Dear <<First Name>>,
Please find below the Spring/Summer 2017 issue of the US Securities Law Digest, for the period of March, April, May, and June 2017. This update is intended to provide a compilation of recent legal news relevant to a capital markets practice in the London and international markets. The news pieces have been collected and summarized from various sources, and links to the original sources are provided.
We continue to welcome any feedback that you may have about the Digest.
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Daniel Winterfeldt
DWinterfeldt@reedsmith.com
Partner, International Capital Markets & US Securities
Reed Smith LLP
Founder and Co-Chair of the Forum
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Edward Bibko
Edward.Bibko@bakermckenzie.com
Head of EMEA Capital Markets
Baker & McKenzie LLP
Co-Chair of the Forum
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US SECURITIES LAW DIGEST:
SPRING/SUMMER 2017
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SEC Regulations and Rulemaking
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SEC Adopts EGC Inflation Adjustments and Other Technical Amendments Under the JOBS Act
The US Securities and Exchange Commission ("SEC") adjusted the threshold used in the definition of “emerging growth company” ("EGC"), as required by the Jumpstart Our Business Startups Act ("JOBS Act"), as well as the dollar amounts used in Regulation Crowdfunding. At the same time, the SEC adopted technical amendments to its rules and forms to conform to changes that the JOBS Act previously made to the Securities Act of 1933, as amended ("Securities Act"), and the Securities Exchange Act of 1934, as amended ("Exchange Act"). Because the amendments revised cover pages on many SEC forms, these amendments also affect SEC reporting companies that are not EGCs and that do not participate in crowdfunding. The amendments became effective on April 12, 2017.
See the Mayer Brown LLP article here.
See the Skadden Arps Slate Meagher & Flom LLP alert here.
See the Buchanan Ingersoll & Rooney PC article here.
See the Katten Muchin Rosenman LLP alert here.
See the DLA Piper publication here.
See the Morrison & Foerster LLP blog post here.
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SEC Adopts T2 Settlement Cycles for Securities Transactions
The SEC approved shortening the standard settlement cycle for most broker-dealer securities transactions to two business days after the date of the trade. This new settlement cycle, known as T+2, will replace the current T+3 standard for settling most securities transactions three business days after the trade. Under T+2, when an investor buys (or sells) a security through a brokerage firm, generally the investor must deliver payment (or the security) to the firm not later than the second business day after the trade is executed.
See the Mayer Brown LLP update here.
See the Morrison & Foerster update here.
See the Vedder Price article here.
See the Dechert LLP update here.
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SEC Clarifies Unibanco Documentation Requirements
The SEC issued an information update clarifying the representations and undertakings needed by unregistered foreign advisory affiliates of U.S.-registered advisers who rely on the Unibanco line of no-action letters.
See the Drinker Biddle & Reath LLP update here.
See the Ropes & Gray LLP alert here.
See the Katten Muchin Rosenman LLP article here.
See the Baker McKenzie article here.
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SEC Relaxes Conflict Minerals Reporting
The US District Court for the District of Columbia (the "Court") held in National Association of Manufacturers, et al. v. Securities and Exchange Commission that Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), Rule 13p-1 under the Exchange Act and Form SD violate the First Amendment of the US Constitution to the extent that the statute and the rule require companies to report to the SEC and state on their websites if any of their products "have not been found to be 'DRC conflict free.'" The Court invalidated this portion of the rule and remanded to the SEC to take appropriate action in furtherance of the Court's decision. The SEC announced that it will not recommend enforcement action if a company only includes disclosure in Form SD concerning the "reasonable country of origin inquiry" (under Items 1.01(a) and (b)) and does not include disclosure relating to due diligence on the source and chain of custody of conflict minerals or a Conflict Minerals Report and associated Independent Private Sector Audit (under Item 1.01(c)).
See the White and Case article here.
See the Morrison & Foerster LLP alert here.
See the Ropes & Gray LLP article here.
See the Baker Botts LLP update here.
See the Cooley LLP blog post here.
See the Fried Frank Harris Shriver & Jacobson LLP memorandum here.
