Final Rules

References to credit ratings in money market rules removed. The Securities and Exchange Commission published the adopting release and text of new amendments removing credit rating references in Rule 2a-7 of the Investment Company Act, the principal rule that governs money market funds, and Form N-MFP, the form that money market funds use to report information to the Commission about their portfolio holdings. The amendments implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The Commission also adopted amendments to Rule 2a-7’s issuer diversification provisions to eliminate an exclusion from these provisions that is currently available for securities subject to a guarantee issued by a non-controlled person. The amendments are effective October 26, 2015. The compliance date is October 14, 2016. (9/16/2015) SEC press release. 

Proposed Rules and Requests for Comment

Request for comment on the effectiveness of Regulation S-X disclosure requirements. The SEC has published a request for comment regarding the effectiveness of the financial disclosure requirements within Regulation S-X. Comments are due on or before November 30, 2015. (9/25/2015) SEC press release. 

Administrative proceeding amendments. The SEC published proposed amendments to the rules governing its administrative proceedings in an effort to modernize its rules of practice. The proposals include three primary changes to the Rules of Practice that would adjust the timing of administrative proceedings. Comments on proposed rule amendments concerning procedures in administrative proceedings and electronic filing are due on or before December 4, 2015. (9/24/2015) SEC press release.

Liquidity management rules for mutual funds. The SEC published proposed rules designed to enhance effective liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETF). The proposed rules would require mutual funds and ETFs to implement liquidity risk management programs and enhance disclosure regarding fund liquidity and redemption practices. In addition, the proposal would codify the 15 percent limit on illiquid assets included in current Commission guidelines. The proposal also would provide a framework under which mutual funds could elect to use “swing pricing” to effectively pass on the costs stemming from shareholder purchase or redemption activity to the shareholders associated with that activity. The comment period for the proposed rules will be 90 days after publication in the Federal Register. (9/22/2015) SEC press release. See also Division of Economic and Risk Analysis White Paper: Liquidity and Flows of U.S. Mutual FundsGallagher Statement(supporting proposed scaled compliance period for smaller firms but questioning the three-day liquid asset minimum and the use of swing pricing); Piwowar Statement (questioning three-day liquid asset minimum and swing pricing). Since the disclosure requirements under the proposed rule necessitate changes to previously proposed forms, the SEC also reopened the comment period for the Investment Company Reporting Modernization rule proposed on May 20, 2015. SEC Release No. 33-9776. 

Public Statements

Commissioner Gallagher and Commissioner Piwowar dissent from SEC Lucia Opinion. Commissioner Daniel M. Gallagher and Commissioner Michael S. Piwowar published their dissent from the SEC opinion in In the Matter of Raymond J. Lucia Companies, Inc. and Raymond J. Lucia, Sr., in which the respondents touted an approach called “Buckets of Money,” named for a re-balancing strategy. The commissioners concluded that the SEC majority took a fairly straightforward set of facts and engaged in “rulemaking by opinion.” (10/2/2015)

Commissioner White’s opening remarks at the 75th anniversary of the Investment Company Act and Investment Advisers Act. The SEC published SEC Chair Mary Jo White’s opening remarks, which she gave at the 75th anniversary of the Investment Company Act and Investment Advisers Act. In her speech, Commissioner White stated that, while the next 75 years of asset management will certainly hold many challenges, the drafters of the Investment Company Act and Investment Advisers Act devised a regulatory structure with a broad and sturdy foundation. Commissioner White added that the SEC is steadfast in protecting the core ideals of protecting the investor while also maintaining the intended flexibility of the Acts. (9/29/2015) Opening remarks.

Statement issued regarding security-based swap rules. SEC Commissioner Daniel M. Gallagher and SEC Commissioner Michael S. Piwowar issued a statement concerning SEC Commissioner Luis A. Aguilar’s statement calling for the SEC to complete its rules governing the security-based swap market. (9/25/2015) Public statement.


Volcker rule. The SEC and the Commodity Futures Trading Commission (CFTC) issued additional guidance regarding the Volcker rule, the provision of the Dodd-Frank Act which prohibits proprietary trading. The guidance concerns the compliance program for market making-related activities and the submission of the annual CEO certification for prime brokerage transactions. (9/25/2015) See, e.g.,CFTC guidance. See also SEC Volcker rule FAQs (SEC staff guidance on the Volcker rule). 

EDGAR filer guides. The SEC has issued the EDGAR Quick Start Reference Guide and Preparing an EDGAR Filing in Plain Text. (9/18/2015)

Regulation AB CDI. The Division of Corporation Finance released Compliance and Disclosure Interpretation 311.02, which addresses Item 1111 of Regulation AB, the asset-level disclosure compliance date. (9/16/2015) CDIs. 

Exemptive and No-Action Relief

Venture capital funds. The Division of Investment Management provided no-action relief to certain firms relying on the exemption from registration as an investment adviser under Section 203(l) of the Investment Advisers Act and the definition of “venture capital fund” in Rule 203(l)-1 thereunder. (9/21/2015) No-action letter. 

