New in 2020 (USA)

19 November

SEC publishes risk alert on investment adviser compliance programmes

The U.S. Securities and Exchange Commission Office of Compliance Inspections and Examinations (OCIE) has published a risk alert that focuses on notable compliance issues related to Rule 206(4)-7 (the ‘Compliance Rule’) under the Investment Advisers Act of 1940 (the ‘Advisers Act’). The Compliance Rule requires advisers to consider their fiduciary and regulatory obligations under the Advisers Act and to formalise policies and procedures to address them. The OCIE identified deficiencies and weaknesses in connection with the Compliance Rule related to: (i) inadequate compliance resources where advisers did not devote adequate resources to their compliance programmes; (ii) insufficient authority of CCOs to develop and enforce appropriate policies and procedures for the adviser; (iii) annual review deficiencies where advisers were unable to demonstrate that they performed an annual review or whose reviews failed to identify significant existing compliance or regulatory problems; (iv) advisers failed to implement or perform actions required by their written policies and procedures; (v) maintaining accurate and complete information in policies and procedures that contained outdated or inaccurate information about the adviser; and (vi) maintaining or establishing reasonably designed written policies and procedures where the OCIE observed that some advisers failed to establish, implement or appropriately tailor these to prevent violations of the Advisers Act.

The Director of the OCIE, Peter Driscoll, delivered a speech at the National Investment Adviser/Investment Company Outreach 2020 program where he spoke about the Risk Alert findings.


19 November

SEC adopts rules to facilitate electronic submission of documents

The U.S. Securities and Exchange Commission (SEC) adopted a final rule that will provide additional flexibility in connection with documents filed with the SEC by permitting the use of electronic signatures in authentication documents, and facilitate electronic service and filing in the SEC’s administrative proceedings. Signatories to an electronic filing are now permitted to sign an authentication document through an electronic signature that meets certain requirements specified in the EDGAR Filer Manual. At a minimum, the signing process for the electronic signature must (i) require the signatory to present a physical, logical or digital credential that authenticates the signatory’s individual entity; (ii) reasonably provide for non-repudiation of the signature; (iii) provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (iv) include a timestamp to record the date and time of the signature. In addition, the SEC also amended certain rules and forms under the Securities Act, Exchange Act, and Investment Company Act to allow the use of electronic signatures in authentication documents in connection with certain other filings when these filings contain typed, rather than manual, signatures. The rule amendments will be effective upon publication in the Federal Register. The SEC also adopted rule amendments to require electronic filing and service of documents in administrative proceedings. These amendments require the redaction of sensitive personal information from many of these documents before filing with the SEC. These amendments will become effective 30 days after publication in the Federal Register but compliance will not be required until April 21, 2021 and there will be an initial 90-day phase-in period following the compliance date.


19 November

SEC publishes risk alert on investment adviser compliance programme

The U.S. Securities and Exchange Commission Office of Compliance Inspections and Examinations (OCIE) has published a risk alert that focuses on notable compliance issues related to Rule 206(4)-7 (the ‘Compliance Rule’) under the Investment Advisers Act of 1940 (the ‘Advisers Act’). The Compliance Rule requires advisers to consider their fiduciary and regulatory obligations under the Advisers Act and to formalise policies and procedures to address them. The OCIE identified deficiencies and weaknesses in connection with the Compliance Rule related to: (i) inadequate compliance resources where advisers did not devote adequate resources to their compliance programmes; (ii) insufficient authority of CCOs to develop and enforce appropriate policies and procedures for the adviser; (iii) annual review deficiencies where advisers were unable to demonstrate that they performed an annual review or whose reviews failed to identify significant existing compliance or regulatory problems; (iv) advisers failed to implement or perform actions required by their written policies and procedures; (v) maintaining accurate and complete information in policies and procedures that contained outdated or inaccurate information about the adviser; and (vi) maintaining or establishing reasonably designed written policies and procedures where the OCIE observed that some advisers failed to establish, implement or appropriately tailor these to prevent violations of the Advisers Act.


10 November

SEC publishes risk alert on supervision, compliance and multiple branch offices

The U.S. Securities and Exchange Commission Office of Compliance Inspections and Examinations (OCIE) has published a risk alert that focuses on SEC-registered investment advisers operating from numerous branch offices and with operations geographically dispersed from the adviser’s principal or main office. The OCIE observed a range of deficiencies across the examinations. More specifically, some of the investment advisers had not fully implemented policies and procedures addressing advisory activities occurring in branch offices and in geographically dispersed operations. The risk alert discusses common deficiencies identified by OCIE staff. It also discusses examples of practices certain advisers implemented which aimed to improve compliance and supervisory practices at those firms.


2 November

SEC adopts final rule on exempt offering framework

The U.S. Securities and Exchange Commission (SEC) has adopted a set of amendments to facilitate capital formation and increase opportunities for investors by expanding access to capital for entrepreneurs across the United States. The amendments simplify, harmonise, and improve certain aspects of the exempt offering framework to promote capital formation while preserving or enhancing important investor protections. The amendments seek to close gaps and reduce complexities in the exempt offering framework that may impede access to investment opportunities. Specifically, the SEC has:

  • Changed the financial information that must be provided to non-accredited investors in Rule 506(b) private placements to align with the financial information that issuers must provide to investors in Regulation A offerings. This eliminates the current Rule 502(b) provisions that permit an issuer, other than a limited partnership, that cannot obtain audited financial statements without unreasonable effort or expense, to provide only the issuer’s audited balance sheet. The SEC argues that the financial statement requirements of Regulation A provide adequate information to non-accredited investors in such offerings and it believes that the same is true for non-accredited investors in the Rule 506(b) context;
  • Added a new item to the non-exclusive list of verification methods in Rule 506(c) by permitting an issuer to establish that an investor that the issuer previously took reasonable steps to verify as an accredited investors in accordance with Rule 506(c)(2)(ii) remains an accredited investor as of the time of a subsequent sale if the investor provides a written representation that the investor continues to qualify as an accredit investor and the issuer is not aware of information to the contrary. The SEC has, however, adopted a five-year time limit on the ability of issuers to rely on a prior verification; and
  • Harmonised the bad actor disqualification provisions in Regulation D, Regulation A and Regulation Crowdfunding by adjusting the lookback requirements in Regulation A and Regulation Crowdfunding to include the time of sale in addition to the time of filing.

