Insights from Winston & Strawn
Marc Wyatt, Acting Director of the Office of Compliance, Inspections and Examinations (“OCIE”) weaved the theme of transparency throughout his speech at Private Equity International’s private fund compliance forum on May 13th. In a speech that followed up on former Director Andrew J. Bowden’s “Sunshine Speech” given at the same conference last year, Wyatt noted that private fund advisers “have an affirmative duty to fully and fairly describe ‘the deal’ to investors…” and highlighted OCIE’s role in enabling limited partners to better focus their due diligence initiatives.
Wyatt noted that OCIE has seen positive changes at private equity funds since beginning the Presence Exam Initiative in October of 2012 as advisers respond to areas that OCIE has highlighted as problem areas in prior years. Advisers are providing more detailed disclosure of fees, expenses and the role of operating partners in offering documents and Part 2A of Form ADV. In addition, some advisers have changed fee and expense practices all together (e.g., OCIE has seen declining use of accelerated monitoring fees and evergreen provisions in monitoring agreements).
In 2015, OCIE intends to focus on areas where it believes improvement is still needed—fees, expenses, valuation and coinvestment allocation. We have seen many of these areas of focus in the past. However, OCIE now seems to be turning its attention to the allocation of coinvestment opportunities and how priority rights are disclosed to other investors. Recognizing that coinvestment allocation is an important investment piece for investors, OCIE is dedicating resources to this area of focus. Wyatt noted that inadequate disclosure surrounding the allocation of coinvestment opportunities is a real problem that could result in material conflicts of interest and potential federal securities law violations. Wyatt recommends that advisers have a “robust and detailed co investment allocation policy” that is shared with investors to reduce the risk of potential deficiencies during examination. Advisers should carefully review their offering materials to ensure that investors “know where they stand in the coinvestment priority stack.”
Feature: European Union Developments
The three primary regulators for the financial services industry in the European Union (“E.U.”), the European Securities and Markets Authority (“ESMA”), the European Banking Authority (“EBA”), and the European Insurance and Occupational Pensions Authority (“EIOPA”) have published a spate of new guidance and proposals.
The Joint Committee
Together, the three regulators are known as the Joint Committee of the European Supervisory Authorities. And as a Joint Committee, the regulators published a report regarding the disclosure requirements and obligations for structured finance instruments (“SFI”). The report reviews the existing legislative and regulatory framework and implementing measures supplementing SFI due diligence and disclosure requirements in the E.U. and assess whether the existing framework has been set up in a consistent manner. Where inconsistencies are identified, the report makes recommendations to be undertaken at the E.U. level. The report’s main recommendations are: the harmonization of due diligence requirements within the E.U.; the standardization of investor reports to reflect the dynamics of SFIs; the empowerment of investors to conduct their own stress tests; and the development of a comprehensive regime for supervision and enforcement. See EBA Press Release.
The European Securities and Markets Authority
ESMA published an updated questions and answers on the application of the Alternative Investment Fund Managers Directive (“AIFMD”). The AIFMD establishes a comprehensive framework for the regulation of alternative investment fund managers within Europe. The extensive requirements with which AIFMs must comply are meant to ensure that these managers can manage Alternative Investment Funds (“AIFs”) on a crossborder basis and the AIFs that they manage can be sold on a crossborder basis. The updated guidance includes new questions and answers on reporting and calculation of leverage. ESMA Press Release.
ESMA also published guidelines on the Markets in Financial Instruments Directive (“MiFID”) I. The guidelines provide a common, uniform, and consistent application of the definition of “commodity derivatives” as used in Section C of Annex I of MIFID I. These definitions will be in effect from August 7, 2015 until MiFID II comes into force on January 3, 2017. ESMA Press Release.
Finally, ESMA requested comment on proposed regulatory technical standards (“RTS”) on the clearing obligation under Regulation (EU) No 648/2012 of the European Parliament and Council on overthecounter derivatives, central counterparties and trade repositories (known as “EMIR”). The proposal would establish a clearing obligation on additional classes of overthecounter interest rate derivatives that were not included in the first
RTS on the clearing obligation for interest rate swaps. Specifically, the proposal consists of the following classes: fixedtofloat interest rate swaps denominated in CZK, DKK, HUF, NOK, SEK and PLN as well as forward rate agreements denominated in NOK, SEK and PLN. Comments should be submitted by July 15, 2015. ESMA Press Release.
