Final Rules

SEC adopts final rule to adjust maximum civil monetary penalties. The Securities and Exchange Commission approved a final rule to implement the first annual adjustment for inflation of the maximum amount of civil monetary penalties administered by the SEC, as required under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The final rule will be effective upon publication in the Federal Register. (1/6/2017) SEC Release No. 33-10276.

SEC makes technical correction to JOBS Act and FAST Act revisions to Exchange Act registration requirements. The SEC published a corrected version of final rules adopted in May 2016 that implement changes to Securities Exchange Act registration requirements to more accurately reflect the holder of record threshold established by Exchange Act Section 12(g)(1). (12/21/2016) SEC Release No. 33-10075a.

Revised EDGAR Filer Manual. The SEC adopted revisions to the EDGAR Filer Manual to reflect updates to the EDGAR system. The revised manual is effective upon publication in the Federal Register. (12/9/2016) SEC Release No. 33-10265.


Investment Management guidance on mutual fund fee structures and the DOL’s fiduciary rule. The SEC’s Division of Investment Management offered guidance on disclosure issues and certain procedural requirements with offering variations in mutual fund sales loads and new share classes that may arise as funds respond to the implementation of the Department of Labor’s rule on conflicts of interest in retirement advice. (12/15/2016) IM guidance update.

Corporation Finance offers guidance on disclosures by foreign private issuers. The SEC’s Division of Corporation Finance updated its Compliance & Disclosure Interpretations on Securities Exchange Act Forms to offer new information about the use of Form 20-F by foreign private issuers. (12/8/2016) C&DIs 110.03-110.07.The Division published related C&DIs on Securities Act F-Series Forms. (12/8/2016). C&DI 102.03 and C&DI 102.04.

New C&DIs on the foreign private issuer definition. The Division of Corporation Finance updated its C&DIs on Securities Exchange Act Rules to include new guidance on the foreign private issuer definition in Securities Exchange Act Rule 3b-4(c). (12/8/2016) C&DIs 110.02-110.08. The Division also published related C&DIs on Securities Act Rule 405. (12/8/2016) C&DIs 203.17-203.23.

New C&DIs on Exchange Act Rules 12g-3 and 12h-6. The Division of Corporation Finance published new C&DIs on successor issuer reporting obligations under Exchange Act Rule 12g-3 and the primary trading market definition under Exchange Act Rule 12h-6. (12/8/2016) C&DI 150.02 and C&DI 155.01. 

Corporation Finance offers guidance on qualified institutional buyer definition under Rule 144A. The Division of Corporation Finance issued new C&DIs on the private resales of securities to institutions under Securities Act Rule 144A. (12/8/2016) C&DIs 138.05-138.10.

New C&DI on Rule 902 of Regulation S. The Division of Corporation Finance published a new C&DI on Securities Act Rule 902 that provides guidance on the US person definition under Rule 902(k)(1)(i). (12/8/2016) C&DI 276.01.

Corporation Finance issues new C&DIs on Rule 903 of Regulation S. In new C&DIs on Rule 903 of Regulation S, the Division of Corporation Finance discussed the application of the rule to an offering of securities in more than one Member State of the European Union, the Category 3 safe harbor, and the electronic submission of required certifications and agreements under Regulation S. (12/8/2016) C&DIs 277.02-277.06.

No-Action Letters

No-action letter offers clarification on remuneration for “affiliated persons” in FX transactions. The SEC’s Division of Investment Management responded to a request by Russell Investment Management LLC by indicating that it would not recommend enforcement action under Section 17(e) of the Investment Company Act if certain registered open-end management investment companies utilize a broker that is an “affiliated person” of the companies’ investment adviser to effect foreign currency transactions as agent for the companies and, for effecting such transactions, receives remuneration within the parameters of Section 17(e)(2). (12/16/2016) SEC no-action letter.

Trading and Markets applies CIP no-action position to beneficial ownership requirements. The SEC’s Division of Trading and Markets issued a no-action letter in which it indicated that it will not recommend enforcement action if a broker-dealer relies on a registered investment adviser to perform some or all of its obligations under the customer identification program and/or the portion of the customer due diligence rule regarding beneficial ownership requirements for legal entity customers, subject to certain conditions. The Division’s no-action relief will be effective until the date upon which an anti-money laundering program rule for investment advisers becomes effective or two years from the date of the no-action letter, whichever is earlier. (12/12/2016)

Selected Enforcement Actions

SEC charges Chinese traders with hacking law firm computers and trading on stolen information. The SEC charged three Chinese traders with trading on nonpublic market-moving information they stole by hacking into the computer networks of two prominent New York-based law firms. The SEC alleged that the traders gleaned nearly US$3 million in illegal profits by trading on the stolen information. The three traders will also face charges in a parallel criminal proceeding. (12/27/2016) SEC press release.

SEC charges company with retaliating against whistleblower. The SEC brought charges against an oil-and-gas company for including restrictive language in its separation agreements that prohibited outgoing employees from participating in any government investigation or disclosing information potentially harmful or embarrassing to the company, in violation of whistleblower protection rules. In addition, the company allegedly fired an internal whistleblower who raised concerns about the process used by the company to calculate its publicly reported oil-and-gas reserves. Without admitting or denying the allegations, the company settled the charges by consenting to the entry of a cease-and-desist order and agreeing to pay a US$1.4 million civil penalty. (12/20/2016) In the Matter of SandRidge Energy Inc., SEC Release No. 34-79607.

