Feature: Gender Wage Gap

According to the Institute for Women’s Policy Research in Washington, D.C., the U.S. gender wage gap is closing so slowly that pay equality won’t be reached until the year 2058. On average, women in the U.S. make only 79 cents for every $1 that men make. In an attempt to bring more transparency to the wage gap, President Obama in January 2016 issued a proposal that would require larger U.S. companies, which already provide race and gender statistics, to report salary data based on race, gender and ethnicity to the Equal Employment Opportunity Commission.

In an attempt to speed up the process one high-profile company at a time, Natasha Lamb, the director of equity research and shareholder engagement at Arjuna Capital, the activist arm of Boston investment firm Baldwin Brothers Inc. and a shareholder in many of the U.S.’s biggest tech outfits, filed shareholder resolutions ahead of proxy season at several major technology companies, compelling each to consider a vote on equal pay transparency. “Our clients are interested in investing in such a way that they’re having a positive impact on the world with their money,” Lamb said. “We pick issues that we think are good for society, good for the environment, and will be good for the companies that manage them well.” Pay gap is an issue that specifically matters for investors because research has repeatedly shown that more diversity is tied to better performance; in addition, some investors want companies to get ahead of greater scrutiny that may be coming at the regulatory level. “It's about protecting their brand and attracting women to their companies,” Lamb stated. “The technology industry lives and dies on innovation, and gender-diverse teams are shown to be a key factor.”

Banking Agency Developments


OCC Shares Its Perspective on Responsible Innovation, Announces Upcoming Forum on Innovation

On March 31st, the Office of the Comptroller of the Currency (“OCC”) published Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective, its take on responsible innovation in the federal banking system, and solicited feedback on what more it could do to support innovation that better serves consumers, businesses, and communities. Comments on the whitepaper should be sent to innovation@occ.treas.gov by May 31, 2016. The OCC will host a forum on responsible innovation on June 23, 2016, at Constitution Center in Washington, D.C. During the event, the agency will discuss comments received on the whitepaper and lead discussions regarding financial services innovation. OCC Press Release.

OCC to Host Risk Governance and Compliance Workshops in Illinois

On March 30th, the OCC announced that it will be hosting two workshops in Springfield, Ill., at the Wyndham Springfield, May 3-4, for directors of national community banks and federal savings associations supervised by the OCC. The May 3rd Risk Governance workshop will combine lectures, discussion, and exercises to provide practical information for directors to effectively measure and manage risks. The workshop will also focus on the OCC’s approach to risk-based supervision and major risks in the financial industry. The May 4th Compliance Risk workshop will combine lectures, discussion, and exercises on the critical elements of an effective compliance risk management program. The workshop will also focus on major compliance risks and critical regulations. Topics of discussion will include the Bank Secrecy Act, Community Reinvestment Act, and the Truth-in-Lending (“TILA”) and the Real Estate Settlement Procedures Act of 1974 (“RESPA”) Integrated Disclosures Rule (“TRID”). OCC Press Release.

OCC to Be Hosting Delaware Workshop for Bank Directors

On March 29th, the OCC announced that it will be hosting a workshop in Wilmington, Del., at the DoubleTree by Hilton Hotel Wilmington, May 2-4, for directors of national community banks and federal savings associations supervised by the OCC. The Building Blocks for Directors workshop will combine lectures, discussion, and exercises to provide practical information on the roles and responsibilities of board participation for both new and experienced directors. The workshop will also focus on directors’ duties and core responsibilities, discusses major laws and regulations, and increases familiarity with the examination process. OCC Press Release.

Federal Reserve

Federal Reserve Finalizes Rule Adding Certain Investment Grade General Obligation State and Local Municipal Bonds to Types of Assets Big Banks May Hold to Meet Liquidity Needs During Time of Financial Stress

On April 1st, the Federal Reserve Board finalized a rule to include certain U.S. general obligation state and municipal securities in the range of assets large banking organizations may use to satisfy regulatory requirements designed to ensure that these banking organizations have the capacity to meet their liquidity needs during a period of financial stress. The final rule will be effective on July 1, 2016. Federal Reserve Press Release.