The European Banking Authority
The EBA launched a number of consultations within the last several weeks. They include a consultation on proposed RTS for specialized lending exposures. As defined by the EBA, specialized lending exposures are a type of exposure where an entity was created specifically to finance or operate physical assets, or is an economically comparable exposure. The contractual arrangements for that entity give the lender a substantial degree of control over the assets and the income that they generate and the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise. The proposed RTS aim to specify how institutions should take into account several factors when assigning risk weights to specialized lending exposures and how they should treat these factors. Comments should be submitted by August 11, 2015. EBA Press Release.
A consultation on draft RTS defining the valuation of derivative liabilities for the purpose of bailin in resolution was also released by the EBA. The proposed standards would provide resolution authorities with the tools by which they could conduct a swift and objective valuation of derivative liabilities while avoiding other discrepancies. The approach applies a statutory valuation methodology based on the costs or gains that would be incurred by the counterparty in replacing the contract. Derivative counterparties would be given the opportunity to provide evidence of commercially reasonable replacement trades and to determine the closeout amount within a certain deadline. Comments should be submitted by August 13, 2015. EBA Press Release.
Finally, the EBA requested comment on proposed Implementing Technical Standards that would specify the
correspondence or “mapping” between credit ratings and credit quality steps that will determine the allocation of appropriate risk weights to credit ratings issued by an External Credit Assessment Institution on a securitization where the Standardized Approach or the Internal Ratings Based approach for securitizations is used. Comments should be submitted by August 7, 2015. EBA Press Release.
The European Banking Authority
The EBA launched a number of consultations within the last several weeks. They include a consultation on proposed RTS for specialized lending exposures. As defined by the EBA, specialized lending exposures are a type of exposure where an entity was created specifically to finance or operate physical assets, or is an economically comparable exposure. The contractual arrangements for that entity give the lender a substantial degree of control over the assets and the income that they generate and the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise. The proposed RTS aim to specify how institutions should take into account several factors when assigning risk weights to specialized lending exposures and how they should treat these factors. Comments should be submitted by August 11, 2015. EBA Press Release.
A consultation on draft RTS defining the valuation of derivative liabilities for the purpose of bailin in resolution was also released by the EBA. The proposed standards would provide resolution authorities with the tools by which they could conduct a swift and objective valuation of derivative liabilities while avoiding other discrepancies. The approach applies a statutory valuation methodology based on the costs or gains that would be incurred by the counterparty in replacing the contract. Derivative counterparties would be given the opportunity to provide evidence of commercially reasonable replacement trades and to determine the closeout amount within a certain deadline. Comments should be submitted by August 13, 2015. EBA Press Release.
Finally, the EBA requested comment on proposed Implementing Technical Standards that would specify the correspondence or “mapping” between credit ratings and credit quality steps that will determine the allocation of appropriate risk weights to credit ratings issued by an External Credit Assessment Institution on a securitization where the Standardized Approach or the Internal Ratings Based approach for securitizations is used. Comments should be submitted by August 7, 2015. EBA Press Release.
Treasury Department Developments
CFPB Launches Inquiry into Student Loan Servicing Practices
On May 14th, the Consumer Financial Protection Bureau (“CFPB”) launched a public inquiry into student loan servicing practices. The CFPB is seeking information on industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service. The CFPB is also relaunching an enhanced version of its Repay Student Debt online tool to help borrowers figure out their options for repayment. CFPB Press Release.
Comment Period for Credit Card Request for Information Is Partially Extended
On May 13th, the CFPB extended to June 17, 2015 the period in which comments may be submitted in response to four aspects of its March 19, 2015 Request for Information. The Request for Information seeks comment, data, and information from the public on the state of the credit card market, both generally and specifically to 12 issues and areas identified by the CFPB. The four areas for which the comment period has been extended concern online disclosures, grace periods, addon products, and debt collection. 80 FR 27294.
CFPB Bulletin on Avoiding LowIncome Discrimination
On May 11th, the CFPB issued a bulletin to help mortgage lenders avoid illegally discriminating against applicants whose income includes vouchers from the Section 8 Housing Choice Voucher Homeownership Program. CFPB Press Release.
FinCEN Provides Additional FBAR Filing Method
On May 8th, the Treasury Department’s Financial Crimes Enforcement Network announced the availability of an alternative EFiling method for individuals filing the Report of Foreign Bank and Financial Accounts. Filers can now choose between the current method of filing using an Adobe PDF or use the new online form that only requires an Internet browser to file. FinCEN Announcement.