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SEC Requires Hyperlinks to Exhibits to Ease Investor Access
The SEC adopted final rules requiring issuers to include hyperlinks to exhibits listed in the exhibit index. The rules apply to most registration statements and reports that are required to include exhibits under Item 601 of Regulation S-K as well as Forms 20-F and F-10. The filings must be submitted in HTML format instead of ASCII format, as ASCII does not support hyperlinking. The final rules will take effect on September 1, 2017, although the SEC encourages early compliance. Smaller reporting companies and non-accelerated filers that submit filings in ASCII format do not have to comply until September 1, 2018.
See the Skadden Arps Slate Meagher & Flom LLP memorandum here.
See the Shearman & Sterling LLP article here.
See the O'Melveny & Myers LLP alert here.
See the Haynes and Boone LLP article here.
See the Husch Blackwell LLP alert here.
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SEC Approves New Continued Listing Standards for ETFs
Since their U.S. introduction in 1993, exchange-traded funds ("ETFs") have operated under exemptive relief from many SEC rules applicable to mutual funds. New types of ETFs continue to test the limits of ETF regulation and exemptions. As exchange-traded products, ETFs are also subject to stock exchange rules and listing standards. While ETFs generally may comply with generic exchange listing standards or standards specific to a particular ETF on an ongoing basis, current practice has required that index ETFs comply only at the time of initial listing. However, under the SEC-approved proposals, continued monitoring and application of listing standards would be required for all ETFs, which may cause additional compliance costs and obligations.
See the Dechert LLP update here.
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SEC Issues Guidance on "Robo-Advisers"
The SEC published a guidance update on the subject of automated investment advisers (“robo-advisers”) and their obligations under the Investment Advisers Act of 1940 ("Advisers Act"). The guidance provides the SEC’s most recent views on the growing number of SEC-registered investment advisers ("RIAs") that utilize automated and digital processes to provide investment advisory services. The guidance provides suggested practices for robo-advisers to consider in: (i) meeting their disclosure obligations; (ii) assessing the suitability of their investment advice; and (iii) adopting and implementing effective compliance programs. Concurrently, the SEC issued an Investor Bulletin to help educate investors regarding robo-adviser services.
See the Dechert LLP article here.
See the Mayer Brown LLP article here.
See the Thompson Hine LLP article here.
See the Morgan Lewis & Bockius LLP article here.
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SEC Denies Application for Bitcoin ETF
The SEC declined to approve a rule change designed to permit the listing and trading of Winklevoss Bitcoin Trust because the proposal was not consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. The SEC believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products ("ETPs") must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity and those markets must be regulated. The SEC said it believes that the significant markets for bitcoin are unregulated. Therefore, Bats BZX Exchange has not entered into, and would currently be unable to enter into, the type of surveillance-sharing agreement that has been in place with respect to all previously approved commodity-trust ETPs.
See the Stinson Leonard Street LLP alert here.
See the Buckley Sandler LLP alert here.
See the Latham & Watkins LLP article here.
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SEC to Permit Confidential Submission of Draft Registration Statements for All Initial Public Offerings and Spin-Offs, Including by Non-Emerging Growth Companies
On June 29, 2017, the SEC’s Division of Corporation Finance announced that, beginning on July 10, 2017, it will permit confidential submissions of draft registration statements for all initial public offerings, including by issuers that do not qualify as emerging growth companies under the Jumpstart Our Business Startups Act.
The confidential submission process will be available for all initial draft registration statements and related amendments filed either under the Securities Act of 1933 (the "Securities Act") or in connection with the initial registration of a class of securities pursuant to Section 12(b) of the Exchange Act of 1934 (the "Exchange Act"), including in respect of spin-offs.
To take advantage of the confidential submission process in connection with Securities Act registration statements, an issuer must confirm it will publicly file its registration statement, together with any confidential draft submissions, at least 15 days prior to its road show, if any, or otherwise before the requested effective date of the registration statement. Similarly, for issuer eligibility in connection with Exchange Act registration statements, an issuer must confirm it will publicly file its registration statement, together with any confidential draft submissions, at least 15 days prior to the requested effective date of the registration statement.