Broker-dealer, individuals charged with violations of market structure rules. The SEC announced charges against a Utah-based broker-dealer and two registered persons associated with the firm for causing the firm’s violations of SEC market structure rules. The SEC alleged that the broker-dealer improperly relied on the bona-fide market making exception under Regulation SHO for all short sales by its proprietary trading group when much of the proprietary trading activity was not, in fact, bona-fide market making. In addition, the broker-dealer failed to have controls and supervisory procedures as required by the Market Access Rule. The SEC additionally alleged that the firm’s CEO violated the certification requirement of the Market Access Rule, and charged a former proprietary trader and the firm’s head trader with causing the firm’s violations. Without admitting or denying the allegations, the CEO, the head trader, and the proprietary trader settled the charges by consenting to the entry of cease-and-desist orders and agreeing to pay monetary sanctions of US$126,688.03, US$25,000, and US$600,000.50, respectively. The SEC’s administrative proceeding against the firm is ongoing. (12/16/2016) In the Matter of Wilson-Davis & Co., SEC Release No. 34-79580In the Matter of Anthony B. Kerrigone, SEC Release No. 34-79579, and In the Matter of Byron B. Barkley and Paul N. Davis, SEC Release No. 34-79578.

Speeches and Statements

Work on global accounting standards will wait for next SEC chair. In a statement on globally accepted accounting standards, SEC Chair Mary Jo White emphasized that the SEC should prioritize the development of high-quality, globally accepted accounting rules, but also indicated that the SEC would not take further action on the matter during the remainder of her tenure as SEC chair. (1/5/2017) White statement.

SEC intends to move forward with rulemaking agenda. SEC Chair Mary Jo White informed the Senate Banking Committee that the SEC will proceed with its consideration of rulemaking items on its agenda, including the adoption of rules establishing additional capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants.  (12/12/2016) White letter.

White cautions against weakening financial reforms. In remarks at the SEC’s Investor Advisory Committee meeting, SEC Chair Mary Jo White stated that “it would be a grave mistake to weaken, let alone dismantle,” the financial reforms put in place following the financial crisis. (12/8/2016) White remarks. 

Other Developments

SEC announces whistleblower award of US$5.5 million. The SEC awarded US$5.5 million to a whistleblower who provided critical information about an ongoing scheme conducted by the company where the whistleblower was employed. (1/6/2017) SEC press release.

Staff announcements. The SEC appointed Timothy Husson to serve as Associate Director in the Division of Investment Management’s Risk and Examinations Office. The SEC named Sara P. Crovitz as Deputy Chief Counsel and Associate Director in the Division of Investment Management’s Chief Counsel’s Office. (12/22/2016) The SEC named G. Jeffrey Boujoukos to replace Sharon B. Binger as Director of its Philadelphia Regional Office. (12/21/2016) Dr. Narahari Phatak has been appointed to serve as Associate Director for Policy in the SEC’s Division of Economic and Risk Analysis. (12/12/2016)

SEC releases annual credit rating agency reports. The SEC published two annual staff reports on the impact of the SEC’s oversight of nationally recognized statistical rating organizations. The Dodd-Frank mandated annual examination report summarizes the staff’s findings from the most recently completed examinations of each NRSRO. The annual report, required by the 2006 Credit Rating Agency Reform Act, addresses the state of competition, transparency, and conflicts of interest at NRSROs. (12/21/2016) SEC press release.

SEC approves PCAOB’s budget and accounting support fee for 2017. The SEC voted to approve the Public Company Accounting Oversight Board’s 2017 budget of US$268.5 million and accounting support fee, which will be allocated by assessing US$232.6 million on public companies and US$35.4 million on broker-dealers. (12/14/2016) SEC press release. SEC Commissioner Michael S. Piwowar dissented, noting his “concerns about the continued escalation of PCAOB costs.” See also the supporting statements by SEC Chair Mary Jo White and SEC Commissioner Kara M. Stein.

MIAX PEARL’s application for national securities exchange registration approved. The SEC approved MIAX PEARL, LLC’s application for registration as a national securities exchange, which indicates that MIAX PEARL will only trade option contracts that meet its options listing standards. (12/13/2016) SEC Commission Notice 34-79543. EDGAR updates. The SEC released the EDGAR Form 13F XML Technical Specification (Version 1.3), the EDGAR Form MA XML Technical Specification (Version 1), the EDGAR ABS XML Technical Specification (Version 1.5), the EDGAR Filer Manual (Volume I) General Information (Version 25), and the EDGAR Filer Manual (Volume II) EDGAR Filing (Version 39). (12/12/2016)

OCIE will examine multi-branch investment advisers. The SEC’s Office of Compliance Inspections and Examinations announced an initiative to examine the supervisory practices of registered investment advisers over personnel in branch offices. (12/12/2016) OCIE Risk Alert.

DERA white paper sees early signs of Regulation A+’s effectiveness. The SEC published an analysis by DERA staff of early data on the use of Regulation A+, which concluded that that Regulation A+ may offer a potentially feasible method for smaller issuers to conduct a public offering and an alternative to other securities offering methods that are exempt from registration under the Securities Act. (12/7/2016) DERA white paper.

SEC awards $900,000 to whistleblower. The SEC announced that it awarded more than US$900,000 to a whistleblower for providing information that allowed the SEC to bring multiple enforcement actions against wrongdoers. (12/9/2016) SEC press release.