New Final Rules

Regulation A amendments. In accordance with the Jumpstart Our Business Startups Act, the SEC published amendments to Regulation A which are commonly known as Regulation A+. The amendments provide for two tiers of offerings. Tier 1 applies to securities offerings of up to US$20 million in a 12-month period while Tier 2 applies to securities offerings up to $50 million in a 12-month period. State securities laws would be preempted for qualified purchasers in Tier 2 offerings. Tier 1 offerings remain subject to federal and state requirements. The amendments will be effective 60 days after publication in the Federal Register, which is expected shortly. (3/25/2015) SEC press release. 

Proposed Rules

FINRA membership for exchange-only broker-dealers proposed. The SEC published a proposal that would amend SEC Rule 15b9-1 under the Securities Exchange Act of 1934, which exempts certain broker-dealers from membership in a registered national securities association. Under the proposal, the SEC would replace the rule’s current gross income allowance with a narrower exemption from association membership for broker-dealers that carry no customer accounts and effect transactions on a national securities exchange. The proposal would exempt broker-dealers that effect transactions off the exchange of which they are members solely for the purpose of hedging the risks of floor-based activity, and off-exchange transactions resulting from orders routed by the exchange to prevent trade-throughs in accordance with the provisions of SEC Regulation NMS. Comments should be submitted within 60 days after publication in the Federal Register, which is expected shortly. (3/25/2015) SEC press release. 

Selected Enforcement Actions

Day trader allegedly propped up stock price to keep shares publicly listed. The SEC filed contested civil fraud charges against a day-trader for allegedly manipulating the securities of a microcap company in order to drive-up and maintain the company’s stock price above the minimum price required for listing on a national exchange. According to the SEC, apart from helping the company get listed on the exchange, the day-trader also profited from his scheme by more than US$650,000. (3/27/2015) SEC v. Ling, Lit.Rel.No. 23224. 

Other Developments

Resource extraction disclosure rules delayed. The Wall Street Journal, citing a recent SEC court filing, reported that new rules for the disclosure of payments made by resource extractors will probably not be issued by the agency for another year. (3/30/2015) Delay. 

Capital formation. Commissioner Daniel Gallagher discussed ways in which the SEC could improve small issuer capital formation and liquidity. (3/27/2015) Gallagher speech. 

Regulatory relief. The Division of Investment Management granted 16th Amendment Advisors LLC no-action relief from the independent verification and account statement delivery provisions of the Investment Adviser Act’s Custody Rule in connection with a private investment fund and a private feeder fund into the master fund. (3/23/2015) No-action letter. 

SEC Investor Advisory Committee to meet. The SEC announced that its Investor Advisory Committee will meet on April 9, 2015. Written comments should be submitted by. (3/23/2015) SEC Release No. 33-9739. 

Regulation SHO. New Regulation SHO guidance was issued by the Division of Market Regulation. The guidance, presented in the form of frequently asked questions and answers, can be found at Questions 2.5(A); Question 2.5(B); and Question 2.6. (3/18/2015) FAQs.