SEC Staff responds to questions on pay to play rule. The Division of Investment Management updated its Staff Responses About the Pay to Play Rule, in response to a question on the Compliance Date for the Ban on Third-Party Solicitation for Capital Acquisition Brokers.
Interpretive guidance on revenue recognition updates. The SEC announced that it has issued Commission Interpretive Release on the Bill-and-Hold Guidance and Commission Interpretive Release on Vaccines for Federal Government Stockpiles. In addition, the agency’s Office of the Chief Accountant and Division of Corporation Finance released Staff Accounting Bulletin No. 116, which brings existing SEC staff guidance into conformity with the Financial Accounting Standard Board’s adoption of and amendments to Accounting Standards Codification Topic 606. (8/18/2017)
Updates to C&DIs on Emerging Growth Companies. The SEC updated its Fixing America’s Surface Transportation (FAST) Act C&DI Question 1, as well as its Securities Act Forms, Section 101 (New C&DI Question 101.04 and New C&DI Question 101.5) on Emerging Growth Companies. (8/17/2017)
Updates to draft registration statement processing procedures. The SEC updated its draft registration statement processing procedures. (8/17/2017) Information Update for advisers filing certain Form ADV amendments. SEC staff posted IM Information Update (Information Update for Advisers Filing Certain Form ADV Amendments) to respond to questions raised by some Form ADV filers about how a filer making an unanticipated other-than-annual amendment before the filer’s next annual amendment is due must respond to new or amended items that would otherwise be required to be filled out on an annual basis. (8/14/2017)
No-Action Relief and Exemptive Orders
Trust granted limited exemptions from Regulation M and Rule 10b-17. The SEC granted IndexIQ ETF Trust an exemption under Regulation M regarding shares issued by the IQ Real Return ETF, allowing those participating in a distribution of shares of the fund to bid for or purchase those shares during their participation in that distribution. The SEC also granted the trust an exemption from the requirements of Exchange Act Rule 10b-17 as to transactions in the shares of the fund. (8/16/2017) See Incoming letter.
Selected Enforcement Actions
SEC charges hedge fund adviser for failing to maintain adequate controls to prevent insider trading. The SEC announced charges against a hedge fund adviser for failing to establish, maintain, and enforce policies and procedures reasonably designed to prevent the misuse of inside information, including information about confidential government decisions. The SEC alleged that the adviser generated more than US$3.9 million in trading profits based on material, nonpublic information from a political intelligence analyst, who obtained the information from contacts at the Centers for Medicare and Medicaid Services. The adviser’s policies and procedures required only an initial review of policies and procedures of the research firms it engaged, placing the burden on the adviser’s own employees to police themselves by identifying issues and informing supervisors. Without admitting or denying the allegations, the adviser settled the charges by consenting to the entry of cease-and-desist and censure orders and agreeing to pay more than US$4.6 million in disgorgement, interest, and penalties. (8/21/2017) In the Matter of Deerfield Management Company, LP, SEC Release No. IA-4749.
Private fund adviser charged with improperly allocating expenses. The SEC announced charges against an investment adviser for improperly allocating legal fees and employee expenses to private equity funds it advised. The SEC alleged that the adviser had private equity funds it advised pay for over US$1.2 million in legal and employee expenses, including US$797,257 in legal fees incurred when the firm renegotiated an agreement with its own employees. The firm did not disclose in the private equity funds’ organizational documents that the funds would be responsible for paying these legal fees or employee costs. Without admitting or denying the allegations, the firm settled the charges by consenting to the entry of a cease-and-desist order and agreeing to pay a US$275,000 civil penalty. (8/16/2017) In the Matter of Capital Dynamics, Inc., SEC Release No. IA-4746.
Investment adviser and CEO overcharged funds for management fees. The SEC instituted settled administrative proceedings against an investment adviser and the firm’s chief executive officer for failing to adequately disclose the firm’s methodology for calculating the management fees and management-related expenses it charged to four private oil and gas funds. The SEC alleged that, as a result of its inadequate disclosures, the adviser overcharged the funds approximately US$1.1 million in management fees and US$449,000 in management-related expenses. In addition, the firm and the CEO caused one of the funds to enter into a transaction with an affiliated entity without properly disclosing or obtaining investor consent to the associated conflicts of interest. Without admitting or denying the allegations, the firm and the CEO settled the charges by consenting to the entry of cease-and-desist and censure orders. The firm also agreed to pay a total of US$2,303,646 in disgorgement, interest, and penalties. The CEO agreed to pay a US$50,000 civil penalty. (8/14/2017) In the Matter of Coachman Energy Partners LLC and Randall D. Kenworthy, SEC Release No. IA-4743.
Speeches and Statements
PCAOB Chair to remain during transition. SEC Chairman Jay Clayton announced that Public Company Accounting Oversight Board Chairman James R. Doty will continue to serve in his role while the SEC searches for his successor and other new PCAOB members. (8/11/2017) Clayton statement.
Money market fund statistics. The SEC’s Division of Investment Management updated its money market fund statistics to include data as of July 31, 2017. (8/18/2017) Money market fund statistics.
Draft EDGAR Form TA XML Technical Specification (Version 1.2). The SEC posted the draft EDGAR Form TA XML Technical Specification. If approved, the changes outlined in this technical specification are slated to take effect on September 11, 2017. (8/14/2017)
Small and Emerging Companies Advisory Committee meeting. The SEC’s Advisory Committee on Small and Emerging Companies will meet on September 13, 2017. Written statements to the Committee are due on or before September 11, 2017. (8/14/2017) SEC meeting notice.
Upcoming SEC-NYU event on ETPs. The SEC’s Division of Economic and Risk Analysis announced that the upcoming SEC-NYU Dialogue on Securities Market Regulation, which will be held on September 8, 2017, will focus on exchange-traded investment products. (8/11/2017) SEC press release.
SEC renews Equity Market Structure Advisory Committee. The SEC approved the renewal of the Equity Market Structure Advisory Committee. (8/9/2017) SEC notice.
DERA report on access to capital and market liquidity. The SEC announced the findings of a report prepared by DERA staff on the impact of financial regulations, including the Volcker Rule and Basel III, on access to capital and on market liquidity. The report found no evidence that the financial regulations lowered primary market security issuance or caused market liquidity to deteriorate. (8/8/2017) DERA report.