New Final Rules
Regulation SCI. New Regulation Systems Compliance and Integrity (Regulation SCI) has been adopted by the SEC. The rule requires self-regulatory organizations, certain alternative trading systems, plan processors, and certain exempt clearing agencies to adopt comprehensive policies and procedures for their technology systems. Regulation SCI is effective February 3, 2015. Compliance will generally be required by November 3, 2015. (11/29/2014) SEC press release. View staff guidance on the new rule here. (11/19/2014)
Systems of records. The SEC proposed revisions to two existing systems of records, “Administrative Proceeding Files (SEC-36)” and “Information Pertaining or Relevant to SEC Regulated Entities and Their Activities (SEC-55)”. Comments should be submitted by December 24, 2014. (11/19/2014) SEC Release No. PA-52.
Forward contracts with embedded volumetric opportunity. The CFTC and SEC request comment on proposed clarifications of the CFTC’s interpretation concerning forward contracts with embedded volumetric optionality. Comments should be submitted be December 22, 2014. (11/13/2014) SEC Release No. 33-9681.
Temporary conditional exemption for NRSROs. The SEC extended the conditional exemption which provides that nationally recognized statistical rating organizations (NRSROs) are not required to comply with Securities and Exchange Act Rule 17g-5(a)(3) with respect to credit ratings where the issuer of the structured finance product is a non-US person and the NRSRO has a reasonable basis to conclude that the structured finance product will be offered and sold upon issuance, and that any arranger linked to the structured finance product will effect transactions in the structured finance product after issuance only in transactions that occur outside the US. The exemption has been extended to December 2, 2015. (11/19/2014) SEC Release No. 34-73649.
Revised Regulation AB C&DIs. The Division of Corporation Finance issued revised Compliance and Disclosure Interpretations (C&DIs) concerning Regulation AB. The revised C&DIs replace the interpretations published in the Regulation AB Manual of Publicly Available Telephone Interpretations. (12/9/2014) C&DIs.
Form PF guidance. The Division of Investment Management updated Form PF frequently asked questions FAQA.1 and FAQF.3. (12/5/2014) FAQs.
BDC guidance. The Division of Investment Management updated its guidance on business development companies’ co-investment activities. (12/5/2014) Guidance.
Staff accounting bulletin. The Office of the Chief Accountant and Division of Corporation Finance released Staff Accounting Bulletin No. 115 concerning pushdown accounting. (11/18/2014) SEC press release.
Selected Enforcement Actions
Operator of virtual currency exchanges sanctioned. The SEC instituted settled administrative proceedings against a computer programmer for operating two online venues that traded securities using the virtual currencies Bitcoin or Litecoin without registering the venues as broker-dealers or stock exchanges. The programmer was sanctioned for conducting unregistered offerings as well. He significantly cooperated with the SEC’s investigation and agreed to settle the case by paying more than US$68,000 in disgorgement and penalties. He also agreed to be barred from the securities industry. (12/8/2014) SEC press release.
Commission reverses ALJ and bans auditor. The Commission reversed an administrative law judge’s decision dismissing a proceeding in which the Division of Enforcement alleged that S.W. Hatfield, CPA, an accounting firm, and Scott W. Hatfield, the firm’s sole proprietor, made misrepresentations with respect to certain audit reports that respondents issued while the firm was not in possession of a state license. The Commission rejected respondents’ argument that the issuers, not they, actually made the alleged misrepresentations and that Hatfield’s signature on the audit reports were only “technical and administrative”. The Commission permanently barred respondents and ordered them to pay disgorgement of US$112,529, plus prejudgment interest, and a civil penalty of US$110,500. (12/5/2014) In the Matter of S.W. Hatfield, CPA, SEC Release No. 34-73763.
Advisory Committee on Small and Emerging Companies. The SEC announced that its Advisory Committee on Small and Emerging Companies will hold its next meeting on December 17, 2014. SEC press release.
Accounting staff discuss IFRS. Chief Accountant James Schnurr discussed the convergence of US Generally Accepted Accounting Practices with International Financial Reporting Standards. He has made it a priority to commence discussions with the Chair and the Commissioners about the different alternatives for potentially making IFRS available to US registrants. (12/8/2014) Schnurr speech. Deputy Chief Accountant Julie A. Erhardt provided background on convergence and noted how the issues surrounding convergence have changed during the last ten years.Erhardt speech.
Municipal advisors. The unofficial transcript from the SEC’s compliance outreach program for municipal advisors has been made available on the Commission’s website. View the transcript here. (12/5/2014)
Working papers. The Division of Economic and Risk Analysis has made five working papers available on its webpage. The papers are: “Going Public Abroad”,“Differences of Opinion and Stock Prices: Evidence from Spin-Offs and Mergers”,“Making the Most of Good Times: Shareholder Rights and Performance Revisited”,“Automated Liquidity Provision”, and “Liquidity Risk, Speculative Trade, and the Optimal Latency of Financial Markets”. (12/1/2014)
Enforcement priorities. Enforcement Director Andrew Ceresney outlined the Division’s upcoming enforcement priorities. They include financial reporting; Foreign Corrupt Practices Act; asset management; and the municipal markets. (11/21/2014) Ceresney speech.
Investor alert. The SEC warned investors about investment scams involving companies that claim their products or services relate to Ebola. (11/20/2014)Investor alert.
The FCPA. Enforcement Director Andrew Ceresney spoke on the SEC’s enforcement of the Foreign Corrupt Practices Act (FCPA), noting what comprises an effective FCPA compliance program, the benefits of self-reporting and what constitutes “items of value” under the FCPA. (11/19/2014) Ceresney speech.
Office of the Whistleblower. The Office of the Whistleblower published its 2014 annual report. The SEC issued more whistleblower awards to more individuals and for more money than in any other year, including one US$30 million award. (11/17/2014) Annual report.
Draft EDGAR Filer manuals. Four draft EDGAR Filer Manuals have been published. They are DRAFT EDGARLink Online XML Technical Specification(Version 14); DRAFT EDGAR Filer Manual (Volume II) EDGAR Filing (Version 29); DRAFT EDGAR Filer Manual (Volume I) - General Information (Version 19); and DRAFT EDGAR Form TA-2 XML Technical Specification (Version 5.5.0). (11/14/2014)
Life insurance company products. The Director of the Division of Investment Management, Norm Champ, discussed variable insurance products, which are being actively monitored for investor protection issues. (11/13/2014) Champ speech.
Staff announcements. Kevin M. Kelcourse has been named the associate director for the Office of Compliance Inspections and Examinations in Boston. (11/26/2014)SEC press release.