Federal Reserve Survey Provides Information on Mobile Financial Services

On March 30th, the Federal Reserve released a survey, Consumers and Mobile Financial Services 2016, which shows how consumers use their mobile phones to interact with financial institutions, make payments, and manage their personal finances. Federal Reserve Press Release.

Treasury Department Developments

Treasury Department

Deputy Secretary Raskin Speaks at Cybersecurity Docket’s Incident Response Forum 2016

On March 31st, Deputy Secretary Sarah Bloom Raskin delivered a speech at the Incident Response Forum of the Cybersecurity Docket in which she discuss the need to prepare for the possibility of major cyber incidents. Raskin Remarks.

Securities and Exchange Commission


Interests in ABLE Accounts May Be Municipal Securities

The SEC’s Office of Municipal Securities issued a letter on March 31st in response to the Municipal Securities Rulemaking Board’s (“MSRB”) request for guidance on the applicability of Section 3(a)(29) of the Securities Exchange Act to interests in savings accounts under the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (“ABLE”) to support individuals with disabilities. The Office of Municipal Securities indicated that some interests in ABLE accounts may be “municipal securities” as defined in Section 3(a)(29) of the Securities Exchange Act depending on the direct obligation of a State or any agency or instrumentality of a State. The Office also indicated that a dealer participating in the sale of ABLE account interests would be participating in a primary offering and would be subject to the requirements of Rule 15c2-12 under the Exchange Act. Office of Municipal Securities Staff Letter.

No-Action Relief

Division of Investment Management Grants Relief to ETF from Some Investment Company Act Ownership Limits

The Division of Investment Management of the Securities and Exchange Commission (the “SEC”) granted a request by SPDR S&P Dividend ETF on March 28th for no-action relief from certain ownership restrictions under sections 12(d)(2) and 12(d)(3) of the Investment Company Act. In its no-action letter, the Division indicated it would not recommend enforcement action against the fund if it invests such that it may own more than 10 percent of the total outstanding voting stock of an insurance company and/or purchase more than 5 percent of an outstanding class of equity securities of an issuer that, in its most recent fiscal year, derived more than 15 percent of its gross revenues from securities related activities. SEC No-Action Letter.

Speeches and Statements

White Sounds Cautionary Note Regarding Unicorns and Start-Up Governance

In remarks at the SEC-Rock Center for Corporate Governance’s Silicon Valley Initiative on March 31st, SEC Chair Mary Jo White discussed some of the opportunities, challenges, and risks facing private start-up financing and the IPO market. White expressed concern regarding the accuracy of unicorn valuations and emphasized the need for private companies to ensure the accuracy of their financial results and other disclosures. White also urged start-ups to develop their governance structures and internal controls as they grow in size and market impact. White Remarks.

Fund Directors Must Be Proactive in Addressing Funds’ Preparation for Current and Future Risks, Says White

In an address to the Mutual Fund Directors Forum 2016 Policy Conference on March 29th, SEC Chair Mary Jo White discussed the current risks and challenges facing mutual funds and their directors, the role directors should take in assessing these risks, and the need for directors to strike a balance between management and oversight. White highlighted recent failures and technological problems at mutual funds to emphasize the need for directors to be proactive, encouraging directors to investigate whether such problems could occur at their funds and whether their funds have appropriate preventive measures and response plans in place. White Remarks.

Other Developments

SEC Pushes Back Date of Open Meeting

The SEC announced that it has changed the date of the open meeting scheduled for March 30, 2016, to April 13, 2016. SEC Sunshine Act Meeting Notice.

SEC Approves SIPC’s Determination on Cash Advance Amount for SIPA Liquidation Claims

The SEC issued an order on March 30th approving the Securities Investor Protection Corporation’s (“SIPC”) determination that the standard maximum cash advance amount available to satisfy customer claims in a Securities Investor Protection Act (“SIPA”) liquidation proceeding will remain at $250,000 beginning on January 1, 2017, and for the five-year period immediately thereafter. SEC Commission Notice SIPA 176.

DERA Staff Discourages Use of Custom Axis Tags in Annual Report XBRL Exhibits

Staff from the Office of Structured Disclosure in the SEC’s Division of Economic Risk and Analysis (“DERA”) published a report on March 29th regarding the use of custom axis tags, or tags not in the standard taxonomy, by some reporting companies in the XBRL exhibits that accompany their annual reports on Form 10-K. In the report, staff discouraged issuers from using custom axis tags as it impairs the ability of market participants to compare and analyze financial statement data. DERA Staff Report. 