Tender offer exemptions. The Division of Corporation Finance granted exemptions from Section 14(d)(6) of the Securities Exchange Act and Rule 14d-8 thereunder to allow the inclusion in an unsolicited tender offer of an Odd-Lot Provision in the offer to be made in the Republic of China but not in the offer to be made in the US. The relief has been granted to harmonize the conflicting requirements of US and Taiwanese securities laws. (9/17/2015) Exemptive letter. 

Temporary exemptions for securities-based swaps. The SEC extended its previously issued order providing temporary exemptions and exceptions from compliance with certain provisions of the Securities Exchange Act applicable to security-based swaps that were amended or added by the Dodd-Frank Act. (9/15/2015) SEC Release No. 34-75919. 

Selected Enforcement Actions

Executives charged with defrauding investors in fraud scheme. The SEC announced that it charged two former executives of ContinuityX Solutions Inc., an Illinois-based publicly traded company that claimed to sell Internet services to businesses, with fabricating almost all of ContinuityX’s revenue and enriching themselves at the same time. The company is now in bankruptcy. Its former CEO was criminally charged last year with six counts of wire fraud for conduct related to the SEC’s allegations. The SEC charged ContinuityX’s former CEO and former CFO with engineering a scheme to inflate ContinuityX’s revenues—99% of those reported revenues came from fraudulent and fictitious sales. (9/30/2015) SEC press release.

Fraud charges filed against former officers of energy firm. The SEC filed contested civil fraud charges against four former SMF Energy Corp. senior officers, alleging that they vastly inflated SMF’s revenues via a fraudulent billing scheme. The SEC also alleged that SMF understated its liabilities in its annual reports, its quarterly reports, and other reports. (9/25/2015) SEC press release. 

Investment adviser fined US$75,000 for violating Regulation S-P. The SEC instituted settled administrative proceedings against an investment adviser for failing to establish required cybersecurity policies and procedures in advance of a breach that compromised the personally identifiable information (PII) of approximately 100,000 individuals, including thousands of the firm’s clients. Without admitting or denying the allegations, R.T. Jones Capital Equities Management consented to the entry of an order finding that it violated Regulation S-P’s PII safeguard rules during a nearly four-year period when it failed to adopt any written policies and procedures to ensure the security and confidentiality of PII and protect it from anticipated threats or unauthorized access. The firm will pay a US$75,000 penalty. In a related development, the SEC announced that the Office of Investor Education and Advocacy has published a new Investor Alert, “Identity Theft, Data Breaches, and Your Investment Accounts.” The alert offers steps for investors to take regarding their investment accounts if they become victims of identity theft or a data breach. (9/22/2015) SEC press release. 

Investment adviser pays US$40 million for revenue sharing violations. The SEC instituted settled administrative proceedings against an investment adviser and its affiliated distributor for improperly using mutual fund assets to pay for the marketing and distribution of fund shares. First Eagle Investment Management and FEF Distributors agreed to pay nearly US$40 million, including a US$12.5 million penalty, to settle the SEC’s charges. The SEC found that First Eagle and FEF unlawfully caused the First Eagle Funds to pay nearly US$25 million for distribution-related services, rather than making the payments out of the firms’ own assets. The case is the first arising out of a recent SEC initiative to protect mutual fund shareholders from bearing the costs when firms improperly use fund assets to pay for distribution-related services. (9/21/2015) SEC press release. 

Speeches and Testimony

Mary Jo White gives introductory remarks at the National Faith Leaders Conference. SEC Chair Mary Jo White gave introductory remarks at the National Faith Leaders Conference, “Protecting Investors Protects You.” In her remarks, Chair White referenced the SEC’s objective to bring all wrongdoers to justice and return money to harmed investors. (10/2/2015). White remarks.

Commissioner Stein addresses Securities Traders Association. Commissioner Kara M. Stein made remarks at the Securities Traders Association’s 82nd Annual Market Structure Conference, “Back to the Future: Trading and Regulation 2015.” In a speech entitled “Market Structure in the 21st Century: Bringing Light to the Dark.” Commissioner Stein stressed the need “to bring light to some of the darker places in our market, to boost transparency in Alternative Trading Systems operations, to get moving on a consolidated audit trail that will add transparency, and to rethink roles and responsibilities.” (9/30/2015) Stein speech.

Chief Accountant addresses AICPA. James Schnurr, Chief Accountant of the SEC, outlined his office’s priorities, which include the implementation of new revenue recognition standards and the expected release of the Financial Accounting Standard Board’s new credit impairment standard. (9/17/2015) Schnurr speech.

Deputy Chief Accountant’s views on revenue recognition. Before the Bloomberg BNA Conference on Revenue Recognition, Wendy R. Bricker, Deputy Chief Accountant at the SEC discussed her office’s efforts to navigate towards a more principles-based approach to revenue recognition. (9/17/2015) Bricker speech. 