Securities and Exchange Commission
Guidance
The SEC Enforcement Division’s Statement on Forum Selection
On May 8th, the Securities and Exchange Commission’s (“SEC” or “Commission”) Division of Enforcement (“Enforcement Division”) issued a statement describing the factors it considers when determining whether a contested enforcement action should be brought as an administrative proceeding before the Commission’s administrative law judges or as a civil action in the federal courts. The statement makes clear that the approach it describes is nonexhaustive, fact driven, and that Enforcement Division recommendations are subject to Commission review. The Enforcement Division also openly states that if the action involves novel or unsettled legal issues it may bring the action inhouse. “[O]btaining a Commission decision on such issues, subject to appellate review in the federal courts, may facilitate development of the law.” Statement. On May 12th, SEC Enforcement Division Director Andrew Ceresney outlined the agency’s litigation program. He highlighted the Enforcement Division’s successes and discussed how the Enforcement Division selects a forum for contested suits, essentially reiterating the Enforcement Division’s statement. Ceresney also emphasized that, contrary to popular belief, the Enforcement Division brings more contested cases in federal court than it does in administrative proceedings. Ceresney Remarks.
Speeches and Statements
Chair White’s Opening Statement at Equity Market Structure Meeting
On May 13th, SEC Chair Mary Jo White provided the opening remarks at the Equity Market Structure Advisory Committee’s inaugural meeting. White has asked the SEC staff to submit several market structure rulemaking recommendations to the Commission. One would improve firms’ risk management of trading algorithms and enhance regulatory oversight of their use. Other rulemaking recommendations would enhance transparency of alternative trading system operations and of broker routing practices for institutional orders. The staff is also developing a recommendation for an antidisruptive trading rule that would be tailored to apply to active proprietary traders in short time periods when liquidity is most vulnerable and the risk of price disruption caused by aggressive shortterm trading strategies is highest. White Statement.
Enforcement Director Addresses Government Enforcement Institute
On May 13th, Andrew Ceresney, Director of the Division of Enforcement, discussed the SEC’s cooperation program. Ceresney explained how the Enforcement Division uses cooperation agreements, and other cooperation tools, highlighting the significant benefits that accrue through cooperation. He also noted how the Division’s use of cooperation agreements, admissions, and reverse proffers developed and how the agency uses them. Ceresney Remarks.
OCIE Acting Director Discusses Private Equity
On May 13th, Marc Wyatt, the Acting Director of the Office of Compliance Inspections and Examinations (“OCIE”), presented an overview of OCIE’s Presence Exam Initiative for private equity funds. OCIE has created the Private Funds Unit (“PFU”) which is dedicated to examining advisers to private funds, including private equity advisers. The Private Funds Unit is based in four regional offices where there is a particularly high concentration of private fund registrants. The PFU’s mission is to apply industry and product knowledge to conduct focused riskbased examinations. The Presence Exam Initiative has led to changes in the disclosure practices of private equity funds, the revision of fee practices, and an increased focus on compliance procedures. Areas requiring improvement include expenses and expense allocation and coinvestment allocation. Moving forward, the PFU will be examining real estate private equity advisers, credit advisers, and infrastructure and timber advisers. Wyatt anticipates additional private equity actions by the SEC’s Division of Enforcement which are likely to involve undisclosed and misallocated fees and expenses as well as conflicts of interest. Wyatt Remarks.
Commissioner Aguilar Discusses Market Structure
On May 11th, SEC Commissioner Luis A. Aguilar released a statement outlining the framework for assessing the quality of the U.S. equity markets. The framework prioritizes the policy goals of a market structure review and discusses the issues which have arisen as a result of the proliferation of trading venues and the competition for order flow. Aguilar Statement.
Other Developments
Open Meeting
The SEC will hold an Open Meeting on May 20, 2015 to consider whether to propose new rules and forms and amendments to current rules and forms to modernize the reporting and disclosure of information by registered investment companies. The Commission will also consider whether to propose form and rule amendments to require investment advisers to provide additional information concerning their operations, require the maintenance of performance records, and remove outdated transition provisions from rules. Meeting Notice.
2015 National Compliance Outreach Program for BrokerDealers
The SEC and the Financial Industry Regulatory Authority (“FINRA”) announced the opening of registration for their 2015 National Compliance Outreach Program for BrokerDealers. The program provides an open forum for regulators and industry professionals to discuss compliance practices and exchange ideas on effective compliance structures. The program will be held on July 14, 2015 at the SEC’s Washington, D.C. headquarters and will focus on 2015 priorities for the SEC’s Office of Compliance Inspections and Examinations and FINRA as well as current topics of interest including cybersecurity, antimoney laundering, and firms’ approaches to supervision and sales practices. SEC Press Release.
