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The BD/IA Regulator

Providing securities regulatory, enforcement and litigation trends for broker-dealers, investment advisers and investment funds

ThinkingCapMarkets Podcast: FINRA Communication Rules

Posted in Podcast

All communications by FINRA member firms are subject to the communications rule, which has approval and review, recordkeeping, filing and content standards.  The rule also includes exceptions from many of its requirements.  FINRA recently updated its advice relating to the use of social media by member firms, as FINRA continues to react to the rapidly changing social media landscape.  The rule covers a firm’s communications to retail and institutional investors, and many of the requirements are somewhat relaxed for institutional communications.

Morrison & Foerster’s Bradley Berman gives an overview of Rule 2210 in this ThinkingCapMarkets podcast.

Our recently updated FAQs can be accessed here: Frequently Asked Questions about the FINRA Communication Rules.

Mutual Fund Liquidity Risk Management

Posted in Events

Wednesday, October 18, 2017

Voltaire Advisors Breakfast Briefing

The New York Athletic Club
180 Central Park South
New York, NY 10019

Partner Jay Baris will participate in a panel discussion entitled “Operational & implementation Challenges for Funds & Advisers.” The expert panel will be speaking about operational challenges for fund managers.

For more information, view the full agenda, and click here to register.

Treasury Report, Part II: Regulation of the Capital Markets

Posted in Fund Regulation

The U.S. Department of the Treasury (“Treasury Department” or “Treasury”) issued its second report (of four reports), titled “A Financial System that Creates Economic Opportunities, Capital Markets” (the “Report”). The Report was issued in response to Presidential Order 137772 setting forth the Core Principles that should guide regulation of the U.S. financial system. The Report addresses various elements of the capital markets, from the equity and debt markets, to the U.S. Treasury securities market, and to derivatives and securitization. The Report also addresses the role and regulation of financial market utilities and clearinghouses. Like many movie sequels, which are somehow less compelling than the original, this second installment is less cohesive than the first Treasury report, which focused on the regulation of depositary institutions. The Report notes that certain aspects of the capital markets regulatory framework are working well, but other elements would benefit from better “calibration.” To that end, the Report recommends various measures, most of which would not require legislation, that would promote capital formation. There are few novel recommendations included in the Report. In this alert, we discuss many of the recommendations in the principal areas of interest to our clients. Read our client alert.

Morrison & Foerster’s Oliver Ireland gives a quick review of the Report in this ThinkingCapMarkets podcast.


Complimentary Teleconference – Financing Fintech: ILC Charters

Posted in Events

Thursday, October 19, 2017
5:00 p.m. – 5:45 p.m. EDT

Join us for one of our upcoming monthly telephone briefings led by members of our Fintech team.

Topics will include: What is an ILC?; What laws apply to an ILC and what laws don’t apply?; and How does it differ from an OCC Fintech Charter?

This call will be an operator-assisted call of approximately 45 minutes in duration, and will be followed by a brief Q&A opportunity. We also invite you to submit questions before the start of the call. A replay will be available upon request.

In order to RSVP for the October call, and to submit questions, please click here.

SEC Chairman Clayton Addresses Senate Committee

Posted in Broker-Dealer Regulation, Investment Adviser Regulation, SEC Enforcement

On September 26, 2017, SEC Chairman Jay Clayton delivered to the U.S. Senate Committee on Banking, Housing and Urban Affairs his first testimony as Chairman.  A copy of his prepared remarks may be found here.

Mr. Clayton’s testimony was fairly broad in scope, covering a variety of issues of concern to the Committee, from the SEC’s budget request to its activity in the enforcement arena.  However, we highlight a few items that are likely to be of particular interest to our broker-dealer clients.

Encouraging Initial Public Offerings and Investor Choice.  Mr. Clayton expressed his concern that investors could have fewer investment choices if IPOs continued their downward pace.  Accordingly, Mr. Clayton expects that regulatory tools, such as scaled disclosure and confidential submissions of draft registration statements, would continue to be used to attract smaller and mid-sized companies to the capital markets.  He indicated that the SEC will soon consider a rule proposal, as required by the FAST Act, to modernize and simplify the disclosure requirements in Regulation S-K in a manner that reduces costs and burdens on companies, while still providing for the disclosure of all required material information.

The Staff is also developing rule amendments that would eliminate redundant, overlapping, outdated or superseded disclosure requirements.  In addition, the Staff is developing recommendations for the SEC on final rule amendments to the “smaller reporting company” definition under Exchange Act Rule 12b-2, which would expand the number of issuers eligible to provide scaled disclosures.

A Fiduciary Duty for Broker-Dealers?  Mr. Clayton summarized the SEC’s current efforts and considerations in assessing changes to the standards of conduct for investment advisers and broker-dealers, including:

  • the need for retail investors to have access to high-quality and affordable investment advice, without sacrificing the protection of the securities laws;
  • the actions taken by the financial industry to date in the aftermath of the Department of Labor’s fiduciary rules, including changes to product offerings;
  • changes by mutual fund complexes to the terms of their offerings; and
  • the need to work with the Department of Labor, due to the interaction of their efforts with those of the SEC on investors and financial institutions.

Examinations of Broker-Dealers.  Mr. Clayton discussed the national examination program conducted by the SEC’s Office of Compliance Inspections and Examinations (“OCIE”).  In light of the growth of assets managed by investment advisers, the SEC has moved additional resources to these examinations; Mr. Clayton indicated that the SEC is on track to deliver a 30% increase in the number of investment-adviser examinations in 2017, or 15% of all investment advisers.

*  *  *

Mr. Clayton’s testimony reflects the fact that the SEC’s current rule making and other activities are broad in scope, are widely scrutinized, and will have a substantial impact on the financial markets.  His testimony may not have conveyed much in the way of specific actionable items for market participants, but did provide a useful overview of the types of issues that the SEC will act on during the remainder of 2017 and beyond.

The Fiduciary Rule Poll

Posted in Broker-Dealer Regulation, Investment Adviser Regulation

The US Department of Labor’s (DOL) fiduciary standard rule has been befuddling the financial services industry for the past seven years. In its simplest form, it increases accountability for the brokers, planners and insurance agents that handle US retirement accounts. It introduces measures to ensure they act in the best interest of their clients rather than for their own financial gain.

And exactly what steps can be taken to best respond to the rule are also polarizing, even though much of the market agrees with its basic principles. It is not solely the rule itself that is under fire, but the way that it has been implemented, and to an extent even the implementing agent itself.

To read our IFLR/MoFo Fiduciary Rule Poll, click here.

Form ADV Amendments: Ready to Go?

Posted in Investment Adviser Regulation

As summer recedes and we head into the autumn, investment advisers are in the home stretch of preparations for Form ADV reporting and disclosure changes that become effective October 1, 2017. The amendments, which were adopted in August 2016, require registered investment advisers to provide additional information regarding separately managed accounts and impose new disclosure obligations on private fund advisers that file a single registration for multiple private fund advisers that collectively conduct a single advisory business.

Although the compliance date for the amendments is October 1, 2017, many advisers will first transition to the new Form ADV in connection with their annual updating amendment for fiscal year 2017, which is generally due in March 2018. Set forth in our guide is a summary of the upcoming changes and some checklists to facilitate implementation. Advisers that have not yet considered how the amendments will affect their upcoming annual filing should do so now.

Read our user guide.