The Final Rule will come into effect 60 days after publication in the Federal Register.


2 November

SEC adopts final rule on use of derivatives

The U.S. Securities and Exchange Commission (SEC) has adopted a Final Rule with respect to the use of derivatives by registered investment companies and business development companies, which includes the adoption of new Rule 18f-4 designed to provide an updated, comprehensive approach to the regulation of funds’ use of derivatives. Under the new rule, fund derivative transactions will not be considered senior securities to be counted toward the leverage limit if: (i) the fund adopts and implements a written derivatives risk management programme which includes policies and procedures that are reasonably designed to manage the fund’s derivatives risks and to reasonably segregate the functions associated with the programme from the portfolio management of the fund; (ii) the fund complies daily with the relative VaR test; (iii) funds meeting certain exceptions for limited derivatives users would not have to comply with i or ii above; (iv) the fund’s board designates a derivatives risk manager; (v) the derivatives risk manager provides a written representation and report to the board on the derivatives risk management programme on implementation and annually thereafter; and (vi) certain reporting, recordkeeping and retention requirements are met. The Final Rule will come into effect 60 days after publication in the Federal Register. The compliance date will be 18 months after the effective date.


19 October

SEC adopts amendments to auditor independence rules

The U.S. Securities & Exchange Commission (SEC) has adopted amendments to update certain auditor independence requirements in Rule 2-01 of Regulation S-X. Specifically, the final amendments will (i) replace the reference to “substantial stockholders” in the business relationships rule with the concept of beneficial owners with significant influence; (ii) amend the definitions of “affiliate of the audit client,” in Rule 2-01(f)(4), and “investment company complex,” in Rule 2-01(f)(14), to address certain affiliate relationships, including entities under common control; (iii) amend the definition of “audit and professional engagement period,” specifically Rule 2-01(f)(5)(iii), to shorten the look-back period, for domestic first time filers in assessing compliance with the independence requirements; (iv) change the definitions of “affiliate of the audit client,” in Rule 2-01(f)(4), and “investment company complex,” in Rule 2-01(f)(14), to address certain affiliate relationships, including entities under common control; and (v) Amend the definitions of “affiliate of the audit client,” in Rule 2-01(f)(4), and “investment company complex,” in Rule 2-01(f)(14), to address certain affiliate relationships, including entities under common control. The amendments will be effective 180 days after publication in the Federal Register.  Voluntary early compliance is permitted after the amendments are published in the Federal Register in advance of the effective date provided that the final amendments are applied in their entirety from the date of early compliance.


7 October

CFTC approves amendments to Form CPO-PQR

The U.S. Commodity Futures Trading Commission (CFTC) approved a final rule adopting amendments to Form CPO-PQR for commodity pool operators (CPOs).  The CFTC is (i) eliminating existing Schedules B and C of Form CPO-PQR, except for the Pool Schedule of Investments; (ii) amending the information requests and instructions to request Legal Entity Identifiers for CPOs and their operated pools that have them, and to delete questions regarding pool auditors and marketers; and (iii) making certain other changes due to the rescission of Schedules B and C, including the elimination of all existing reporting thresholds. All CPOs will now be required to file the revised Form CPO-PQR on a quarterly basis. In addition, the CFTC has also amended regulation 4.27 to permit CPOs to file National Futures Association’s (NFA) Form PQR in lieu of filing the CFTC’s Form CPO-PQR. Conversely, Form PF will no longer be accepted in lieu of the revised Form CPO-PQR. The amendments will be effective 30 days after publication in the Federal Register. CPOs will be required to file the revised Form CPO-PQR with respect to their operated pools for the first calendar quarter of 2021, ending on 31 March 2021. The deadline for filing Form CPO-PQR for that reporting period is sixty days after the quarter-end, or 31 May 2021.


7 October

SEC reminds fund managers of Schedule 13D obligations in enforcement action

The U.S. Securities & Exchange Commission (SEC) announced the settlement of charges against an investment manager of certain private funds for failure to timely amend a statement of beneficial ownership report on Schedule 13D of the Securities Exchange Act of 1934 (Exchange Act). Section 13D requires a beneficial owner that acquires more than 5% of a class of any voting, equity securities registered under Section 12 of the Exchange Act to file with the SEC within ten days of any such acquisition a statement describing such acquisition and containing certain other information, including a description of any plans or proposals that the beneficial owner may have with respect to certain enumerated matters regarding the issuer. Rule 13d-2(a) of the Exchange Act also requires a filer to amend a Schedule 13D promptly upon any material increase or decrease in the percentage of the class beneficially owned. Although “promptly” has not been defined, it is generally understood to be within two business days. An increase or decrease in beneficial ownership of 1% or more is deemed to be “material” under Rule 13d-2(a). Schedule 13D filers must also file an amendment promptly upon any material change to any of the other information disclosed in the Schedule 13D, including, without limitation, the filer’s plans or proposals. The investment manager in question agreed to a cease and desist order and was ordered to pay a penalty of $100,000 after it did not amend its Schedule 13D when it reduced its beneficial ownership by 1% in a U.S. company, nor did it amend Schedule 13D when it determined it was no longer interested in pursuing a possible acquisition or restructuring of the company and that it would liquidate its position.

The enforcement action serves as a reminder that (i) the SEC remains focused on enforcing beneficial ownership reporting obligations, even in instances when a filer has not previously engaged in a pattern of recurring delinquent behaviour; (ii) the value of boilerplate language reserving the right to change a filer’s intentions or take certain actions is limited once a filer has made a definitive determination to abandon or pursue a specific action; and (iii) investment firms will need to have compliance procedures in place to properly monitor filing requirements and changes and events around their outstanding filings.


