Revised EDGAR Filer Manual. The SEC adopted a final rule that implements revisions to the EDGAR Filer Manual and related rules to reflect several updates to the EDGAR system. The final rule will be effective upon publication in the Federal Register. (9/13/2017) SEC final rule.
Interpretative guidance published on pay ratio disclosure. The SEC adopted interpretative guidance to assist registrants in preparing their pay ratio disclosures, as required by Item 402(u) of Regulation S-K. The guidance will become effective upon publication in the Federal Register. Separately, the Division of Corporation Finance issued guidance to help registrants in figuring out how to use statistical sampling methodologies and other reasonable methods when calculating their pay ratio disclosure. The Division also published updated Compliance and Disclosure Interpretations on pay ratio disclosure to reflect the SEC’s interpretative guidance. See revised C&DI 128C.01 and new C&DI 128C.06. (9/21/2017) SEC press release.
Updates to C&DIs. The Securities Act Rules C&DIs were updated throughout Sections 141, 254-258, 260 and 541. In addition, Sections 259 and 659 were withdrawn. (9/20/2017)
SEC publishes new C&DIs associated with certain issuers registering a class of securities on Form 8-A. The SEC updated its Securities Act Rules C&DIs by adding New C&DI 182.21 (discussing whether certain financial statements in the post-qualification amendment to a Form 1-A must be current at the time it is qualified), New C&DI 182.22 (discussing when a certain issuer is required to file an annual report on Form 10-K for the preceding year), and New C&DI 182.23 (discussing when a certain issuer is required to file quarterly reports for certain quarterly periods). (9/14/2017)
Selected Enforcement Actions
Telecommunications company settles FCPA charges. A Swedish telecommunications company has reached a global settlement with the SEC, the US Department of Justice, and Dutch and Swedish law enforcement over charges that it violated the anti-bribery and internal accounting controls provisions of the Foreign Corrupt Practices Act, according to an announcement by the SEC. The company allegedly paid at least US$330 million to a shell company controlled by an Uzbek government official in an effort to obtain and retain business in Uzbekistan. The SEC alleged that the bribes were disguised as payments for lobbying and consulting services that never actually occurred. The company settled the charges by consenting to the entry of a cease-and-desist order and agreeing to pay disgorgement of US$457 million. The company will also pay a criminal fine of more than US$508 million imposed by the DOJ. (9/21/2017) In the Matter of Telia Company AB, SEC Release No. 34-81669.
Investment adviser settles charges of stock scalping. The SEC announced that it has charged an investment adviser with misleading clients and engaging in a stock scalping scheme. The SEC alleged that the adviser purchased shares in a stock, made recommendations to buy the stock through three websites, and then sold shares in his personal accounts within days of his recommendation. The adviser allegedly failed to disclose to his clients that he planned to sell his shares. Without admitting or denying the allegations, the adviser settled the charges by consenting to the entry of a cease-and-desist order and a five-year industry bar. The adviser also agreed to pay approximately US$273,000 in disgorgement, interest, and penalties. (9/15/2017) In the Matter of Mark A. Gomes, SEC Release No. 33-10414.
SEC charges investment advisers with cherry-picking schemes. Two investment advisers have separately agreed to settle charges of engaging in cherrypicking schemes. The SEC alleged that the two advisers cherry-picked profitable trades for their personal accounts to the detriment of their clients’ accounts. One adviser allegedly misrepresented in his Forms ADV that no account would be favored over another as a result of the allocation of orders placed in the omnibus account. Without admitting or denying the allegations, the advisers consented to the entry of cease-and-desist orders and industry bars. One adviser agreed to pay disgorgement, prejudgment interest and civil penalties totaling over US$278,000, and the other adviser and his firm agreed to pay more than US$203,000. (9/12/2017) SEC press release.
Speeches and Statements
Chairman Clayton discusses EDGAR cyber breach before Senate Banking Committee. In testimony before the US Senate Committee on Banking, Housing and Urban Affairs, SEC Chairman Jay Clayton explained that the SEC is currently conducting two investigations of the 2016 hack of the EDGAR filing system. The Division of Enforcement is heading an investigation into trading activity potentially connected to the breach while members of several SEC departments, including the Office of General Counsel and the Office of the Inspector General, are investigating the scope of and circumstances surrounding the intrusion in an effort to develop recommendations for remediation and prevention efforts. (9/26/2017). Clayton testimony.