Division of Enforcement Director testifies on proposed electronic communications privacy bill. In a hearing before the Senate Judiciary Committee, Andrew Ceresney, the Director of the Division of Enforcement, voiced his concerns over the proposed Electronic Communications Privacy Amendments Act. Although Ceresney shares in the goal of updating the Act’s evidence collections procedures and privacy protections, the proposed amendments may impede the ability of the SEC and other federal agencies to investigate and uncover financial fraud and other unlawful conduct. (9/16/2015) Ceresney testimony. 

Other Developments

Michael Liftik named SEC Deputy Chief of Staff. The SEC announced that Michael Liftik will become a deputy chief of staff of the agency. Mr. Liftik became Senior Advisor to Chair Mary Jo White in 2013, serving as the Chair’s legal advisor on enforcement policy matters and cases. He also serves as the Chair’s representative on the Deputies Committee of the Financial Stability Oversight Council. (10/5/2015) Liftik announcement. 

SEC Deputy Chief of Staff to leave agency. Erica Williams will be leaving the SEC after serving as Deputy Chief of Staff to Chairs Mary Jo White, Elisse B. Walter and Mary L. Schapiro. (10/5/2015) Williams announcement.

SEC names an Associate Director in the Division of Economic and Risk Analysis. The SEC announced that Chyhe Becker has been named as an Associate Director in the Division of Economic and Risk Analysis. The appointment is effective immediately. Dr. Becker assumes a new position in the division’s Office of Litigation Economics, created to reflect the significance of data-driven economic and statistical analysis in investigations and litigated cases. (10/2/2015) Becker appointment.

Office of Inspector General publishes its ‘Improvements Needed in the Division of Enforcement’s Oversight of Fund Administrators.’ The Office of Inspector General (OIG) has published its “Improvements Needed in the Division of Enforcement’s Oversight of Fund Administrators.” This report details the results of the OIG’s audit of the SEC’s Division of Enforcement’s oversight of fund administrators used in the distribution process. It contains three recommendations for corrective action that, if completely applied, should help the SEC to improve oversight of fund administrators, comply with applicable laws and agency policy and requirements, and ensure that goals and objectives are met. (9/30/2015) OIG report.

SEC will be holding an Equity Market Structure Advisory Committee meeting on October 27. The SEC has announced that the Equity Market Structure Advisory Committee will be holding its second meeting on October 27, 2015 at 9:30am Eastern time. This meeting will focus on two important market structure topics: Rule 610 of SEC Regulation NMS, and the regulatory structure of trading venues. (9/29/2015) SEC press release.

SEC is holding an Investor Advisory Committee meeting on October 15th. The SEC announced that it will be holding an Investor Advisory Committee Meeting at its Washington, DC headquarters on October 15, 2015 from 10am-4pm.

Operation Plan in case there is a government shutdown. The SEC has published its Operation Plan for operating in the event of a lapse in appropriations that results in an SEC shutdown. The Plan addresses a complete shutdown, and not a partial shutdown due to the SEC having funds available, but not enough to maintain full operations during an entire quarter. In the event of an actual shutdown, supplemental government-wide guidance issued by the Office of Management and Budget, the Office of Personnel Management, and the General Services Administration will also apply. (9/25/2015)

Investor Advisory Committee meeting. The Investor Advisory Committee will meet on October 15, 2015 to discuss recent market structure developments, ETF pricing and SEC enforcement priorities. SEC Release No. 33-9924. 

New rulemaking website debuts. SEC Chair Mary Jo White announced the availability of a new website listing the agency’s rulemaking activity since 2008. The site allows uses to view proposed rules, final rules, and other actions related to a particular rulemaking. (9/24/2015) White announcement.

Money market fund statistics. The SEC published money market fund data as of August 31, 2015. (9/24/2015) Statistics. 

Renewal of the Advisory Committee on Small and Emerging Companies. The SEC has renewed the Advisory Committee on Small and Emerging Companies, which will continue to focus on interests and priorities of small businesses and smaller public companies. (9/24/2019) SEC Release No. 33-9927. 

Advisory committee documents. The SEC posted the following documents from the Advisory Committee on Small and Emerging Companies: 


Staff announcement. Lara Shalov Mehraban has been named the SEC Associate Regional Director for Enforcement in the New York Regional Office. (9/22/2015) SEC press release. 

Chair White addresses settlement cycle. The SEC published Chair Mary Jo White’s letter to Kenneth E. Bentsen, Jr., President and Chief Executive Officer of the Securities Industry and Financial Markets Association, and Paul Schott Stevens, President and Chief Executive Officer of the Investment Company Institute. In her letter, White strongly supported the industry’s efforts to shorten the settlement cycle from the third business day after the trade date to no later than the second business day (T+2). White has asked agency staff to develop a proposal to amend SEC Rule 15c6-1(a) to require settlement no later than T + 2. (9/16/2015) White letter.