29 September 

AIMA responds to SEC Form 13F proposals

AIMA has submitted comments in response to the U.S. Securities and Exchange Commission’s (SEC) proposal to update the reporting thresholds for Form 13F reports and make other targeted changes. The proposed amendments to Form 13F and rule 13f-1 under the Securities Exchange Act of 1934 would raise the threshold for reporting specified equity securities on Form 13F from $100 million to $3.5 billion. In our response, we argued that the SEC had not given sufficient consideration to the widespread use of the data stemming from Form 13F reports, nor has it provided a detailed and cost-benefit analysis that is necessary to support the proposals. In addition, we did not agree with the SEC’s proposal to eliminate the omission threshold that permits the exclusion of holdings of fewer than 10,000 shares (or less than $200,000 principal amount of convertible debt securities) and less than $200,000 aggregate fair market value as this would require large investment managers to provide granular information for each individual positions they hold.

[UPDATE 27 October]: According to Bloomberg, the SEC is considering shelving their Form 13F proposals after wide-spread opposition. More information, see https://www.bloomberg.com/news/articles/2020-10-27/hedge-funds-shot-at-stock-secrecy-fades-as-sec-shelves-revamp?srnd=markets-vp&sref=nPhh5shT


17 September

NFA hosts webinar to debut redesigned annual questionnaire

As part of the National Futures Association’s (NFA) membership application, as well as on an annual basis thereafter, NFA requires its members to complete an annual questionnaire.  NFA recently redesigned the annual questionnaire which will launch on 2 October 2020. NFA will host a webinar on 29 September at 9.30 a.m. CT/10.30 a.m. ET/15.30 p.m. BST where it will cover the transition to the new system, the key differences between the old and new questionnaire and other helpful information. If you access the system on or after October 2, you will be required to fill out the redesigned questionnaire, even if you previously began completing the questionnaire in the old system.

If you have any questions, please contact [email protected].


15 September

Cybersecurity: OCIE Risk Alert on Safeguarding Client Accounts against Credential Compromise

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) has issued a Risk Alert following observations in recent examinations of an increase in the number of cyber attacks against SEC-registered investment advisers and brokers-dealers using “credential stuffing”, a method of cyber attack to client accounts that uses compromised client login credentials, resulting in the possible loss of customer assets and unauthorised disclosure of sensitive personal information.

Cyber attackers obtain lists of usernames, email addresses, and corresponding passwords from the ‘dark web’ and then use automated scripts to try the compromised user names and passwords on other websites, such as a registrant’s website, in an attempt to log in and gain unauthorised access to customer accounts.

The failure to proactively mitigate the risks of credential stuffing proactively significantly increases various risks for firms, including but not limited to financial, regulatory, legal, and reputational risks, as well as risks to investors. OCIE encourages firms to review their customer account protection safeguards and identity theft prevention programs and consider whether updates to such programs or policies are warranted to address emergent risks.  In addition, firms are encouraged to consider outreach to their customers to inform them of actions they may take to protect their financial accounts and personally identifiable information.


28 August

SEC revises Accredited Investor definition

The U.S. Securities and Exchange Commission (SEC) has adopted revisions to the definition of “accredited investor” which adds new categories of qualifying natural persons and entities and makes other adjustments to the existing definition.  The two new categories of natural persons that will qualify are:

  • certain individuals holding in good standing certain qualifying professional certifications, designations or credentials, and
  • knowledgeable employees with respect to a private fund (with respect to investments in that private fund).

The five new categories of entities that will qualify are:

  • SEC- and State-registered investment advisers and exempt reporting advisers;
  • rural business investment companies;
  • limited liability companies not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5 million;
  • “family offices” with assets under management in excess of $5 million, and “family clients” whose prospective investment in the issuer is directed by that qualifying family office; and
  • other entities owning “investments”, in excess of $5 million that is not formed for the specific purpose on acquiring the securities being offered.

The SEC has also revised the definition of “qualified institutional buyer” to expand the list of qualifying entities. These include RBICs, limited liability companies and a new catch-all category for entities that are institutional accredited investors (as defined in the Securities Act) that are not any of the types of entities expressly included in Rule 144A.  The SEC also added a clarifying instruction that an entity formed for the purpose of acquiring 144A securities is eligible to be a qualified institutional buyer.

The new definitions will come into effect 60 days after the adopting release is published in the Federal Register.  


21 August 

AIMA publishes implementation checklist on CFTC Statutory Disqualification Requirements

AIMA has published a useful checklist for members on the upcoming Commodity Future Trading Commission’s (CFTC) rule change which will ask Commodity Pool Operators (CPOs) to self-certify that neither the CPO nor its principals are subject to a statutory disqualification under section 8a(2) of the Commodity Exchange Act when applying for or updating any exemption filing under Regulation 4.13. The checklist provides an overview of the key actions CPOs will have to consider to ensure it is complying with the rule change before it comes into effect on 8 September 2020.  Members are encouraged to provide us with any feedback on the content, format and usefulness of these checklists as we endeavour to publish a range of these in the near future.

Please contact [email protected] to share your feedback on the checklist.


 

23 July

SEC adopts final proxy voting rule amendments

The U.S. Securities and Exchange Commission (SEC) has adopted amendments to its rules governing proxy voting advice. The amendments add conditions to the availability of certain existing exemptions from the information and filing requirements of the Federal proxy rules that are commonly used by proxy voting advice businesses.  These conditions require compliance with disclosure and procedural requirements, including conflicts of interest disclosures by proxy voting advice businesses and two principles-based requirements.  The first requirement calls for proxy voting advice businesses to adopt written policies and procedures designed to ensure that the proxy voting advice is made available to registrants.  The second principles-based requirement calls for proxy voting advice businesses to adopt written policies and procedures designed to ensure that they provide clients with a mechanism by which clients can reasonably be expected to become aware of a registrant’s views about the proxy voting advice so that they can take these views into account as they vote proxies. The SEC also amended the definition of the terms “solicit” and “solicitation” in Rule 14a-1(l) of the Exchange Act to codify its view that proxy voting advice generally constitutes a solicitation within the meaning of Section 14(a) of the Exchange Act. The amendments will be effective 60 days after publication in the Federal Register but affected proxy voting advice businesses subject to the final rules are not required to comply with the Rule 14a-2(b)(9) amendments until December 1, 2021.