Commissioner Gallagher to Leave SEC
On May 13th, Market Watch reported Commissioner Daniel Gallagher has informed the White House that he intends to leave the agency as soon as his replacement is confirmed. Departure.
Investor Alert
On May 8th, the SEC’s Office of Investor Education and Advocacy and FINRA issued an alert to provide investors with a general overview of automated investment tools. Investor Alert. On May 11th, Think Advisor noted that the alert can be used by sponsors of automated tools as a compliance template. Template.
Staff Announcement
The SEC announced that Daniel Murdock, a Deputy Chief Accountant overseeing the accounting group in the agency’s Office of the Chief Accountant, is leaving at the end of May. Separately, the SEC announced the appointment of Wesley R. Bricker as a Deputy Chief Accountant overseeing the accounting group in the agency’s Office of the Chief Accountant.
Commodity Futures Trading Commission
Final Interpretation
On May 12th, the CFTC released its Final Interpretation on Forward Contracts with Embedded Volumetric Optionality. The interpretation identifies when an agreement, contract, or transaction would fall within the forward contract exclusions from the “swap” and “future delivery” definitions in the Commodity Exchange Act, even though the agreement allows for variations in the delivery amount (i.e., contains “embedded volumetric optionality”). The final interpretation clarifies that it applies to embedded volumetric optionality in the form of both puts and calls and it does not preclude bandwidth (a.k.a. “swing”) contracts from falling within the forward contract exclusion. The final interpretation also clarifies that the embedded volumetric optionality must be primarily intended, at the time that the parties enter into the agreement, to address physical factors or regulatory requirements that reasonably influence demand for, or supply of, the nonfinancial commodity. The final interpretation will be effective upon publication in the Federal Register, which is expected during the week of May 18. CFTC Fact Sheet.
Federal Rules Effective Dates
May 2015 July 2015
Commodity Futures Trading Commission
May 26, 2015 Residual Interest Deadline for Futures Commission Merchants. 80 FR 15507.
Federal Deposit Insurance Corporation
July 1, 2015 Restrictions on Sale of Assets of a Failed Institution by the Federal Deposit Insurance Corporation. 80 FR 22886.
Federal Housing Finance Agency
July 6, 2015 Minority and Women Inclusion Amendments. 80 FR 25209.
Federal Reserve Board
May 15, 2015 Regulations Q, Y, and LL: Small Bank Holding Company Policy Statement; Capital Adequacy of BoardRegulated Institutions; Bank Holding Companies; Savings and Loan Holding Companies. 80 FR 20153.
National Credit Union Administration
July 6, 2015 Chartering and Field of Membership Manual. 80 FR 25924.
June 5, 2015 Corporate Credit Unions. 80 FR 25932.
Securities and Exchange Commission
June 19, 2015 Amendments for Small and Additional Issues Exemptions Under the Securities Act (Regulation A). 80 FR 21805.
June 15, 2015 Nationally Recognized Statistical Rating Organizations. 79 FR 55077.
[This rule is effective November 14, 2014; except the amendments to Sec. 240.17g3(a) (7) and (b)(2) and Form NRSRO, which are effective on January 1, 2015; and the amendments to Sec. 240.17g2(a)(9), (b)(13) through (15), Sec. 240.17g5(a)(3)(iii)(E), (c)(6) through (8), Sec. 240.17g7(a) and (b), and Form ABS15G, which are effective June 15, 2015. The addition of Sec. Sec. 240.15Ga2, 240.17g8, 240.17g9, 240.17g 10, and Form ABS Due Diligence15E are effective June 15, 2015.]
May 18, 2015 Regulation SBSRReporting and Dissemination of SecurityBased Swap Information. 80 FR 14563.
SecurityBased Swap Data Repository Registration, Duties, and Core Principles. 80 FR 14437.
