Proposed Rules

Proposed rule amendments would require access to security-based swap data repositories. The Securities and Exchange Commission (SEC) proposed amendments to rule 13n-4 under the Securities Exchange Act of 1934, which would implement the conditional Exchange Act requirement that security-based swap data repositories make data available to certain regulators and other authorities and would also set forth a conditional exemption from the statutory indemnification requirement associated with that regulatory access provision. Comments are due by October 29, 2015. (9/4/2015) SEC Release No. 34-75845.


Cybersecurity Risk Alert. The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert to provide additional information on the areas of focus for OCIE’s second round of cybersecurity examinations, which will involve more testing to assess implementation of firm procedures and controls. (9/15/2015) Risk Alert. 

SEC publishes FAQs on Regulation SCI. The SEC’s Division of Trading and Markets released frequently asked questions and answers regarding Regulation SCI. The FAQs address SCI entities, systems of SCI entities, SCI events, business continuity and disaster recovery plans, recordkeeping, and compliance dates. (9/2/2015) FAQs. 

Selected Enforcement Actions

SEC announces fraud charges in cross-border scheme to secretly control and manipulate stock of Chinese companies after reverse mergers. The SEC announced fraud charges against Wall Street CEO Benjamin Wey and his company, family members, and business associates accused of secretly obtaining control and manipulating the stock of Chinese companies that they were purportedly guiding through the process of raising capital and becoming publicly traded in the US. In a parallel action, the US Attorney’s Office for the Southern District of New York announced criminal charges against Wey and his Switzerland-based broker. (9/10/2015) SEC press release.

SEC announces fraud charges against financial adviser accused of greatly exaggerating assets under management and investment returns on paid radio program. The SEC announced fraud charges against a Maryland-based financial services firm and its founder/CEO accused of grossly inflating the amount of managed assets and exaggerating the investment returns actually obtained for customers. The SEC Enforcement Division alleged that Dawn J. Bennett frequently touted to customers and more broadly on her paid radio program that highly profitable investment returns generated by Bennett Group Financial Services placed it in the “top 1 percent” of firms worldwide without disclosing that the returns were calculated for a model portfolio and not based on actual investor performance. The SEC Enforcement Division further alleged that Bennett and her firm claimed to be managing more than US$2 billion in assets when the real number was no more than one-fifth of that amount. (9/9/2015) SEC press release.

Bankrate to pay US$15 million to settle accounting fraud charges. The SEC announced that Bankrate Inc. agreed, without admitting or denying the SEC’s findings, to pay US$15 million to settle accounting fraud charges in a case involving fraudulent manipulation of the company’s financial results to meet analyst expectations. Three former executives were also charged. (9/8/2015) SEC press release.

Commission sustains revocation of registration and holds that slideshow presentations are ‘advertisements.’ The Commission issued an opinion finding that it is in the public interest to bar the owner of a registered investment adviser from the industry; to revoke the adviser’s registrations; to order them to cease and desist from further violations of the provisions violated; and to order civil penalties of US$250,000 against the adviser and US$50,000 against the owner. The Commission found that Raymond J. Lucia Companies, Inc. and Raymond J. Lucia committed securities fraud by making material misrepresentations to prospective clients about their retirement wealth management strategies. In doing so, the Commission reversed an ALJ’s finding that the adviser’s client slideshow was not an “advertisement” because it did not qualify as a “written communication” under Rule 206(4)-1(b). The Commission also rejected the contention that the administrative hearing was an unconstitutional procedure because the Commission ALJ who presided over this matter was not appointed in accordance with the Appointments Clause of the U.S. Constitution. (9/3/2015) In the Matter of Raymond J. Lucia Companies, Inc., et al., SEC Release No. 34-75837. 

Advisory firm improperly retained CDO fees. The SEC instituted settled administrative proceedings against Taberna Capital Management, an investment advisory firm, its former managing director, and its former chief operating officer. Without admitting or denying the allegations, respondents consented to the entry of an order which found that they did not tell their collateralized debt obligation (CDO) clients that Taberna was retaining payments known as “exchange fees” in connection with restructuring transactions. Taberna’s retention of the exchange fees was neither permitted by the CDOs’ governing documents nor disclosed to investors in the CDOs. The fees rightfully belonged to the CDOs and created conflicts of interest that Taberna failed to disclose. To settle this matter, Taberna agreed to pay disgorgement of US$13 million, prejudgment interest of US$2 million, and a penalty of US$6.5 million, and will not act as an investment adviser for three years. The managing director agreed to pay a US$100,000 penalty and to be barred from the securities industry for at least five years. The COO agreed to pay a US$75,000 penalty and to be barred from the securities industry for at least two years. (9/2/2015) SEC press release. 


Commissioner Stein addresses role of accountants in capital markets. In a speech before the Institute of Chartered Accountants in England and Wales and BritishAmerican Business, Commissioner Kara M. Stein examined how accountants can be leaders in moving capital markets and the economy forward during a time of significant technological change. (9/9/2015) Stein remarks.

Other Developments

SEC updates EDGAR Filer Manual. The SEC released updated versions of EDGAR Filer Manual Volume IEDGAR Filer Manual Volume II and EDGAR Filer Manual Volume III. (9/14/2015) 

SEC appoints co-chiefs of Market Abuse Unit. The SEC named Robert Cohen and Joseph Sansone as co-chiefs of the Division of Enforcement’s Market Abuse Unit. (9/10/2015) SEC press release.

SEC announces new Deputy Director in the Office of Credit Ratings. The SEC announced that Smeeta Ramarathnam will serve as Deputy Director in the Office of Credit Ratings. (9/8/2015) SEC press release.

Commissioner Gallagher sets resignation date. SEC Commissioner Daniel M. Gallagher released a public statement in which he announced that his resignation will be effective upon the appointment of his successor or on Friday, October 2, 2015, whichever is earlier. (9/4/2015) Public statement.

Equity Market Structure Advisory Committee. The SEC’s Equity Market Structure Advisory Committee will hold a public meeting on September 24, 2015. (9/3/2015) SEC Release No. 34-75829. 

Meeting of Advisory Committee on Small and Emerging Companies. The SEC’s Advisory Committee on Small and Emerging Companies will hold a public meeting on September 23, 2015. SEC Release No. 33-9899. 

Rule 48. In a recent interview, CNBC asked SEC Commissioner Daniel Gallagher about how New York Stock Exchange (NYSE) Rule 48 may affect exchange-traded funds (ETFs) during times of market volatility. Gallagher indicated that the SEC will be examining Rule 48 and ETFs. (9/2/2015) Rule 48.

Closed-end funds request exemption to make periodic distributions of long-term capital gains. The SEC gave notice of a request for an order to permit certain registered closed-end investment companies to make periodic distributions of long-term capital gains with respect to their outstanding common shares. The SEC will grant the application unless it orders a hearing; requests for a hearing should be received by the Commission by 5:30 p.m. (ET) on September 28, 2015. (9/1/2015) SEC Release No. IC-31802.