In addition, the SEC also approved additional guidance concerning investment advisers’ use of automated voting features offered by proxy advisory firms. It calls on advisers to consider whether they have sufficient procedures in place to address scenarios where an issuer intends to file or has filed additional soliciting materials with the SEC after the adviser has received the proxy advisory firm’s voting recommendation but before the vote submission deadline. The supplemental guidance will be effective upon publication in the Federal Register.


21 July

AIMA responds to SEC proposed rule on Fair Value

AIMA has submitted comments in response to the Securities and Exchange Commission’s (SEC) proposal on fair valuation of investments, which permits a fund’s board of directors to assign the fair value determination to an investment adviser of the fund who would then carry out these functions for some or all of the fund’s investments, subject to the board’s oversight.  AIMA has expressed support for this key step in bringing the regulation in line with market practice and has proposed the following amendments to ensure the proposal maximises its potential: 

  • Include an explicit reference to the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) Topic 820 in the definition of readily available market quotations;  

  • Allow for valuation procedures to be proportionate and appropriate to the level of asset valued;  

  • Eliminate or amend prompt reporting requirements to reduce the administrative burden on investment advisers and boards; and  

  • Provide clarity on the requirements with respect to the selection and supervision of pricing services envisaged under the Proposed Rule. 


10 July

SEC proposes amendments to update Form 13F for institutional managers

The U.S. Securities and Exchange Commission (SEC) has proposed to amend Form 13F to update the reporting threshold for institutional investment managers and make other targeted changes. The proposed amendments to Form 13F and rule 13f-1 under the Securities Exchange Act of 1934 would raise the threshold for reporting specified equity securities on Form 13F from $100 million to $3.5 billion. The proposal would also direct SEC staff to conduct reviews of the Form 13F reporting threshold every five years and recommend an appropriate adjustment to the SEC, if the staff believes after such review that additional adjustments should be made to the threshold. The new threshold would retain disclosure of over 90% of the dollar value of the holdings data currently reported while eliminating the Form 13F filing requirement and its attendant costs for the nearly 90% of filers that are smaller managers. In addition, the proposal would eliminate the omission threshold that currently permits managers to exclude from the form certain small positions. The proposal also would (i) require managers to report certain numerical identifiers to enhance the usability of the information provided on Form 13F; (ii) make certain technical amendments to modernise the information reported on Form 13F; and (iii) conform the standard for SEC review of requests for confidential treatment of Form 13F information with a recent decision by the U.S. Supreme Court.

Comments on this proposal will be required to be submitted within 60 days of the publication of the proposing release in the Federal Register. 


 

24 June

OCIE publishes observations from private fund adviser examinations

A new Risk Alert from the U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) points out deficiencies from recent examinations of private fund advisers, focusing on (i) conflicts of interest, (ii) fees and expenses, and (iii) policies and procedures relating to material non-public information (‘MNPI’). 

With respect to conflicts of interest, OCIE observed inadequately disclosed conflicts of interest and deficiencies related to:

  • Allocation of investments among different clients, for example preferentially allocating limited investment opportunities to new, higher fee paying or proprietary/proprietary-controlled accounts without adequate disclosure and allocating securities at different prices or in apparently inequitable amounts among clients;
  • Multiple clients investing in the same portfolio company but at different levels of the capital structure;
  • Financial relationships between investors or clients and the investment adviser, for example seed investments or financing provided to the investment adviser or its clients;
  • Preferential liquidity rights;
  • Investment adviser interests in the recommended investments;
  • Operation of coinvestments;
  • Service providers and service provider incentive programs;
  • Fund restructurings and “stapled secondary transactions”; and
  • Cross-transactions.

With respect to fees and expenses, OCIE noted deficiencies observed with respect to:

  • Allocation of fees and expense, specifically with respect to:
    • Shared expenses,
    • Expenses not permitted by the relevant fund operating agreements,
    • Non-compliance with contractual expense limits, and
    • Failure to follow stated travel and entertainment expense policies;
  • Disclosure of the role, function and cost of non-employee individuals providing services to the fund or portfolio companies;
  • Failure to value in accordance with the adopted and disclosed valuation processes; and
  • Disclosure of portfolio company fees such as monitoring fees, board fees and management fee offsets.

With respect to MNPI and code of ethics, OCIE’s Risk Alert highlights observed deficiencies related to:

  • Failure to address risks posed by their employees interacting with: (1) insiders of publicly-traded companies, (2) outside consultants arranged by “expert network” firms, or (3) “value added investors” (e.g., corporate executives or financial professional investors that have information about investments) in order to assess whether MNPI could have been exchanged;
  • Failure to address risk posed because employees could obtain MNPI through their ability to access office space or facilities of the investment adviser or its affiliates; and
  • Failure to address risk posed by employees who periodically have access to MNPI about public issuers due to private investments in public equity;
  • Failure to enforce trading restrictions on securities on the investment adviser’s “restricted list”, including failure to have a defined policy for adding/removing securities on the “restricted” list;
  • Failure to enforce the policy regarding employee receipt of gifts and entertainment from third parties; and

Failure to require submission or transaction and holdings reports or timely pre-clearance requests and failure to identify access persons correctly.