See the Shearman & Sterling LLP article here.
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CFTC Regulations and Rulemaking
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CFTC Approves Amendments to Recordkeeping Rules
On May 23, 2017, the Commodity Futures Trading Commission (the "CFTC") unanimously approved proposed amendments to the recordkeeping obligations set forth in CFTC Regulation 1.31 (Recordkeeping Rule) which is applicable to all CFTC registered entities and other persons required to maintain records under the Commodity Exchange Act. The final amendments are intended to modernize the Recordkeeping Rule by making the form and manner in which regulatory records must be kept technology-neutral. The amendments provide recordkeepers with greater flexibility regarding the retention and production of CFTC regulatory records. The CFTC indicated that it does not believe the amendments impose any new recordkeeping requirements on any recordkeeper, and existing recordkeeping methods remain valid for compliance with the amended Recordkeeping Rule should a recordkeeper choose not to take advantage of the less-prescriptive, principles based approach of the amended Recordkeeping Rule. The final amendments also reorganized the Recordkeeping Rule for ease of understanding, including by adopting new definitions. The amendments represent a long-awaited and generally positive modernization of important CFTC rules that have often frustrated market participants. The effective date for the amended Recordkeeping Rule is August 28, 2017.
See the Sidley Austin LLP blog post here.
See the Sullivan & Cromwell LLP article here.
See the Wilmer, Cutler, Pickering, Hale and Dorr LLP publication here.
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Ninth Circuit Holds Internal Whistleblowers Are Protected from Retaliation
A divided panel of the Ninth Circuit Court of Appeals held that Dodd-Frank Act anti-retaliation protection extends to whistleblowers who report alleged unlawful activity internally but not to the SEC. In so doing, the Ninth Circuit sided with the Second Circuit and against the Fifth Circuit on this issue.
See the Eversheds Sutherland LLP alert here.
See the Weil Gotshal & Manges LLP alert here.
See the DLA Piper LLP publication here.
See the Nixon Peabody LLP article here.
See the Baker & Hostetler LLP alert here.
See the Bryan Cave LLP article here.
See the Cahill Gordon & Reindel LLP article here.
See the Dechert LLP update here.
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U.S. Supreme Court to Clarify Definition of “Whistleblower” Under The Dodd-Frank Act
The U.S. Supreme Court granted certiorari in Somers v. Digital Realty Trust Inc., a case the Ninth Circuit Court of Appeals decided this past March. This is significant because the Supreme Court may clarify how broad the term “whistleblower” is defined under the Dodd-Frank Act.
The issue in Somers was whether Digital Realty’s former vice president could invoke the anti-retaliation protections of the Dodd-Frank Act when he alleged that he was fired after making several internal reports to senior management regarding possible securities law violations at the company, although he had never reported directly to the SEC. The Ninth Circuit held that he could because the Dodd-Frank Act’s definition of whistleblower includes not only those who disclose information to the SEC, but also employees who report alleged unlawful activity internally within their companies. In deciding Somers, the Ninth Circuit agreed with the Second Circuit’s broader definition of whistleblower, splitting with the Fifth Circuit’s narrower interpretation that requires the whistleblower to have reported to the SEC.
See the Dechert LLP update here.
See the Greenberg Traurig LLP blog post here.
See the Wilmer, Cutler, Pickering, Hale and Dorr publication here.
See the Sullivan & Cromwell article here.
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Financial CHOICE Act "2.0": House Financial Services Committee Chairman Releases Revised Financial Regulatory Reform Proposal
The House Financial Services Committee Chairman released a modified version of the financial regulatory reform legislation introduced in the last Congress. The revised discussion draft, dubbed “CHOICE Act 2.0,” builds on and retains key features of the original CHOICE Act adopted in the Committee last year, including its targeted approach of amending, repealing, or replacing individual provisions of the Dodd-Frank Act rather than repealing it altogether. The Chairman stressed that the “ideas and principles” underlying the bill remain unchanged. There are, however, several key modifications in the revised legislation, including focusing the prerequisite for so-called “off-ramp” regulatory relief solely on maintenance of a 10% leverage capital ratio (eliminating a supervisory ratings component), providing additional relief from and changes to the existing stress-testing regime, removing the Federal Deposit Insurance Corporation from the Dodd-Frank Act living will process, taking a different approach in proposed modifications to the Consumer Financial Protection Bureau’s governance structure, and putting in place limits and guidelines applicable to the federal financial regulatory agencies’ enforcement, rulemaking, and supervisory authority.
