Final Rules

SEC rule permitting broker-dealers to engage in retail forex transactions will expire. The Securities and Exchange Commission provided notice that, as of July 31, 2016, any broker or dealer, including a broker-dealer that is dually registered as a futures commission merchant, will be prohibited from offering or entering into retail forex transactions pursuant to Section 2(c)(2)(E) of the Commodity Exchange Act. (5/20/2016) SEC Release No. 34-77874.

Interim Final Rules and Requests for Comment

SEC adopts FAST Act amendment to Form 10-K. The SEC adopted an interim final rule that implements a FAST Act amendment to Form 10-K, which allows issuers to include a summary of business and financial information in the annual report and requires each item in the summary to be hyperlinked to the related, more detailed disclosure in the Form 10-K. Comments on the interim rule are due within 30 days of publication in the Federal Register. (6/1/2016) SEC press release. 


SEC provides guidance on JOBS Act amendments to Exchange Act registration thresholds. The SEC’s Division of Corporation Finance released a small entity compliance guide that provides an overview of recent JOBS Act and FAST Act amendments to registration thresholds and other requirements under Section 12(g) of the Securities Exchange Act. (5/24/2016) SEC Small Entity Compliance Guide.

Division of Investment Management publishes new Money Market Reform FAQs. The SEC’s Division of Investment Management revised its frequently asked questions on the 2014 Money Market Fund Reform to include new information on disclosure requirements for multi-fund advertisements, the floating NAV compliance date, and the definition of a government money market fund. (5/23/2016) Money Market Reform FAQs. 

SEC updates guidance on non-GAAP financial measures. The Division of Corporation Finance revised its Compliance and Disclosure Interpretations on non-GAAP financial measures to provide new information regarding misleading non-GAAP measures and disclosures that would violate the prominence requirements for comparable GAAP measures. (5/17/2016) Non-GAAP financial measures C&DIs. 

Selected Enforcement Actions

Broker-dealer charged with anti-money laundering compliance failures. The SEC announced charges against a broker-dealer for failing to comply with anti-money laundering obligations that required the firm to monitor customers’ trading for suspicious activity. The SEC alleged that the broker-dealer failed to file Suspicious Activity Reports with bank regulators even when customers’ trading activity raised red flags, including a case where a customer’s trading in a security exceeded 80 percent of the overall market volume on a given day. The charges against the broker-dealer mark the first case brought by the SEC against a firm for anti-money laundering lapses based solely on the failure to file SARs when warranted. 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 a US$300,000 penalty. (6/1/2016) In the Matter of Albert Fried & Company, LLC, SEC Release No. 34-77971.

Investment adviser, principal failed to disclose fees to clients. The SEC filed a contested civil proceeding against an investment adviser and one of its principals for failing to disclose some of the fees charged to their advisory clients. The SEC alleged that the adviser and the principal moved some of their advisory clients’ assets into newly-created mutual funds, but failed to inform the clients that the move would increase the fees they would pay without changing their investment strategy or provide different or additional services. (5/31/2016) SEC v. Momentum Investment Partners LLC and Ronald J. Fernandes, SEC Lit. Release 23549.

Investment adviser failed to detect compliance risk in relationship with outside consultant. An investment adviser will pay US$1.5 million to settle charges that it failed to establish policies and procedures designed to prevent the misuse of material nonpublic information in connection with its use of outside consultants. The SEC alleged that investment adviser hired a third-party consultant to provide analysis and buy, sell and hold recommendations regarding pharmaceutical and biotechnology stocks. The consultant also served on the boards of four public companies and had access to nonpublic information about those companies as well as the holdings of funds advised by the investment adviser. The adviser’s compliance program failed to detect the risk of misusing material nonpublic information created by its relationship with the consultant. Without admitting or denying the allegations, the adviser settled the charges by consenting to the entry of cease-and-desist and censure orders. The firm will also pay a US$1.5 million civil penalty. (5/27/2016) In the Matter of Federated Global Investment Management Corp., SEC Release No. IA-4401. 