11 June

AIMA responds to CFTC consultation on Rule 4.27 and Form CPO-PQR

AIMA has responded to the Commodity Futures Trading Commission’s (CFTC) consultation on their proposed revisions to CFTC Regulation 4.27 and Form CPO-PQR. The proposals, as suggested, would (i) amend the information in existing Schedule A of the form to request Legal Entity Identifiers (LEIs) for commodity pool operators (CPOs) and their operated pools that have them, and to eliminate questions regarding pool auditors and marketers; and (ii) eliminate the pool-specific reporting requirements in existing Schedules B and C of Form CPO-PQR, other than the pool schedule of investments. In addition, dual Securities and Exchange Commission (SEC)/CFTC registrants would no longer be able to file the Form PF in lieu of the Form CPO-PQR, although edits to Rule 4.27 would still require dual registrants to file Form PF as a CFTC form. All CPOs, regardless of their size, would be required to file the resulting amended Form CPO-PQR quarterly, but would also be allowed to file National Futures Association’s (NFA) Form in lieu of filing the revised Form CPO-PQR. In our response, we encouraged the CFTC to allow dual registered CPOs to supply the Form PF filing to the NFA in satisfaction of the reporting obligations under CFTC Regulation 4.27 and NFA Compliance Rule 2-46 with respect to the commodity pools included in the Form PF, leaving a residual Form PQR filing obligation solely with respect to relevant commodity pools that are not included in the Form PF.


8 June

CFTC approves final rule prohibiting persons subject to certain statutory disqualifications from relying on certain registration exemptions

The Commodity Futures Trading Commission (CFTC) has approved a final rule prohibiting persons from seeking to claim a Commodity Pool Operator (CPO) registration exemption under CFTC Rule 4.13 who are, or whose principals are, subject to any of the statutory disqualifications listed in Section 8a(2) of the Commodity Exchange Act (CEA). The rule is intended to align the treatment of exempt CPOs and their principals with that of CPOs seeking to register with the CFTC, which are typically denied registration where they are subject to such a statutory disqualification.  The final rule will require any person claiming an exemption under Rule 4.13 to represent that, subject to limited exceptions, neither the claimant nor any of its principals has in their background a CEA Section 8a(2) disqualification that would require disclosure if the claimant sought registration with the CFTC.  The proposal to include the disqualifications under CEA Section 8a(3) was questioned by AIMA and others, and ultimately, the CFTC chose to limit the relevant disqualifications to those in CEA Section 8a(2)

CPOs with existing exemptions in place will need to assess whether any of its principals (as defined in the CFTC Regulations) is subject to any of the relevant statutory disqualifications and seek any necessary exemptive relief or register prior to the 1 March 2021 renewal deadline for existing exemptions.  CPOs seeking their first Rule 4.13 exemption will be subject to the requirements immediately.

The final rule is effective as per 8 September 2020.


2 June

Recent changes to NFA's self-examination questionnaire

On an annual basis, National Futures Association (NFA) Member FCMs, RFEDs, IBs, CPOs and CTAs must review their operations using NFA's Self-Examination Questionnaire (Questionnaire). The Questionnaire is designed to aid NFA members in recognising potential problem areas and to alert them to procedures that need to be revised or strengthened.

NFA recently revised the Questionnaire to reflect rule amendments that became effective over the past year. The Questionnaire now reflects, among other minor changes, recent amendments to:

Given that a number of NFA members may be currently operating with limited resources, NFA developed Self-Examination Questionnaire Revision Notes, a comprehensive document that specifies the recent changes to the Questionnaire.

The latest Questionnaire, dated June 2020, is available on NFA's website. Members must review the entire Questionnaire on an annual basis and should use this version when completing their next annual review.


2 June

CFTC proposes amending CPO exemption to facilitate cross-border activity

The U.S. Commodity Futures Trading Commission (CFTC) is proposing to amend the conditions under which non-U.S. Commodity Pool Operators (CPOs) qualify for exemptions from registration under CFTC Rule 3.10(c). The amended rule would allow CPOs who are legally domiciled outside of the U.S. to claim an exemption from CPO registration on a pool-by-pool basis in which no U.S.-domiciled persons invest (i.e. an offshore pool). The amended rules would also create a conditional safe harbour for non-U.S. CPOs who cannot, due to the structure of their offshore pools, determine with certainty that such pools contain U.S. investors provided that they take reasonable steps to ensure that participation units in the offshore pool are not being offered or sold to persons located in the U.S. It would also allow the U.S.-based affiliates of fund sponsors to make initial capital contributions to such offshore pools without being considered U.S. investors for purposes of the exemption. The proposed amendments are designed to provide regulatory flexibility for non-U.S. CPOs operating offshore commodity pools by taking into account the global nature of their operations without compromising the CFTC’s mission of protecting US pool participants, thereby deferring to foreign regulators to oversee offshore pools.

Comments on this proposal will be required to be submitted on or before 11 August. 


26 May

AIMA and MFA submit letter to SEC on proxy voting proposal

AIMA and MFA have submitted a joint letter to the U.S. Securities and Exchange Commission (SEC) in response to recent statements from SEC Commissioners that it may consider, as part of a final rulemaking, alternative approaches that would differ from aspects of the proposed rules, including the prior review period of proxy voting advice by companies. An alternative under consideration is a contemporaneous review period of proxy voting advice by companies, where a proxy advisory firm would provide its recommendations to a company at the same time it distributes them to its clients. In addition, there has been discussion of introducing a speed bump, a period during which a proxy advisory firm would need to disable any automatic submission features for clients. In our response, we encourage the SEC to consider whether it would be useful for it to seek additional feedback on these additional approaches, which could potentially benefit both the SEC and market participants.


19 May

AIMA and MFA respond to CFTC on position limits

AIMA and MFA have responded to the CFTC’s notice of proposed rulemaking on position limits, commending the fact that the CFTC has taken on board many of the suggestions we have made in response to prior proposals, including the need for the CFTC to make a necessity finding, using accurate deliverable supply data on which to base spot month position limits, clarifying the definition of linked contracts and economically equivalent swaps, and not adopting position limits outside the spot month (other than for the legacy agricultural contracts). 