Exchanges and SelfRegulatory Organizations
Chicago Board Options Exchange
Amendments to Trading Permit Holder Rules Proposed
On May 14th, the SEC provided notice of the Chicago Board Options Exchange’s (“CBOE”) proposed amendment of its rules related to Trading Permit Holder requirements and direct access to the System. The CBOE recently launched Extended Trading Hours. To accommodate the potential interest of nonU.S. persons or organizations to become Trading Permit Holders or Trading Permits Holders to access the System from other jurisdictions in connection with the launch of Extended Trading Hours, the proposed rule change adds Rule 3.4A to set forth additional qualifications applicable to all Trading Permit Holder applicants, amends Rule 6.20A to add a requirement regarding access by Sponsored Users, and amends Rule 6.23A to add a requirement regarding access to the System. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of May 18. SEC Release No. 3474963.
Amendments to Stock Option Order Handling Procedures Approved
On May 14th, the SEC approved the CBOE’s proposed amendment of CBOE Rule 6.48 to allow Trading Permit Holders (“TPH”) or PAR Officials to electronically route the stock component of a stock option order represented in open outcry on the floor of the CBOE directly from a Public Automated Routing (“PAR”) workstation to an Exchangedesignated brokerdealer for electronic execution on a stock venue. In addition, the proposal amends Interpretation .06 to Rule 6.53C to require that the Clearing Trading Permit Holder identified as the Designated Give Up by the executing TPH in accordance with CBOE Rule 6.21 on a stockoption order enter into a brokerage agreement with the nonaffiliated CBOE designated brokerdealers before the TPH electronically routes the stock component of the stock option order to that CBOEdesignated brokerdealer for execution on a stock venue. SEC Release No. 3474960.
Use of Asian Style Settlement and Cliquet Style Settlement for FLexible Exchange BroadBased Index Options Proposed
On May 8th, the SEC provided notice of the CBOE’s filing of a proposal that would permit it to introduce Asian style settlement and Cliquet style settlement for FLexible Exchange BroadBased Index options. In general, Asian style settlement provides for payout based on the average of prices of a broadbased index on pre determined dates over a specified time period and Cliquet style settlement provides for a payout that is the greater of $0 or the (positive) sum of “capped” monthly returns of a broadbased index on predetermined dates over a specified period of time. Comments should be submitted on or before June 3, 2015. SEC Release No. 34 74914.
Longer Period Designated for Consideration of Proposed Amendments to Rules 6.74A and 6.74B
On May 4th, the SEC designated June 21, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding the CBOE’s proposed amendment regarding the ability of a MarketMaker assigned to an options class to be solicited as the contra party to an Agency Order in that class on the CBOE’s Automated Improvement Mechanism and Solicitation Auction Mechanism. SEC Release No. 3474862.
EDGX Exchange
Rules Governing the Trading of Options Proposed
On May 13th, the SEC provided notice of EDGX Exchange’s filing of a proposed series of rules in connection with EDGX Options, which will be a facility of the EDGX Exchange. EDGX Options will operate an electronic trading system developed to trade options (“System”) that will provide for the electronic display and execution of orders. All EDGX Exchange Members will be eligible to participate in EDGX Options provided that the EDGX Exchange specifically authorizes them to trade in the System. The System will provide a routing service for orders when trading interest is not present on EDGX Options, and will comply with the obligations of the Options Order Protection and Locked/Crossed Market Plan. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of May 18. SEC Release No. 3474949.
Financial Industry Regulatory Authority
Revised FINRA Sanctions Guidelines
On May 12th, FINRA announced the revision of its Sanctions Guidelines regarding misrepresentations and suitability. The revisions modify the guidelines to: (1) advise adjudicators to strongly consider barring an individual respondent for intentional or reckless fraud, and expelling a firm where aggravating factors predominate the firm’s misconduct; (2) modify the guidelines related to suitability to advise adjudicators to strongly consider barring an individual respondent where aggravating factors predominate the respondent’s misconduct, and ordering expulsion of a firm in egregious cases; (3) emphasize that FINRA’s disciplinary sanctions should be designed to protect the investing public by deterring misconduct and upholding high standards of business conduct; (4) reiterate FINRA’s longstanding position that sanctions in disciplinary cases should be more severe for recidivists; (5) index the highend of the monetary sanctions to the Consumer Price Index starting from 1998; and (6) reflect the new FINRA rule numbers for rules that have been adopted into the consolidated FINRA rulebook. The revised guidelines are effective immediately. FINRA Regulatory Notice 1515. See also FINRA Press Release.
