Yesterday the SEC announced its first enforcement proceeding for breach of the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act.
SEC’s 2016 Examination Priorities Focus on Retail Investors, Market Wide Risk and Use of Data Analytics
The recently issued Examination Priorities for 2016 reveals that the SEC’s priorities are organized around the same three thematic areas as last year: (i) retail investors, including retirement investments; (ii) market-wide risks; and (iii) the SEC’s increasing analysis of data to identify problematic activity.
FINRA’s 2016 Examination Priorities Identifies New Initiatives on Market Integrity and Firm Culture and Further Concern on Supervision and Controls
The recently issued 2016 Regulatory and Examination Priorities Letter discloses FINRA’s new initiatives on market integrity and firm culture and reflects a focus on firms’ supervision regarding conflicts of interest and technology. Regulatory concern over many of these issues has been previously reported in this blog here, here, here and here.
FINRA Arbitration Task Force Fails To Reach Consensus On Many Major Issues
The FINRA Dispute Resolution Task Force issued its final report last week, making certain recommendations designed to improve the arbitration process. More notably, however, the Task Force reported that it was unable to reach agreement on a number of more controversial issues, reflecting deep divisions among practitioners in this area.
SEC Proposal Would Limit Investment In Derivatives By Investment Companies
Recognizing the substantial risks inherent in many derivatives transactions, and the substantial leverage that is often imbedded in derivatives, the SEC last week announced its proposed new rules that would impose limits on the exposure to derivatives for investment companies, which include mutual funds, exchange-traded funds and closed-end funds, and create other regulatory requirements. Exposure to highly leveraged derivatives gave rise to large losses and many years of litigation in the wake of the 2008 financial crisis. The proposed rules represent an effort to reduce these types of losses in the next financial crisis, at least with regard to registered investment companies.
There are three principal aspects to the proposed rules.
CFTC Proposes New Regulations For Algorithmic Trading
On November 24, 2015, the CFTC announced the new proposed Regulation Automated Trading (“Reg. AT”), which contains a variety of measures designed to prevent potential market disruptions arising from algorithmic trading. Among other things, Reg. AT proposes certain pre-trade risk and order management controls, the implementation of policies and procedures governing algorithmic trading, and additional registration and reporting obligations. Many of these proposals were foreshadowed in a recent speech by the CFTC Chair, which we blogged about here.
SEC Once Again Sanctions The CCO of An Investment Advisory Firm
On November 19, 2015, the SEC announced a settlement with investment advisory firm Sands Brothers Asset Management, LLC for violating the Custody Rule, SEC Rule 206(4)-2, which requires that registered investment advisers who have custody of their clients’ assets put in place policies and procedures intended to safeguard those assets against loss, misuse or misappropriation. The SEC also imposed sanctions on Sands Brothers’ Chief Compliance Officer who was subjected to a one-year suspension and a fine for aiding and abetting these violations.
SEC Proposes Rules To Enhance Transparency And Oversight Of Alternative Trading Systems
The SEC announced this week its proposal to substantially overhaul the rules regarding alternative trading systems (“ATS”), often referred to as dark pools. The proposed rules would require firms operating ATSs to make additional disclosure about business activities that may present conflicts of interest between firms and ATS subscribers, and considerable information as to how the ATS operates. The proposed rules would also require advance SEC approval of a firm’s ATS disclosures.