12 May

AIMA and MFA submit recommendations to the SEC on proposed advertising rules

On 26th March, AIMA and MFA held conversations with the U.S. SEC Commissioners and Staff from the Division of Investment Management to discuss member concerns with the proposed advertising rule as reflected in our 10th February joint comment letter. As a follow-up to those discussions, on 8th May, we submitted to the SEC a summary document of our joint recommendations on the proposed rule from our comment letter and proposed amendments of the rule text consistent with those recommendations. We intend to schedule calls with the SEC Commissioners and Staff in the coming weeks to discuss our recommendations further.


5 May

Joint AIMA and MFA response to SEC derivatives proposal

AIMA and Managed Funds Association (MFA) have filed a joint response to the U.S. Securities and Exchange Commission’s (SEC) proposal on the use of derivatives rule for registered investment companies (RICs) and business development companies (BDCs), and required due diligence by broker-dealers and advisers regarding retain customers’ transactions in certain leveraged/inverse investment vehicles. The proposal, if adopted, would impose limits on the use of derivatives by RICs and BDCs by setting value at risk (Var) thresholds on a fund, among other requirements, and would establish a new sales practice due diligence requirement with respect to the sale of leveraged/inverse investment funds. In the letter, we have recommended several modifications to the proposal, including (i) providing funds with flexibility in selecting either the absolute or relative VaR test to use with respect to their strategy; (ii) raising the absolute and relative VaR test limits to at least 20% and 200%, respectively; (iii) allowing funds to develop their VaR calculation models by using more data points than provided by the proposal; (iv) allowing funds that breach their VaR test seven calendar days to come back in to compliance; (v) eliminating a “time out” period for a fund to trade derivatives after a breach of its VaR test; (vi) eliminating the sales practice rule for leveraged/inverse funds; and (vii) eliminating the fund requirement to publicly report VaR-based limit breaches and derivatives exposures.


22 April

Amendments to NFA Compliance Rule 2-29 and related Intepretive Notice now effective

The National Futures Association (NCA) recently amended Compliance Rule 2-29 and Interpretive Notice 9003 – NFA Compliance Rule 2-29: Communications with the Public and Promotional Material. These require, among other things, that past performance used in promotional material be presented net of all commission, fees and expenses. NFA recently amended these requirements to allow its commodity trading advisor (CTA) members that are also SEC registered investment advisers (RIA) to present past performance to eligible contract participants (ECP) on a gross basis in non-public, one-on-one presentations. To rely on this limited exception, a CTA member/RIA must (i) provide the ECP client with a written disclosure that the performance results are presented on a gross basis and do not reflect the deduction of fees and expenses, which will reduce the client's returns; and (ii) offer to provide the ECP client with the performance results net of any fees and expenses agreed upon by the CTA member and the ECP client at or prior to exercising discretion over the client's account. These amendments are effective immediately.


21 April 2020

SEC proposes to modernise framework for fund valuation practices

The U.S. Securities and Exchange Commission (SEC) has proposed a new rule that would establish a framework for fund valuation practices. The rule is designed to clarify how fund boards can satisfy their valuation obligations in light of market developments, including an increase in the variety of asset classes held by funds and an increase in both the volume and type of data used in valuation determinations. The proposed rule would establish requirements for satisfying a fund board’s obligation to determine fair value in good faith for purposes of the Investment Company Act of 1940. The rule would require a board to assess and manage material risks associated with fair value determinations; select, apply and test fair value methodologies; oversee and evaluate any pricing services used; adopt and implement policies and procedures; and maintain certain records. Recognising that most fund boards do not play a day-to-day role in the pricing of fund investments, the proposed rule would permit a fund’s board to assign the determination of fair value to the fund’s investment adviser, subject to additional conditions and oversight requirements. These detailed conditions include specific reporting by the adviser both periodically and promptly; clear specification of responsibilities and reasonable segregation of duties among the adviser’s personnel; and additional recordkeeping. The proposal makes clear that a board’s effective oversight of this process must be active.

Comments on this proposal are due on 21 July 2020. 


21 April

ACC and AIMA co-sign joint letter requesting deferral of EU DAC6 reporting obligations

The ACC and AIMA have co-signed with other European industry bodies a letter to the European Commission requesting the deferral of domestic reporting deadlines under the Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU (DAC6) to 2021 or later if required.

The letter argues that current lack of technical and legal guidance combined with the current COVID-19 crisis not only complicates the implementation of domestic DAC 6 rules but also threatens financial institutions with serious penalties if they infringe these rules and are not able to report on cross-border arrangements within the prescribed deadline (30 days or 31 August 2020).

The letter calls for consistency in the deferral of reporting deadlines across the European Union and the UK as some member states have granted some flexibilities to intermediaries and/or relevant taxpayers during a given limited period while other member states have not.

The ACC and AIMA will keep members appraised of responses received from the European Commission.


15 April 2020

CFTC proposes revisions to Regulation 4.27 and Form CPO-PQR

The U.S. Commodity Futures Trading Commission (CFTC) has proposed revisions to CFTC Regulation 4.27 and Form CPO-PQR. Specifically, the proposals would (i) amend the information in existing Schedule A of the form to request Legal Entity Identifiers (LEIs) for commodity pool operators (CPOs) and their operated pools that have them, and to eliminate questions regarding pool auditors and marketers; and (ii) eliminate the pool-specific reporting requirements in existing Schedules B and C of Form CPO-PQR, other than the pool schedule of investments. Dual Securities and Exchange Commission (SEC)/CFTC registrants would no longer be able to file the Form PF in lieu of the Form CPO-PQR, although edits to Rule 4.27 would still require dual registrants to file Form PF as a CFTC form. All CPOs, regardless of their size, would be required to file the resulting amended Form CPO-PQR quarterly, but would also be allowed to file NFA Form PQR, a comparable form required by the National Futures Association (NFA), in lieu of filing the revised Form CPO-PQR. These amendments, if adopted, will focus Form CPO-PQR on data elements that facilitate the CFTC’s oversight of CPOs and their pools while reducing overall data collection requirements for CPOs in favour of relying on data from other existing sources.

