Final Rules

Foreign dealers must include US security-based swap transactions when determining registration obligations under new rules. A unanimous Securities and Exchange Commission voted to approve final rules that will require foreign dealers who use personnel located in a US branch or office to arrange, negotiate, or execute security-based swap transactions to include these transactions in their dealer de minimis threshold calculations when determining their obligation to register as security-based swap dealers. The final rules will become effective on April 19, 2016. Compliance will not be required until the later of February 21, 2017, or the SBS Entity Counting Date. (2/10/2016) SEC press release. 

Proposed Rules and Requests for Comments

SEC extends comment period for proposal on transfer agent regulations. The SEC extended the comment period for its Advance Notice of Proposed Rulemaking, Concept Release and Request for Comment relating to transfer agent regulations until April 14, 2016. (2/18/2016) SEC Release No. 34-77172.

SEC and FDIC propose rule relating to liquidation of covered broker-dealers.The SEC and the Federal Deposit Insurance Corporation proposed a rule that would implement provisions relating to the orderly liquidation of covered brokers and dealers under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Comments are due within 60 days of publication in the Federal Register. (2/17/2016) SEC Release No. 34-77157. 


Investment Management publishes FAQs on mutual fund valuation guidance.The SEC’s Division of Investment Management offered answers to frequently asked questions regarding the valuation guidance for all mutual funds provided in the July 2014 money market fund reforms adopting release. (2/11/2016) Valuation Guidance frequently asked questions.

Corporation Finance staff offers guidance to ABS issuers on EDGAR filings.The SEC’s Division of Corporation Finance published questions and answers for issuers of Asset-Backed Securities regarding the procedures they must follow in EDGAR to file initial ABS filings.(2/9/2016) Division of Corporation Finance staff guidance. 

No-Action and Exemptive Relief

SEC approves requests for exemption from Tick Size Pilot Program data collection requirements. The SEC’s Division of Trading and Markets granted an exemption to the Financial Industry Regulatory Authority from certain data collection requirements in the Plan to Implement the Tick Size Pilot Program under Rule 608(c) of Regulation NMS. (2/17/2016) The Division of Trading and Markets also granted a similar exemption to BATS Exchange, Inc. (2/10/2016).

SEC modifies no-action relief relating to the “ready market” definition for foreign equity securities. The SEC’s Division of Trading and Markets revised the basis for calculating trading volume in the no-action relief it granted to FINRA in November 2012, which permits broker-dealers to treat an equity security of a foreign issuer as having a “ready market.” Under the Division’s revised no-action relief, trading volume calculations will be based only on bona fide transactions. (2/9/2016) SEC no-action letter.

Selected Enforcement Actions

Biopesticide company and executive charged with accounting fraud after inflating financial results. The SEC brought charges against a biopesticide company and its former chief operating officer for accounting fraud after the company inflated its revenue to meet projections that it would double its revenues in its first year as a public company. In separately filed civil proceedings, the SEC alleged that the company and its COO offered a variety of sales concessions to customers so the company could improperly recognize revenue on the sales. The company was ultimately required to restate its financial results, reversing US$2 million in reported revenue. The company agreed to pay a US$1.75 million penalty to settle the charges. The proceedings against the COO are ongoing. The SEC also brought an administrative proceeding against the company’s former customer relations manager for violations of the books and records provisions of federal securities laws. (2/17/2016) SEC press release.

Speeches and Statements

White emphasizes need for SEC to look beyond disclosure. In a speech at the Practising Law Institute’s 2016 SEC Speaks conference, SEC Chair Mary Jo White said that the SEC will go beyond disclosure during 2016 and prioritize rulemaking initiatives in the areas of asset management, equity market structure, and disclosure effectiveness. (2/19/2016) White remarks.

Stein urges greater scrutiny of ETFs. In remarks at the SEC Speaks conference, SEC Commissioner Kara Stein urged the SEC to develop a regulatory framework for exchange-traded funds, noting the risks associated with ETFs and the inadequacy of applying rules designed for traditional equity securities to ETFs. (2/19/2016) Stein remarks.

Investor Advocate sounds alarm regarding deteriorating listing standards. In an address to the SEC Speaks conference, SEC Investor Advocate Rick Fleming discussed what he believes to be a “troubling downward drift in the listing standards of the exchanges” and suggested that the SEC may need to reconsider placing the “regulatory responsibilities of an SRO” in the hands of a “for-profit business.” (2/19/2016) Fleming remarks.

Other Developments

SIPC Board sets maximum cash advance amount for SIPA liquidation claims.The SEC requested comments on a determination made by the Board of Directors of the Securities Investor Protection Corporation that the standard maximum cash advance amount available to satisfy customer claims for cash in a Securities Investor Protection Act liquidation proceeding will remain at $250,000, effective January 1, 2017, and for the following five-year period. Comments are due within 15 days of publication in the Federal Register. (2/22/2016) SEC Release No. SIPA 174.

Staff announcements. The SEC announced that Daniel Kahl has been named the Chief Counsel of the SEC’s Office of Compliance Inspections and Examinations. (2/17/2016) The SEC also announced that C. Dabney O’Riordan and Alka Patelwill serve as Associate Directors for Enforcement in the SEC’s Los Angeles Regional Office. (2/9/2016)

SEC publishes guidance for investors on securities-based crowdfunding. The SEC’s Office of Investor Education and Advocacy issued an Investor Bulletin that provides questions and answers for investors regarding securities-based crowdfunding. (2/16/2016) SEC Investor Bulletin.

SEC Investor Advocate encourages Nasdaq to retain strong shareholder approval rules. In a comment letter regarding proposed changes to the NASDAQ Stock Market LLC’s shareholder approval rules, SEC Investor Advocate Rick Fleming highlighted the importance of shareholder approval in the corporate governance framework and disagreed with any attempt to reduce or eliminate shareholder approval requirements. (2/12/2016) SEC Investor Advocate letter.

PCAOB proposed rules would require disclosure of audit participants. The SEC requested comments on proposed rules and auditing standards amendments filed by the PCAOB that would require firms to disclose information about the engagement partner and accounting firms that participate in the audit for each issuer. Comments are due on or before March 8, 2016. (2/8/2016) SEC Release No. 34-77082.