SEC Releases Draft EDGAR Filer Manual and other EDGAR updates

The SEC published the Draft EDGAR Filer Manual (Volume II) EDGAR Filing (Version 36) on March 25th. The changes in the draft filer manual, if approved by the SEC, will be implemented on April 25, 2016. Changes in the draft filer manual include new submission form types relating to the registration of security-based swap dealers and major security-based swap participants and submission form types for filing the Risk Assessment Reports for Brokers and Dealers. The SEC also published the Draft EDGAR ABS XML Technical Specification (Version 1.2); the Draft EDGAR Form 17-H XML Technical Specification (Version 1); and Draft EDGAR SBS Entity Forms XML Technical Specification (Version 1).

Commodity Futures Trading Commission

CFTC Approves Final Rule Providing an Alternative to Fingerprinting for Foreign Natural Persons

On March 28th, the U.S. Commodity Futures Trading Commission (“CFTC”) announced that it approved a final rule adding an alternative for foreign natural persons to the requirement to provide fingerprints when applying for CFTC registration. The final rule will allow any such person’s registered firm to complete a criminal history background check instead of submitting fingerprints. The final rule is effective on May 2, 2016. CFTC Press Release.

Federal Rules Effective Dates

April 2016 – June 2016

Commodity Futures Trading Commission

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Federal Deposit Insurance Corporation

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Federal Housing Finance Agency

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Federal Reserve System

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National Credit Union Administration

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Office of the Comptroller of the Currency

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Securities and Exchange Commission

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Exchanges and Self-Regulatory Organizations


Proposed Amendments to IPO Auction Process Approved by SEC

On March 30th, the SEC approved BATS Exchange, Inc. (“BATS”) proposal to amend BATS rules regarding the handling of securities subject to an initial public offering (“IPO”).  Among other things, the amendments will change the definition of Eligible Auction Order, exclude certain order types from participation in an IPO auction, specify the types of orders that would be converted by the exchange for purposes of participating in an IPO auction, and implement changes to the Quote-Only Period. SEC Release 34-77476.

Chicago Board Options Exchange

SEC Accelerates Approval of CBOE’s Proposal on Professional Order Counting, Seeks Comments on Amendment

On March 25th, the SEC requested comments on the Chicago Board Options Exchange, Incorporated’s (“CBOE”) amendment to its proposed rule change that would modify the methodology for counting average daily order submissions in listed options to determine whether a person or entity meets the definition of a Professional. The amendment makes changes to the way in which complex orders will be computed under the proposed rule change. Comments on the amendment should be submitted on or before April 21, 2016. SEC Release No. 34-77450.

Financial Industry Regulatory Authority

SEC Initiates Proceedings for FINRA’s Proposed Pay-to-Play Rules

On March 29th, the SEC instituted proceedings to determine whether to approve or disapprove the Financial Industry Regulatory Authority’s (“FINRA”) proposed adoption of new “pay-to-play” and related rules to regulate the activities of member firms that engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisers. Comments should be submitted within 21 days of publication in the Federal Register. Rebuttal comments are due within 45 days. SEC Release No. 34-77465.

First SEC-FINRA Compliance Outreach Program Will Focus on Culture, Conflicts, and Sales Practices

On March 28th, the SEC and FINRA released the agenda for the first Compliance Outreach Program for Broker-Dealers, which will be held in New York on April 7, 2016. The agenda for the New York program includes a discussion of hot topics in sales practices and recent developments regarding conflicts, firm culture, and compliance, including recent examination findings and industry practices.  Joint Agency Press Release.

International Securities Exchange

ISE Exchanges Propose New Market Wide Risk Protection Measures

On March 31st, the SEC requested comments on International Securities Exchange, LLC’s (“ISE”) and ISE Gemini, LLC’s (“ISE Gemini”) separately filed proposals to amend their respective rules to introduce two new mandatory, activity-based risk protections for orders, which are designed to protect members against entering or executing orders at a rate that exceeds predefined thresholds and risk settings. Comments on the proposals should be submitted within 21 days of publication in the Federal Register, which is expected the week of April 4, 2016.