Comments on this proposal will be required to be submitted within 60 days of the publication of the proposing release in the Federal Register. 


14 April

SEC adopts offering reforms for BDCs and registered Closed-End funds

The Securities and Exchange Commission (SEC) has adopted rule amendments implementing provisions of the Small Business Credit Availability Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act relating to business development companies (BDC) and other closed-end funds. The SEC’s reforms will allow eligible funds to engage in a streamlined registration process. Key provisions include:

  • Shelf offering process and new short-form registration statement
  • Ability to qualify for Well-Known Seasoned Issuer (WKSI) status
  • Expansion of the scope of rule 486 under the Securities Act of 1933 to registered closed-end funds or BDCs that conduct continuous offerings of securities
  • Allowing use of a “free writing prospectus,” certain factual business information, forward-looking statements, and certain broker-dealer research reports
  • New Method for Interval Funds and Certain Exchange-Traded Products to Pay Registration Fees
  • Requirements to include certain key prospectus disclosure in their annual reports
  • Removal of requirement to provide new purchasers with a copy of all previously filed materials with information to now be made available online
  • Requirement to tag certain registration statement information, with BDCs also now required to submit financial statement information, as operating companies currently do

The rule and form amendments will become effective on 1 August 2020, with the exception of the amendments related to registration fee payments by interval funds and certain exchange-traded products, which will become effective on 1 August 2021.


14 April

SEC provides relief for BDCs

The Securities and Exchange Commission (SEC) has announced that it is providing temporary, conditional exemptive relief for Business Development Companies (BDCs) to enable them to issue additional securities providing additional financial support to small and medium-sized businesses, including those with operations affected by COVID-19.  Moreover, BDCs will be able to participate in investments in these companies alongside certain private funds that are affiliated with the BDC. The relief is subject to investor protection conditions, including specific requirements for obtaining an independent evaluation of the issuances’ terms and approval by a majority of a BDC’s independent board members. Detailed terms are available here.


20 March 2020

CFTC provides regulatory relief for CPOs

On 20 March 2020 the Division of Swap Dealer and Intermediary Oversight of the U.S. Commodity Futures Trading Commission (CFTC) confirmed that it would not recommend that the CFTC take an enforcement action against any commodity pool operator (‘CPO’) for the failure to comply with the following CFTC regulations, subject to the applicable conditions stated below:

  1. Filing of Form CPO-PQR under CFTC regulation 4.27.  Any requirement that a small or mid-sized CPO file an annual report on Form CPO-PQR pursuant to CFTC regulation 4.27, provided that such filing is made by 15 May 2020; or any requirement that a large CPO file a quarterly report on Form CPO-PQR for Q1 2020 pursuant to CFTC Regulation 4.27, provided that such filing is made by 15 July 2020.
  2. Pool Annual Reports under CFTC Regulations 4.7(b)(3)and 4.22(c).  Any requirement that a CPO with a pool annual report due on or before 30 April 2020 file such report pursuant to CFTC regulations 4.7(b)(3) or 4.22(c), provided that the annual certified financial statements for its operated commodity pools are filed with the National Futures Association and distributed to pool participants no later than 45 days after the due date for such report. This relief does not foreclose a CPO from requesting an additional extension of time not to exceed a total of 180 days from the end of the pool’s fiscal year consistent with CFTC regulation 4.22(f).
  3. Pool Periodic Account Statements under CFTC Regulations 4.7(b)(2) or 4.22(b).  Any requirement that a CPO distribute periodic account statements to pool participants on either a monthly or quarterly basis under CFTC regulations 4.7(b)(2)or 4.22(b)(3) provided that such statements are distributed to participants within 45 days of the end of the reporting period for all reporting periods ending on or before 30 April 2020.

See https://www.cftc.gov/PressRoom/PressReleases/8136-20


13 March 2020

SEC provides regulatory relief for funds and investment advisers

The U.S. Securities and Exchange Commission (SEC) announced regulatory relief for funds and investment advisers whose operations may be affected by Covid-19. The relief covers in-person board meetings and certain filing and delivery requirements for certain investment funds and investment advisers.  The impacts of the coronavirus may delay or prevent funds and advisers operating in affected areas from meeting certain regulatory obligations due to restrictions on large gatherings, travel and access to facilities, the potential limited availability of personnel and similar disruptions.  The relief is designed to enable funds and advisers to meet those obligations and to continue their operations, while recognising that there may be temporary disruptions outside of their control. The relief provides up to an additional 45 days for funds and investment advisers to satisfy the relevant requirements where their operations may be affected by Covid-19. The SEC issued separate orders pertaining to the requirements under the Investment Advisers Act and under the Investment Company Act. 

For anyone seeking to rely upon an order, attention is directed to the various conditions, including, as applicable, the requirements to notify SEC staff of the intention to rely upon the order and to disclose information on its website about its reliance upon the order.

Registered investment advisers and exempt reporting advisers are given relief in respect of their filing and delivery obligations in relation to Form ADV (form and brochure) or Form PF, as applicable, to file and deliver as soon as practicable, but no later than forty five (45) days after the original filing or delivery due date which is on or after 13 March 2020, but on or prior to 30 April 2020. To rely on the order, the registered investment adviser or exempt reporting adviser must promptly email the SEC and disclose on its public website the following information: (i) that it is relying on the order, (ii) a brief description of the reasons why it could not make its filing or delivery on a timely basis, and (iii) the estimated date by which it expects to make its filing or delivery. Advisers using this relief are required to publicly post that they are relying on the order.


