Proposed Rules and Requests for Comment 

Erroneously awarded compensation. The SEC requested comment on proposed rules that would prohibit national securities exchanges from listing any security of an issuer that is not in compliance with Securities Exchange Act Section 10D’s requirements for disclosure of the issuer’s policy on incentive-based compensation and recovery of incentive-based compensation that is received in excess of what would have been received under an accounting restatement. Comments should be submitted within 60 days after publication in the Federal Register, which is expected shortly. (7/1/2015) SEC Release No. 33-9861SEC press release. 

Audit committee reporting. The SEC seeks information about the audit committee and auditor relationship and whether improvements can be made to enhance the information provided to investors about the audit committee’s responsibilities and activities. Comments should be submitted within 60 days after publication in the Federal Register, which is expected shortly. (7/1/2015) SEC Release No. 33-9862;SEC press release.

Regulatory Orders

Investment adviser political contributions. The compliance date for the SEC’s rule prohibiting third-party solicitation under Investment Advisers Act Rule 206(4)-5 has been set for July 31, 2015. (6/25/2015) SEC Release No. IA-4129. 


Personal securities transaction reporting. The Division of Investment Management published guidance on the reporting of personal securities trading by certain advisory personnel. The guidance addresses the exception to the reporting requirement for access persons who hold securities in accounts over which they have “no direct or indirect influence or control.” (6/26/2015) Guidance.

Compliance and Disclosure Interpretations. The Division of Corporation Finance added to its Securities Act Rules Compliance and Disclosure Interpretations (C&DI) new Questions 182.01 through 182.11, which address Rules 251 through 263 of Regulation A. Question 182.09 addresses the use of Twitter, and other character-limited platforms, to “test the waters” in a Regulation A offering. The Division also withdrew Questions 128.01 and 128.03 concerning Form 1-A from the Securities Act Forms C&DI. (6/23/2015) C&DI updates.

Selected Enforcement Actions

Investment adviser charged with fraudulently inflating valuations. The SEC instituted settled administrative proceedings against an investment adviser and its principles for fraudulently inflating the prices of securities in hedge fund portfolios they managed. The SEC found that AlphaBridge Capital Management told investors and its auditor that it obtained independent price quotes from broker-dealers for certain unlisted, thinly-traded residential mortgage-backed securities. However, AlphaBridge actually gave internally-derived valuations to broker-dealer representatives to distribute as their own. The inflated valuation of these assets caused the funds to pay higher management and performance fees to AlphaBridge. AlphaBridge and its owners will together pay US$5 million in disgorgement and penalties to settle the charges. (7/1/2015) SEC press release.

Data-driven examination of “cherry-picking” leads to contested charges. The SEC instituted contested administrative proceedings against an investment advisory firm and its owner for allegedly allocating to personal and business accounts certain options trades that appreciated in value while allocating to clients trades that depreciated in value. The action is the first to derive from the Enforcement Division’s data-driven initiative to identify potentially fraudulent trade allocations known as “cherry-picking.” (6/29/2015) SEC press release. 

SEC charges two as unregistered brokers in EB-5 immigrant investor program.The SEC instituted settled administrative proceedings against two firms for acting as unregistered securities brokers. The charges were the first brought against brokers handling investments in the US Citizenship and Immigration Services EB-5 Immigrant Investor Program, which provides a path to legal residency for foreigners who invest directly in a US business or private “regional center” that promotes economic development in specific areas and industries. While the firms promised to help investors choose the right regional center with which to invest, they allegedly directed most of the investors to the same regional centers, which in turn paid the firms commissions of about US$35,000 per investor once an investor’s petition for permanent residency was approved. (6/23/2015) SEC press release.

Statements and Speeches

Commissioner Aguilar declares support for CCOs. Commissioner Luis A. Aguilar assured compliance personnel that the SEC is not targeting them. Aguilar made his statement in response to fellow Commissioner Daniel M. Gallagher’s earlier publication of his dissent from two enforcement actions against the CCOs of two separate investment advisers. See Gallagher statement. Aguilar noted how infrequently the SEC files enforcement actions against CCOs and how most of the cases against CCOs involved those who also engaged in the business activities of the adviser. (6/29/2015) Aguilar statement. 

Chair White discusses shareholder engagement. In a speech before the Society of Corporate Secretaries and Governance Professionals, SEC Chair Mary Jo White discussed proxy-related issues, including the delivery of preliminary proxy voting results by intermediaries, universal proxies, “unelected” directors and shareholder proposals. (6/25/2015) White speech.

Commissioner Aguilar on the challenges of cybersecurity. At the SINET Innovation Summit, Commissioner Luis A. Aguilar summarized SEC Regulation Systems Compliance and Integrity and the agency’s cybersecurity inspections, examinations, and enforcement efforts. (6/25/2015) Aguilar speech. 

Commissioner Gallagher discusses activism and short-termism and the SEC.Speaking at the 21st Annual Stanford Directors’ College, Commissioner Daniel M. Gallagher discussed shareholder activism and short-termism and the SEC. (6/23/2015) Gallagher speech.

Other Developments

Advisory Committee on Small and Emerging Companies. The Advisory Committee on Small and Emerging Companies will hold a telephone meeting on July 15, 2015, to continue discussions regarding public company disclosure effectiveness and the treatment of “finders.” SEC Release No. 33-9854. 

Draft EDGAR Manuals Published. The SEC has published Draft EDGAR Filer Manual (Volume II) EDGAR Filing (Version 33)Draft EDGAR Filer Manual (Volume I) General Information (Version 22); and Draft EDGARLink Online XML Technical Specification (Version 17). (7/2/2015) 

Office of the Investor Advocate. The SEC’s Office of the Investor Advocate published its semi-annual report to Congress. The Office will continue to focus primarily on investor flight, elder fraud, cybersecurity, equity market structure, municipal market reforms and ways to improve the effectiveness of disclosure. (6/30/2015) Report.

Staff announcement. John C. Roeser has been named Associate Director and deputy head of the Office of Market Supervision in the Division of Trading and Markets. (6/25/2015) SEC press release.