See the Sullivan & Cromwell LLP article here.
See the K&L Gates alert here.
See the Stinson Leonard Street LLP alert here.
See the Dechert LLP update here.
See the Squire Patton Boggs blog post here.
See the Morgan Lewis & Bockius LLP blog post here.
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House Passes Financial Regulatory Reform Legislation: Financial CHOICE Act of 2017
On June 8, 2017, the House of Representatives passed (with all Democrats and one Republican voting against) the Financial CHOICE Act of 2017, a bill principally designed to reverse many features of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"). The House Financial Services Committee majority has provided both an executive summary and a comprehensive summary of the current bill. It is unclear at this time what action the U.S. Senate will take with regard to the bill in its current form.
While the vast majority of the bill relates to the banking provisions of the Dodd-Frank Act and other financial regulatory reforms, the bill contains a number of notable changes to the corporate governance landscape and Securities and Exchange Commission (the "SEC") reporting and disclosure requirements. The bill also includes a number of administrative law changes that would impact SEC and other financial regulatory agency rulemaking, including a heightened cost-benefit analysis requirement for rulemaking, new congressional review and consent requirements for rulemakings to become effective, and a less deferential standard of judicial review of agency interpretations and rulemaking. If any of these provisions become law, they could significantly impact the financial regulatory rulemaking process.
See the Cadwalader, Wickersham & Taft LLP article here.
See the Paul, Weiss, Rifkind, Wharton & Garrison LLP article here.
See the Skadden Arps Slate Meagher & Flom LLP articles here and here.
See the Sullivan & Cromwell LLP article here.
See the DLA Piper LLP publication here.
See the Manatt Phelps & Phillips LLP article here.
See the Morrison & Foerster LLP article here.
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Marblegate: Second Circuit Reverses Broad Interpretation of Trust Indenture Act in Out-of-Court Restructurings
In a highly anticipated decision, a divided panel of the U.S. Court of Appeals for the Second Circuit ruled that an out-of-court debt restructuring which impaired the practical ability of noteholders to be repaid did not violate section 316(b) of the Trust Indenture Act of 1939 because it did not amend an indenture’s "core payment terms." The Second Circuit’s decision reversed a 2014 district court ruling, which had concluded that section 316(b) provides "broad protection against nonconsensual debt restructuring" and prohibits such restructuring transactions if they adversely impact a noteholder’s practical ability to be repaid.
See the Jones Day article here.
See the O'Melveny & Myers LLP alert here.
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U.S. Treasury Department Releases Report to Reform U.S. Financial System
On June 12, 2017, the U.S. Treasury Department released a 150-page report (the "Report") that recommends revamping many of the rules for banks and other financial services firms put in place after the 2008 financial crisis through the Dodd-Frank Act. While some in Washington believed that the Report would simply recommend unwinding the Dodd-Frank Act, the Report is being received as a serious effort to put forth good-faith proposals to improve the financial regulatory ecosystem and a valuable contribution to the debate over financial regulatory reform.
Overall, the Report recommends streamlining supervision of the financial sector and giving political appointees more influence over the process while taking some power away from independent regulators. Although the Report does not recommend repeal of the Dodd-Frank Act, it suggests changes to many of the law’s major provisions. The Report’s recommendations include: (i) changing the enforcement authorities of the Consumer Financial Protection Bureau (the "CFPB") and making the CFPB director more accountable to the president; (ii) easing certain elements of the Volcker Rule; (iii) exempting many banks from certain “stress tests” and changing requirements for living wills; (iv) updating the Community Reinvestment Act; (v) increasing the power of the Financial Stability Oversight Council; and (vi) encouraging a reconsideration of the influence of international standard-setting bodies.
