SEC makes technical amendments to Forms ADV and ADV-W. The Securities and Exchange Commission published a final rule that makes technical amendments to Form ADV and Form ADV-W to reflect the addition of Wyoming to the group of states with laws regulating investment advisers. The final rule will become effective on July 1, 2017. (5/4/2017) SEC final rule.
SEC proposes amendments to Investment Advisers Act rules to reflect FAST Act changes. The SEC requested comments on a proposed rule that would amend certain Investment Advisers Act rules to reflect changes made by the Fixing America’s Surface Transportation Act of 2015. The proposed rule would amend the definition of a venture capital fund to include “small business investment companies” and would modify the private fund adviser exemption by changing the definition of “assets under management” to exclude the assets of “small business investment companies.” Comments are due within 30 days of publication in the Federal Register. (5/3/2017) SEC proposed rule.
No-Action Relief and Exemptive Orders
Exemption granted from website data publication requirements of plan to implement a tick size pilot program. The Financial Industry Regulatory Authority, on behalf of itself and Chicago Stock Exchange, Inc., requested that the SEC grant an exemption from the website data publication requirements of the National Market System Plan to Implement a Tick Size Pilot Program. The Division of Trading and Markets granted FINRA and CHX a limited exemption from the requirement to comply with certain provisions of the plan as long as the pilot data is published in accordance with the FINRA proposed rule change. (4/28/2017)
No enforcement recommended if Hines Global repurchases Class I and Class J shares under new redemption plan. The Division of Corporation Finance’s Office of Mergers and Acquisitions determined that it will not recommend that the SEC take enforcement action under Exchange Act Rule 13e-4 if Hines Global REIT II, Inc. repurchases Class I and Class J shares from its stockholders under a new redemption plan. (4/26/2017)
Application granted to exchanges for conditional exemption from certain requirements of Rule 6a-2. The SEC granted the application of New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and NYSE National, Inc., (Exchanges) for a conditional exemption pursuant to Section 36(a) of the Exchange Act from certain requirements of Rule 6a-2 under the Exchange Act, as appropriate in the public interest and consistent with the protection of investors. (4/27/2017) Release No. 34-80536.
Selected Enforcement Actions
SEC charges semiconductor company and former CFO with accounting fraud. The SEC announced charges against a semiconductor company and its former chief financial officer for engaging in fraudulent accounting practices that artificially inflated the company’s revenue and caused the company to report misleading financial results to investors. The SEC alleged that the CFO directed or approved several fraudulent accounting practices to make it appear that the company had met its revenue and gross margin targets. The company and the CFO settled the charges by agreeing to pay civil penalties of US$3 million and US$135,000, respectively. The CFO also agreed to the entry of an officer-and-director bar and a bar prohibiting her from practicing before the SEC as an accountant. (5/1/2017) In the Matter of MagnaChip Semiconductor Corporation and Margaret Hye-Ryoung Sakai, SEC Release No. 33-10352.
Broker-dealer charged with violating market structure rules. The SEC announced charges against a Utah-based broker dealer for violations of SEC market structure rules. The SEC alleged that the broker-dealer consistently relied upon the bona-fide market making exception to the locate or borrow requirement under Regulation SHO when conducting proprietary trading, even though most of its proprietary trading was not bona-fide market making. In addition, the broker-dealer allegedly violated the Market Access Rule for its proprietary trading group by failing to implement controls and supervisory procedures reasonably designed to manage the risks of having market access and by failing to establish a system to review the effectiveness of its risk management controls and supervisory procedures. Without admitting or denying the allegations, the broker-dealer settled the charges by consenting to the entry of cease-and-desist and censure orders and agreeing to pay disgorgement, prejudgment interest, and civil penalties totaling almost US$311,000. (4/26/2017) In the Matter of Wilson-Davis & Company, Inc., SEC Release No. 34-80533.
Speeches and Statements Bricker cautions companies about potential risks in reporting operating metrics. In remarks at the 2017 Baruch College Financial Reporting Conference, SEC Chief Accountant Wesley R. Bricker emphasized the need for companies to adopt adequate disclosure controls and procedures when reporting other kinds of financial information such as operating metrics and forecasts. Bricker noted that “these other reporting processes may require more steps than some GAAP processes, not less.” (5/4/2017)
SEC Small and Emerging Companies Advisory Committee agenda. The SEC released the agenda for the May 10 meeting of the Advisory Committee on Small and Emerging Companies. The agenda includes, among other things, a discussion of the underwriting of small offerings, as well as the consideration of draft recommendations on secondary market liquidity for Regulation A, Tier 2 securities and the treatment of “finders” that assist companies in capital raising activities. (5/5/2017) SEC press release.
OIG semi-annual report to Congress on the SEC. The Office of the Inspector General issued its semiannual report to Congress on the work of the SEC, which reports on the audits, evaluations, investigations, and reviews it has conducted of the SEC’s programs and operations. The report covers the period from October 1, 2016, through March 31, 2017. (5/5/2017) OIG report.
New SEC Chair sworn in. The SEC announced that Jay Clayton has been sworn in to serve as the 32nd Chair of the SEC. The Senate confirmed Clayton's nomination on May 2, 2017. (5/4/2017) SEC press release.
National Compliance Outreach Program for Broker-Dealers. The SEC’s Office of Compliance Inspections and Examinations and FINRA will co-host the National Compliance Outreach Program for Broker-Dealers on July 27, 2017, which will focus on current compliance practices to promote an effective compliance structure. (5/3/2017) SEC press release.
SEC includes new data in quarterly Private Fund Statistics. The SEC’s Division of Investment Management updated its Private Fund Statistics to include additional information about the use of financial and economic leverage by hedge funds, and characteristics of private liquidity funds. The Division also released new statistics from the third quarter of 2016. (5/3/2017) SEC press release.
SEC, NYU will co-host forum on reviving the IPO market. The SEC’s Division of Economic and Risk Analysis will hold a public forum with NYU’s Salomon Center for the Study of Financial Institutions on May 10, 2017, which will focus on the current state of the initial public offering market. (5/2/2017) SEC press release.
SEC gives US$500,000 whistleblower award to company insider. The SEC awarded more than US$500,000 to a whistleblower who reported information to the SEC about well-hidden misconduct at a company, which resulted in an SEC investigation and successful enforcement action. (5/2/2017) SEC press release.
SEC administrative proceedings caseload status report. The SEC published its six-month status report on its administrative proceedings caseload, which contains information about the proceedings pending, instituted, and disposed of from October 1, 2016, through March 31, 2017. (4/28/2017)
SEC awards nearly US$4 million to whistleblower who provided detailed tip and expertise. The SEC awarded approximately US$4 million to a whistleblower for tipping the SEC about serious misconduct as well as providing detailed information and ongoing assistance during the investigation, including specialized knowledge and expertise. (4/25/2017) SEC press release.