Chairman Clayton issues statement on PCAOB search process. SEC Chairman Jay Clayton provided an update on the search process for the new Board members of the Public Company Accounting Oversight Board. (9/22/2017) Clayton statement.
SEC discloses 2016 hack of EDGAR system. SEC Chairman Jay Clayton issued a statement on cybersecurity in which he revealed that a breach of the EDGAR filing system in 2016 resulted in access to nonpublic information that may have been exploited by hackers for illicit trading. SEC Commissioner Michael S. Piwowar said in a separate statement that he only recently learned of the 2016 breach. (9/20/2017) SEC press release.
Stein addresses Eurofi Financial Forum 2017. SEC Commissioner Kara M. Stein told the Eurofi Financial Forum 2017 that the interdependence of global financial markets underscores the need for international collaboration to address the opportunities and challenges presented by the rapid rise of technology. (9/13/2017) Stein remarks.
SEC launches search for an Advocate for Small Business Capital Formation. The SEC is seeking candidates for a new senior executive position that will lead the SEC’s new Office of the Advocate for Small Business Capital Formation, which will oversee efforts to advance the interests of small businesses and small business investors. (9/13/2017) SEC press release.
Investor Advisory Committee October meeting. The SEC’s Investor Advisory Committee will hold a public meeting on October 12, 2017, to discuss, among other matters, the implications of blockchain technology for securities markets, law school clinic advocacy efforts on behalf of retail investors, and electronic delivery of information to retail investors. Written statements to the Committee are due on or before October 12, 2017. SEC meeting notice.
New enforcement initiatives will focus on cyber threats and protection of retail investors. The SEC announced two new enforcement initiatives aimed at addressing cyber threats and protecting retail investors. The new Cyber Unit will target cyber-related misconduct. The new Retail Strategy Task Force will develop and implement initiatives to identify misconduct impacting retail investors. (9/25/2017) SEC press release.
August 2017 money market fund statistics. The SEC’s Division of Investment Management updated its money market fund statistics to include data as of August 31, 2017. (9/20/2017) Money market fund statistics.
Staff announcements. Catherine McGuire, Counsel in the Division of Trading and Markets, announced her retirement from the SEC after 44 years of service. (9/19/2017) Thomas J. Butler, Director of the SEC's Office of Credit Ratings, has been named an Associate Regional Director for the Investment Adviser and Investment Company examination program in the SEC’s New York Regional Office. Jessica Kane, Director of the SEC's Office of Municipal Securities, has been appointed Acting Director of OCR on an interim basis and Rebecca Olsen will serve as Acting Director of OMS. (9/20/2017) Ken C. Joseph, Head of Investment Adviser/Investment Company Examination Program in the SEC’s New York Regional Office, will leave the agency after 21 years of service. (9/15/2017)
Small and Emerging Companies Advisory Committee conducts final meeting. The SEC’s Advisory Committee on Small and Emerging Companies held its final meeting to discuss its final report and new recommendations regarding amendments to Securities Act Rule 701. SEC Chairman Clayton Jay Clayton addressed the Committee, noting that the SEC will establish the Small Business Capital Formation Advisory Committee as a successor to the Small and Emerging Company Advisory Committee. (9/13/2017) See also remarks by SEC Commissioner Michael S. Piwowar.
OCIE finds deficiencies in Advertising Rule compliance. The SEC’s Office of Compliance Inspections and Examinations published a Risk Alert that identifies the most common compliance issues related to the Investment Advisers Act’s Advertising Rule, as noted in deficiency letters sent to registered investment advisers as part of an examination initiative that focused on advisers’ marketing materials. (9/14/2017) OCIE Risk Alert.
OIG evaluates Corporation Finance’s disclosure review and comment letter process. The SEC’s Office of Inspector General published the findings of its evaluation of the Division of Corporation Finance’s disclosure review and comment letter process and made several recommendations to address problems with the Division’s disclosure review documentation. (9/13/2017) OIG final report.
SEC still watching for market impact of hurricanes. The SEC continues to monitor the impact of Hurricanes Harvey and Irma on capital markets and investors. (9/13/2017) SEC press release.