Speeches and Statements

White underscores importance of SEC’s work on equity market structure. SEC Chair Mary Jo White emphasized the need for the SEC to keep pace with technological advances in equity market structure in an address to the SEC Historical Society. (6/2/2016) White remarks.

SEC is examining the operations of ETFs, says White. In her remarks to the Investment Company Institute’s general membership meeting, SEC Chair Mary Jo White indicated that the SEC is considering additional regulatory measures to address trading disruptions related to exchange-traded funds. (5/20/2016) White remarks.

SEC will monitor market developments under JOBS Act capital formation methods. In opening remarks at the SEC Advisory Committee on Small and Emerging Companies meeting, SEC Chair Mary Jo White said that the SEC will closely watch how markets develop under Regulation Crowdfunding and other new capital-raising methods created by the JOBS Act (5/18/2016) White remarks. 

Other Developments

Staff announcements. The SEC announced that Stephen L. Cohen, Associate Director of the SEC’s Enforcement Division, will leave the SEC later this month. (6/3/2016) The SEC also announced that Christopher R. Hetner will advise SEC Chair Mary Jo White on all cybersecurity policy matters in his new role as the Senior Advisor to the Chair for Cybersecurity Policy. (6/2/2016)

Privacy Act restrictions would hamstring SEC’s enforcement abilities, says Investor Advocate. In a letter to ranking members of the Senate Judiciary Committee, SEC Investor Advocate Rick A. Fleming argued that the Electronic Communications Privacy Act Amendments Act of 2015, by requiring enforcement agencies to seek criminal warrants to obtain electronic communications from internet service providers, would weaken the SEC’s investigative abilities and undermine investor confidence. (5/25/2016) SEC Investor Advocate letter.

OIG will audit SEC’s coordination of enforcement investigations. In its Semiannual Report to Congress, the SEC’s Office of Inspector General indicated that it will audit, among other things, the SEC’s process for coordinating enforcement investigations internally, the SEC’s review of rule change proposals submitted by self-regulatory organizations, and the SEC’s compliance with guidance from other government agencies in its information security programs. (5/24/2016) OIG Semiannual Report. 

Investor Advocate objects to House legislation that would exempt small companies from auditor attestation requirements. SEC Investor Advocate Rick A. Fleming, in a letter to US House of Representatives leadership, argued that a proposal to exempt smaller companies from complying with the Sarbanes-Oxley Act’s auditor attestation requirements for up to ten years following an initial public offering would weaken investor protections and further complicate reporting requirements. (5/23/2016) SEC Investor Advocate letter.

Two whistleblowers will split US$450,000 award. The SEC announced that it has awarded US$450,000 to two whistleblowers for providing a tip that initiated an SEC corporate accounting investigation and assisting the SEC throughout its investigation. (5/20/2016) SEC press release.

SEC issues technical corrections to business conduct rules for security-based swap dealers. The SEC revised its final rules on business conduct standards for security-based swaps dealers and major security swap participants to make technical corrections to a burden estimate for Paperwork Reduction Act purposes and a corresponding estimate in its economic analysis. (5/19/2016) SEC Release No. 34-77617a.

SEC will adjust dollar threshold amounts for performance-based advisory fees to qualified clients. The SEC announced that it will adjust the assets-under-management test and net worth test in the definition of “qualified client” under Investment Advisers Act rules by maintaining the dollar amount of the assets-under-management test at US$1,000,000, and increasing the dollar amount of the net worth test from US$2,000,000 to US$2,100,000. Requests for hearings are due to the Commission by 5:30 p.m. on June 13, 2016. (5/18/2016) SEC Release No. IA-4388.

Company insider receives whistleblower award of over US$5 million for detailed tip. The SEC announced that it will award a company insider between US$5 million and US$6 million, its third highest whistleblower award, for providing information about securities violations that would have been nearly impossible for the SEC to detect on its own. (5/17/2016) SEC press release.