Along with the Financial CHOICE Act passed by the House of Representatives on June 8, 2017, the Report will frame the debate for the Senate as it takes up the issue of financial regulatory reform. The Report gives a strong indication of Treasury’s approach to financial regulation, an approach it may well embrace as it works with Congress to effect regulatory change. Among other themes, the Report emphasizes:
- Tailoring rules to the size/complexity of institutions;
- Reducing regulations deemed unnecessary;
- Promoting transparency of regulatory requirements and processes;
- Improving regulatory coherence; and
- Increasing political control of regulatory bodies.
See the Wilmer, Cutler, Pickering, Hale and Dorr LLP article here.
See the Sidley Austin LLP update here.
See the Paul, Weiss, Rifkind, Wharton & Garrison LLP publication here.
See the Sullivan & Cromwell LLP article here.
See the Kilpatrick, Townsend & Stockton LLP alert here.
See the Bradley, Arant, Boult, Cummings LLP article here.
See the Buckley Sandler LLP article here.
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Department of Labor Fiduciary Rule
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Department of Labor Delays Fiduciary Rule for 60 Days
The U.S. Department of Labor issued a final rule delaying the applicability date of its fiduciary rule from April 10, 2017 to June 9, 2017. The rule also delays to June 9, 2017 certain transitional requirements under the Best Interest Contract Exemption (“BIC”) and other new or revised prohibited transaction exemptions; however, it does not delay the compliance date for the “full” BIC, which remains January 1, 2018. In addition to delaying the compliance date under the BIC, the final rule repeals all of the requirements for relying on the BIC between June 9, 2017 and January 1, 2018, other than the requirements to (i) adhere to a best interest standard, (ii) receive no more than reasonable compensation, and (iii) avoid making materially misleading statements.
See the Ropes & Gray LLP alert here.
See the Shearman & Sterling LLP article here.
See the Briggs and Morgan blog post here.
See the Greensfelder Hemker & Gale PC article here.
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New Department of Labor “Fiduciary” Rule Goes Into Effect
After several delays, the Department of Labor’s (the “DOL’s”) final “fiduciary” rule expanding the definition of who is an investment advice fiduciary became effective on June 9, 2017. The final rule significantly expands the concept of “investment advice” for purposes of determining fiduciary status under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. The final rule originally was to go into effect on April 10, 2017. However, on February 3, 2017, President Trump signed a Presidential Memorandum directing the DOL to reexamine the final rule, upon which, if certain findings were met, the DOL was instructed to publish for notice and comment a proposed rule rescinding or revising the final rule, as appropriate. The DOL then delayed the effective date of the final regulation until June 9, 2017. While many hoped the final rule would be delayed further, the Secretary of Labor recently announced that while he is concerned that the new fiduciary rule is not consistent with President Trump’s deregulatory goals, the DOL did not have the authority to further delay the rule. The Secretary of Labor has stated that the DOL will continue to study the final rule, and may propose further changes.
See the Haynes and Boone LLP alert here.
See the Kilpatrick, Townsend & Stockton alert here.
See the Morrsion & Foerster LLP article here.
See the Ropes & Gray LLP alert here.
See the Squire Patton Boggs article here.
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Auditor Reporting Standards
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PCAOB Adopts New Auditor Reporting Standard and Other Amendments Relating to the Auditor's Report
The Public Company Accounting Oversight Board (the "PCAOB") has adopted Auditing Standard No. 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, and related amendments to its auditing standards that are intended to make the auditor’s report more informative and relevant to investors and other financial statement users by requiring new information about the audit. Most notably, the new standard, which was adopted substantially in the form reproposed in May 2016, adds a requirement for the auditor to identify and discuss, in the audit report, “critical audit matters” that were addressed in the audit. The PCAOB anticipates that, subject to SEC approval, the new standard will take effect (1) with respect to critical audit matters, for audits for fiscal years ending on or after June 30, 2019, for large accelerated filers; and for fiscal years ending on or after December 15, 2020, for all other covered companies, and (2) with respect to all other provisions, for audits for fiscal years ending on or after December 15, 2017. SEC-reporting companies and their audit committees should initiate a dialogue with their auditors to understand how their auditors expect to approach critical audit matters and should consider whether additional company disclosure may be necessary or desirable in light of the new standard, including prior to the effective date for disclosure of critical audit matters in auditor’s reports.