ICE Clear
Proposed Collateral and Haircut Policy Approved
On May 13th, the SEC approved ICE Clear Europe’s proposed Haircut Policy which would codify and consolidate certain existing practices of the Clearing House with respect to Permitted Cover. The proposed Haircut Policy is designed (i) to set out overall principles with respect to the assets accepted by the Clearing House as Permitted Cover; (ii) to establish a framework for determining absolute and relative limits, as applicable, on the value of the collateral that may be posted by a Clearing Member as Permitted Cover; (iii) to establish a valueatrisk based methodology for determining haircuts for all Permitted Cover; (iv) to mitigate wrongway risk from Permitted Cover; (v) to address sources for pricing Permitted Cover; and (vi) to set out certain related monitoring, reviewing and reporting procedures. The Haircut Policy would apply to Permitted Cover provided for all product classes. Following implementation, the Clearing House will from time to time adjust the haircuts applicable to Permitted Cover under the methodology set forth in the policy. SEC Release No. 3474955.
New Triparty Collateral Service Provider Proposed
On May 11th, the SEC provided notice of ICE Clear Europe Limited’s proposed amendment of its Finance Procedures in order to facilitate the use by Credit Default Swap Clearing Members of Clearstream Banking as a triparty collateral service provider. Comments should be submitted on or before June 5, 2015. SEC Release No. 3474922.
Amendments to Rules for Physical Settlement of Swaps Approved
On May 8th, the SEC approved ICE Clear Credit’s proposed amendments to modify the terms and conditions for physical settlement of cleared Credit Default Swap Contracts, and to adopt certain new delivery procedures relating to physical settlement. SEC Release No. 3474917.
NASDAQ OMX Group
Longer Period Designated for Consideration of Proposed Restatement of Market Rules
On May 13th, the SEC designated July 5, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding NASDAQ OMX PHLX’s proposed rule change to amend and restate certain Phlx rules that govern the NASDAQ OMX PSX in order to provide a clearer and more detailed description of certain aspects of its functionality. SEC Release No. 3474954.
Longer Period Designated for Consideration of Proposed Restatement of Equities Market Rules
On May 12th, the SEC designated July 5, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding NASDAQ OMX BX’s proposed rule change to amend and restate certain BX rules that govern the BX Equities Market in order to provide a clearer and more detailed description of certain aspects of its functionality. SEC Release No. 3474934.
National Futures Association
Accurate and Current Business Contact Information
On May 13th, the National Futures Association (“NFA”) reminded members of their obligation to ensure that the addresses, telephone numbers and email addresses for their offices and individual contacts reflected in their registration records contained in the NFA’s Online Registration System are current and accurate. NFA Notice to Members I1514.
NYSE
Rules for New Trading Platform Proposed
On May 13th, the SEC provided notice of NYSE Arca’s proposed adoption of new equity trading rules relating to Trading Sessions, Order Ranking and Display, and Order Execution to reflect the implementation of Pillar, the Exchange’s new trading technology platform. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of May 18. SEC Release No. 3474951.
The Options Clearing Corporation
New Risk Models Proposed
On May 14th, the SEC provided notice of The Options Clearing Corporation’s filing of a proposed rule change to implement new risk models in order to support the clearance and settlement of Asianstyle flexibly structured options and flexibly structured Cliquet options. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of May 18. SEC Release No. 3474966.
Industry News
Tenuous Tender
On May 14th, Forbes recounted how a phony tender offer submitted to the SEC’s EDGAR system caused a brief spike in the share price for Avon. The fake filing, which contained obvious errors, raises numerous issues including whether it constituted a securities fraud when no actual person would have believed it. Instead, the filing may represent an attempt to manipulate algorithmic trading programs. The phony offer also illustrates how easy it is to bypass EDGAR’s security controls. Tenuous Tender.
Expanding Risk
On May 14th, CFO.com summarized the results of a study conducted by Ernst & Young which found that companies seeking to expand into certain countries are at risk of engaging in corruption, bribery and fraud. Expanding Risk.
Senate Banking Committee Chair Proposes Regulatory Reform
On May 12th, Senator Richard Shelby, Chair of the Senate Banking Committee, released a discussion draft of “The Financial Regulatory Improvement Act of 2015.” Among other things, the draft bill would limit the proprietary trading prohibition in the DoddFrank Act to those banks with over $10 billion in assets and revise the Financial Stability Oversight Council’s authority to designate institutions as systemically important. Summary.
DoddFrank Act Compensation Rule to Be ReProposed
On May 11th Reuters, citing the remarks of Comptroller of the Currency Thomas Curry, reported that a multi agency proposal that would limit incentivebased compensation arrangements for financial institutions will be re proposed shortly. ReProposal.
