rates. Starting February 14, 2015, the SEC fee rates for most securities transactions will be US$18.40 per million dollars. The assessment on security futures transactions will remain unchanged at US$0.0042 for each round turn transaction. (1/15/2015) Fee rate. See also FINRA Information Notice. (1/20/2015)
OCIE priorities. The Office of Compliance Inspections and Examinations (OCIE) announced its priorities for 2015, which focus on three areas: protecting retail investors, especially those saving for or in retirement; assessing market-wide risks; and using data analytics to identify signs of potential illegal activity. (1/13/2015)SEC press release. Separately, the OCIE Office of Market Oversight advised that it will be conducting examinations of national securities exchanges, focusing on compliance with recent cease and desist orders; internal controls relating to regulatory functions; enforcement of listing rules; information technology controls; and compliance with transaction fee obligations. (1/13/2015) Letter.
Market Structure Advisory Committee. The members of the SEC’s Equity Market Structure Advisory Committee have been named. (1/13/2015) SEC press release.
Updates to the Financial Reporting Manual. The Division of Corporation Finance published an updated Financial Reporting Manual, which reflects FASB Accounting Standards Update No. 2014-17, Business Combinations (Topic 805): Pushdown Accounting, a consensus of the FASB Emerging Issues Task Force and rescission of SAB Topic 5.J. (1/12/2015) Summary.