Interim Final Rules and Requests for Comment

SEC adopts FAST Act revisions to financial reporting forms for emerging growth and smaller reporting companies. The Securities and Exchange Commission (SEC) approved interim final rules that amend two financial reporting forms for emerging growth companies and smaller reporting companies as mandated by the Fixing America’s Surface Transportation (FAST) Act. The interim final rules became effective on January 19, 2016. The SEC also requested comment on whether the rules should be extended to other registrants or forms. Comments are due on or before February 18, 2016. (1/13/2016) SEC press release.

Proposed Rules

SEC reopens comment period on proposed requirements for security-based swap data repositories. The SEC has reopened the comment period on proposed rules that would require security-based swap data repositories to make data available to regulators and other authorities. The SEC decided to reopen the comment period in response to the elimination of the indemnification requirement for security-based swap data repositories by the recently enacted Surface Transportation Reauthorization and Reform Act. Comments are due within 30 days of publication in the Federal Register. (1/15/2016) SEC Release. No. 34-76922.


Money Market Fund Reform FAQs. The SEC’s Division of Investment Management updated information in its Money Market Fund Reform Frequently Asked Questions regarding required disclosures on Form N-CR, website disclosures, money market fund advertisements, and government money market funds. (1/13/2016) Money Market Fund Reform FAQs.

Prepaid tuition programs request interpretive guidance on their treatment as qualified institutional buyers and accredited Investors. The SEC’s Division of Corporation Finance issued a no-action letter in response to a request by the College Savings Plans Network in which it indicated that eleven state-operated, prepaid tuition programs may be treated as qualified institutional buyers under Rule 144A and as accredited investors under Rule 501(a)(3) of Regulation D, as long as they satisfy the other requirements of these definitions under the respective rules. (1/12/2016) SEC no-action letter.

Division of Investment Management addresses mischaracterization of mutual fund sub-accounting fees. The SEC Division of Investment Management published guidance addressing the mischaracterization of sub-accounting fees by mutual funds as not related to distribution. The Division claimed in the guidance that this practice may result in the inappropriate use of fund assets to pay for distribution-related activities and may mislead investors about investor returns. (1/6/2016) IM Guidance Update 2016-01.

Selected Enforcement Actions

Investment adviser that failed to disclose 12b-1 fees violated best execution duty and compliance requirements. The SEC brought charges against an investment adviser and its co-owners in a settled administrative proceeding for failing to follow best execution requirements and failing to disclose conflicts of interest by investing certain advisory accounts in shares that charged 12b-1 fees. As Chief Compliance Officers, the co-owners also failed to conduct annual compliance reviews for several years and made inadequate disclosures of the 12b-1 fees. Without admitting or denying the allegations, the respondents agreed to settle the charges by consenting to the entry of cease and desist and censure orders and the payment of US$201,985.66 in disgorgement and US$23,422.66 in prejudgment interest on a joint and several basis. The Adviser and the co-owners each agreed to pay civil monetary penalties of US$80,000, US$40,000, and US$20,000. The Adviser also agreed to enlist the services of an independent compliance consultant. (1/14/2016) In the Matter of Everhart Financial Group, Inc., Richard Scott Everhart, and Matthew James Romeo, SEC Release No. 34-76897.

Other Developments

SEC announces public meeting of its Equity Market Structure Advisory Committee. The SEC’s Equity Market Structure Advisory Committee will hold a public meeting on February 2, 2016. Written statements should be received on or before January 27, 2016. (1/13/2016) SEC Commission Notice 34-76883.

SEC awards whistleblower claim to outsider who provided analytical information regarding potential securities law violations. The SEC approved a whistleblower award claim totaling over US$700,000 to an individual who provided an independent, detailed analysis to the SEC that led to a successful enforcement action. (1/15/2016) SEC press release. 

Division of Investment Management publishes private fund statistics. The SEC’s Division of Investment Management released Private Fund Statistics for 2015 Q12015 Q2, and revised statistics for 2014 Q4. (1/14/2016)

SEC 2016 examination priorities. The SEC’s Office of Compliance Inspections and Examinations (OCIE) announced its 2016 examination priorities. OCIE emphasized new areas of focus, including liquidity controls, public pension advisers, product promotion, exchange-traded funds, and variable annuities. (1/11/2016) SEC press release.

Staff announcements. The SEC announced the departure of Julie M. Riewe, Co-Chief of the Enforcement Division’s Asset Management Unit, who will leave the agency in February. (1/11/2016) SEC press release.

Fee Rate Advisory announces increase in securities transaction fee rates. The SEC announced that beginning on February 16, 2016, the fee rate applied to most securities transactions will be set at $21.80 per million dollars. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction. (1/7/2016) SEC press release.