International Swaps and Derivatives Association

ISDA Announces Outcome of Determinations Committees Selection Process

On April 1st, the International Swaps and Derivatives Association (“ISDA”) announced the firms selected through an annual process to serve on the five regional Determinations Committees (“DCs”), which are responsible for determining whether a credit event has occurred in the credit derivatives market. The selected firms will begin serving on the DCs on April 29, 2016. ISDA Press Release.

ISDA Updates OTC Derivatives Compliance Calendar

On March 31st, the ISDA published an updated version of its OTC Derivatives Compliance Calendar.

Municipal Securities Rulemaking Board

MSRB Considers Rules to Require Disclosure of Direct Purchase and Bank Loan Information

The MSRB requested comments on March 28th on a concept proposal for potential rules that would require municipal advisors to disclose information about the bank loans and direct purchases of their municipal entity clients to the MSRB’s Electronic Municipal Market Access (“EMMA”) website. Comments should be submitted on or before May 27, 2016. MSRB Press Release.


Nasdaq Proposal Would Require Director Candidates to Disclose Compensation

On March 30th, the SEC requested comments on The Nasdaq Stock Market LLC’s (“Nasdaq”) proposed rule change that would require listed companies to publicly disclose compensation or other payments by third parties to any nominee for director or sitting director in connection with their candidacy for or service on the companies’ Board of Directors. Comments should be submitted within 21 days of publication in the Federal Register, which is expected the week of April 4, 2016. SEC Release No. 34-77481.

SEC Approves PHLX’s Professional Order Counting Proposal, Seeks Comments on Amendment

On March 25th, the SEC issued an order granting accelerated approval to NASDAQ PHLX LLC’s (“PHLX”) proposal to amend its methodology for counting daily order submissions in listed options to determine whether a person or entity meets the definition of a Professional. The SEC also requested comments on an amendment to PHLX’s original proposal, which revises the way PHLX will count complex orders with respect to Professional order counting. Comments on the amendment should be submitted on or before April 21, 2016. SEC Release No. 34-77449.


NYSE Proposes Changes to Pre-Opening Indication and Opening Procedures

On March 31st, the SEC requested comments on the New York Stock Exchange LLC’s (“NYSE”) proposed rule change that would amend rules related to the pre-opening indication process and opening procedures. Among other things, the proposed amendments would consolidate the requirements for publication of pre-open indications in a single rule, change the conditions in which a Designated Market Maker (“DMM”) is required to publish a pre-opening indication in a security, and specify percentage and volume parameters within which a DMM may effect an opening of a security electronically. Comments should be submitted within 21 days of publication in the Federal Register, which is expected the week of April 4, 2016. SEC Release No. 34-77491.

SEC Seeks Comments on Changes to Order Types on NYSE Bonds Platform and IMP Definition

On March 30th, the SEC provided notice of a proposed rule change filed by the NYSE that would amend its rules to add additional order types to the NYSE Bonds platform and to codify the operation of currently available order types. The proposed rule change would also amend the definition of Indicative Price Match (“IMP”) to provide greater detail of how an IMP is established with respect to Bond Auctions. Comments should be submitted within 21 days of publication in the Federal Register, which is expected the week of April 4, 2016. SEC Release No. 34-77477.

Judicial Developments

Tenth Circuit Revives Government’s Reverse-Piercing Theory in Pursuit of Companies’ Assets to Collect SEC Disgorgement Order

An individual subject to an SEC disgorgement order established several companies and a trust, which the government claims he uses to hide his assets. The government sought a declaration that the defendant companies and trust are the individual’s alter egos under a reverse-piercing theory so it can pursue their assets to satisfy the judgment. Defendants argue that the government’s claim falls under the Fair Debt Collection Procedures Act (“FDCPA”) and is therefore time-barred. The district court ruled that the government’s reverse-piercing alter-ego theory is not available under Utah law. On March 25th, the U.S. Court of Appeals for the Tenth Circuit reversed and remanded, holding that Utah appellate court opinions suggest Utah may apply reverse piercing given the facts of the case.  The court also rejected defendants’ argument that the claim is subject to the FDCPA, holding that the FDCPA does not apply to disgorgement orders. United States v. Badger.