See the Sullivan & Cromwell article here.
See the Dechert LLP update here.
See the Skadden, Arps, Slate, Meagher & Flom LLP memorandum here.
See the Baker McKenzie update here.
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U.S. Supreme Court Decisions
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U.S. Supreme Court Significantly Limits SEC's Power to Recover Disgorgement
On June 5, 2017, in an unanimous ruling in Kokesh v. SEC, No. 16-529, the United States Supreme Court significantly limited the breadth of the SEC's primary enforcement tool. The Supreme Court held that disgorgement, like the SEC's other financial sanctions, is subject to the five-year statute of limitations of 28 U.S.C. § 2462 since it operates as a penalty. The Supreme Court's decision settles a federal circuit court split on the issue and puts an end to the SEC's ability to recover disgorgement based on conduct that occurred more than five years before a claim accrued. Notably, the Supreme Court also suggested in a footnote in the opinion that the very use of disgorgement in SEC actions may be up for debate.
See the Jones Day publication here.
See the Milbank, Tweed, Hadley & McCloy LLP alert here.
See the Wilmer, Cutler, Pickering, Hale and Dorr LLP publication here.
See the Morgan, Lewis & Bockius LLP blog post here.
See the Skadden Arps Slate Meagher & Flom LLP memorandum here.
See the Baker McKenzie article here.
See the Latham & Watkins LLP alert here.
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U.S. Supreme Court Holds That Securities Act's Three-Year Statute of Repose Is Not Tolled by a Pending Class Action
In 1974, the U.S. Supreme Court held in American Pipe & Construction Co. v. Utah that the commencement of a putative class action lawsuit tolls “the applicable statute of limitations as to all asserted members of the class,” including those member who later bring individual actions. Accordingly, unnamed class members could wait to determine whether to bring individual claims without risk that those claims would be barred by the statute of limitations.
In a case closely watched by the securities bar, the U.S. Supreme Court has now held in California Public Employees’ Retirement System v. ANZ Securities that American Pipe tolling is inapplicable to the three-year statute of repose for claims brought under Section 11 of the Securities Act because statutes of repose, as opposed to statutes of limitations, are not subject to equitable tolling. Accordingly, California Public Employees’ Retirement System’s lawsuit—brought in 2011 against underwriters of 2007 and 2008 Lehman Brothers offerings—was untimely under the applicable three-year statute of repose, even though similar claims had been pending in a putative class action.
As a result of the decision, the filing of putative class action lawsuits will serve only to toll statutes of limitations but not statutes of repose. The ruling may encourage unnamed putative class members in cases subject to statutes of repose to file separate actions or to seek to join the putative class action as a named plaintiff before the statute of repose expires in order to protect their right to pursue individual claims at a later stage. The decision will also allow class action defendants in cases where statutes of repose apply to better assess the risk they face from opt-out litigants and other potential individual actions beyond the risks faced from the putative class action.
See the Sullivan & Cromwell LLP article here.
See the Kane, Russell, Coleman, Logan PC update here.
See the Baker Botts update here.
See the Hogan Lovells article here.
See the Jenner Block article here.
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FINRA Proposes Changes to Rules Affecting Offerings
FINRA issued three Regulatory Notices requesting comments on proposed changes to various rules relating to financing transactions. Regulatory Notice 17-14 requests comment on all of FINRA’s existing rules, operations and administrative processes that address the capital-raising activities of its member firms, including recent additions regarding capital acquisition brokers and funding portals. Regulatory Notice 17-15 requests comment on proposed amendments to modernize, simplify and clarify FINRA Rule 5110, the Corporate Financing Rule, which affects all public offerings. Regulatory Notice 17-16 clarifies the application of FINRA’s research rules to desk commentary by sales and trading and principal trading personnel and solicits comments on a proposal to create a limited safe harbor for eligible desk commentary that may rise to the level of a research report.
See the Morrison & Foerster LLP blog post here.
See the Shearman & Sterling LLP article here.
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FINRA Revises Its Sanction Guidelines
FINRA announced that it had revised its sanction guidelines for violations of its rules. The new revisions, among other things:
- contain a new factor requiring that the exercise of undue influence over a customer, such as an elderly investor, be considered when adjudicating violations;
- introduce three new sanction guidelines: “Systemic Supervisory Failures,” “Short Interest Reporting,” and “Borrowing From or Lending to Customers”;
- create a new factor related to the mitigating effect of regulator or firm-imposed sanctions and corrective actions that have been taken; and
- amend a number of sections of the sanction guidelines to revise sanctions for more serious FINRA rule violations.
See the Morrison & Foerster LLP blog post here.
See the Sheppard Mullin Richter & Hampton LLP blog post here.
See the Katten Muchin Rosenman LLP blog post here.
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FINRA Releases New Guidance Regarding Social Media and Digital Communications
On April 25, 2017, the Financial Industry Regulatory Authority (“FINRA”) issued Regulatory Notice 17–18, Social Media and Digital Communications (the “Regulatory Notice”), addressing certain frequently asked questions regarding the use of social media and digital communications by FINRA member broker-dealers (the “FAQs”). The Regulatory Notice expands upon previously-issued FINRA guidance regarding the use of social media and digital communications within the context of various SEC and FINRA rules, including, but not limited to FINRA Rule 2210 (Communications with the Public), as well as the recordkeeping rules promulgated under the Exchange Act, and FINRA Rule 4511 (Recordkeeping). In the Regulatory Notice, FINRA acknowledges that developments in, and the expanded use of, social media and digital communications by broker-dealers since the last-published FINRA guidance on the use of social media by member firms in 2011 necessitated the updated guidance. The principal topics addressed by the FAQs are: (a) text messaging, (b) personal versus business communications, (c) third-party content and hyperlinks, (d) native advertising, (e) testimonials and endorsements and (f) links to BrokerCheck.
See the Shearman & Sterling LLP article here.
See the Manatt Phelps & Phillips LLP article here.
See the Morrison & Foerster LLP article here.
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NY Adopts Final Regulations for Banks, Insurance Businesses and Other Financial Services Institutions
The long-gestating regulation from the New York Department of Financial Services (DFS) mandating that extensive cybersecurity measures be taken by New York-licensed insurance companies and banks, as well as other financial services companies regulated by DFS, including, agents, brokers, adjusters, registered service contract providers, licensed reinsurance intermediaries, licensed life settlement providers, licensed life settlement brokers and licensed insurance consultants, took effect. DFS had first proposed the rule last September and significantly revised it, after considerable public comment.
See the Dentons article here.
See the Mayer Brown LLP update here.
See the Fish & Richardson PC article here.
See the Hudson Cook LLP article here.
See the Crowell & Moring LLP alert here.
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SEC Issues Ransomware Risk Alert Highlighting Cybersecurity Best Practices
On May 17, 2017, the SEC Office of Compliance Inspections and Examinations (the "OCIE") published a Risk Alert regarding the “WannaCry” ransomware worm that infected hundreds of thousands of computers in over 150 nations earlier this month. The alert provides background and resources for registered broker-dealers, investment advisers, and investment companies, including insurance company separate accounts and business development companies, to understand the “WannaCry” attack and the vulnerabilities it exploits. The alert additionally highlighted cybersecurity best practices being emphasized by the OCIE, including a new emphasis on the “rapid response” capabilities that entities should use to respond to cybersecurity issues.
See the Eversheds Sutherland (US) LLP alert here.
See the Cadwalader, Wickersham & Taft LLP article here.
See the Sidley Austin LLP bog post here.
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