13 March 2020

NFA issues notice on Branch Office requirements

The National Futures Association (NFA), in light of the developments around Covid-19, published a notice stating it will not pursue a disciplinary action against an NFA member that permits an Associated Person (AP) to temporarily work from locations not listed as a branch office and without a branch manager provided that the member implements alternative supervisory methods to adequately supervise the APs' activities and meet its recordkeeping requirements. Firms should also ensure that these procedures are documented. NFA expects that these APs will return to the Member's main office or listed branch office location once a Member firm is no longer operating under contingencies pursuant to its business continuity plan. The NFA normally requires a member firm (other than a swap dealer) to list as a branch office on its Form 7-R any location other than the member’s main business address from which APs are engaged in activities requiring registration. NFA understands that the current situation may necessitate alternative work arrangements.


13 March

SEC provides guidance to promote continued shareholder engagement

The U.S. Securities and Exchange Commission (SEC) has issued guidance to assist public companies, investment companies, shareholders and other market participants affected by Covid-19 with their upcoming annual shareholder meetings. The guidance is designed to facilitate the ability of companies to hold these important meetings, including through the use of technology and engage with shareholders while complying with the federal securities laws.  The SEC reminds all parties to consider their own specific facts and circumstances in determining the need for any additional measures beyond the actions discussed in the guidance and encourages all parties and intermediaries involved in the proxy voting process – including broker-dealers, transfer agents and proxy service providers – to be flexible and work collaboratively with one another. The SEC recommends parties to consider (i) changing the date, time or location of an annual meeting; (ii) hold “virtual” shareholder meetings; and (iii) provide shareholder proponents or their representatives the opportunity to present their proposals through alternative means, such as by phone, during the 2020 proxy season.

The amendments would also provide for an additional method of verifying a potential purchaser's status as an accredited investor under Rule 506(c) under the Securities Act and change the financial information that must be provided to non-accredited investors in Rule 506(b) private placements to align with the financial information that issuers must provide to investors in Regulation A offerings. By aligning the disclosure requirements, the SEC believes that additional issuers may be willing to include non-accredited investors in their offerings pursuant to Rule 506(b), which would expand investment opportunities for those investors.

 

 

2019 Developments (USA)

18 December 2019

Effective date for amendments to NFA requirements related to CTA performance reporting and disclosures

The National Futures Association's Compliance Rule 2-34 and the related Interpretive Notice entitled CTA Performance Reporting and Disclosures establish performance reporting and disclosure requirements for commodity trading advisor (CTA) Members. NFA recently amended these requirements. These amendments will become effective on February 1, 2020.

CTAs will not be required to obtain or provide amended written confirmations to existing QEP clients solely to provide information on how cash additions, cash withdrawals and net performance affect nominal account size. However, if a CTA or QEP client amends an existing confirmation for other reasons, the CTA must ensure that the amended confirmation must include this information. More information on these amendments is available in the August 29, 2019 submission letter to the CFTC.


17 December 2019

Court finds fund a "beneficial owner" subject to Section 16 despite delegation to investment adviser

A federal district court found a private fund to be a “beneficial owner” subject to Section 16 of the Securities Exchange Act of 1934, even though the fund had delegated voting and investment power to its investment adviser. Delegation has been relied upon by private funds in taking the position that the fund is a not a “beneficial owner” subject to Section 16. This ruling is likely to attract the interest of the Section 16(b) plaintiff’s bar, which reviews SEC filings for potential theories of private litigation.


17 December 2019

Effective Date for Amendments to NFA's Interpretive Notice

The National Futures Association's Compliance Rule 2-13 and the related Interpretive Notice entitled Compliance Rule 2-13: Break-Even Analysis require commodity pool operator (CPO) Members using a disclosure document under CFTC Regulation 4.21 to include a specified break-even analysis in that document. The NFA recently amended the Interpretive Notice to provide additional guidance for preparing and presenting this break-even analysis and to update the break-even analysis example to illustrate these clarifications. These amendments will become effective on February 1, 2020.

More information on these amendments is available in the August 29, 2019 submission letter to the CFTC.


10 December 2019

CFTC Amends Part 4 Rules

The CFTC has adopted a series of amendments to Part 4 of the CFTC’s regulations in two separate adopting releases.  The rule amendments will become effective on 9 January 2020.

In the first release, titled “Registration and Compliance Requirements for Commodity Pool operators (CPOs) and Commodity Trading Advisors; Family Offices and Exempt CPOs“, the CFTC (i) provides exemptive relief for family offices, (ii) adopts exemptive relief consistent with the JOBS Act by permitting general solicitations, and (iii) clarifies that non-U.S. persons, regardless of their financial sophistication, may invest in exempt pools.  The CFTC chose not to take forward the previously proposed amendments based on Staff Advisory 18-96 and the proposed prohibition on statutory disqualifications for certain exempt CPOs.

In the second release, titled “Registration and Compliance Requirements for Commodity Pool Operators and Commodity Trading Advisors: Registered Investment Companies, Business Development Companies, and Definition of Reporting Person“, the CFTC provides clarification that the exclusion from the CPO definition currently provided for registered investment companies (RICs) should be claimed by the entity most commonly understood to solicit for or “operate“ the RIC, i.e., its investment adviser. When an excluded CPO (that is not the investment adviser) of such RIC is required to annually reaffirm its notice of exclusion, (i.e., within 60 days of the calendar year-end), the excluded CPO entity should simply allow the existing notice to expire, and the registered investment adviser of such RIC will file a new notice pursuant to Regulation 4.5(c), prior to the expiration of the other existing notice. Compliance for this is required by 1 March 2021.  The CFTC also adds a similar exclusion for BDCs.   and eliminates the Form CPO-PQR and CTA-PR filing requirements for (i) CPOs who operate only pools for which the CPO has claimed either a definitional exclusion under Regulation 4.5, or an exemption from CPO registration under Regulation 4.13 and (ii) registered CTAs that otherwise meet the terms of the exemptions provided in Regulations 4.14(a)(4) or 4.14(a)(5).


4 December 2019

FSOC Non-Bank SIFI Designation Guidance

The U.S. Financial Stability Oversight Council (FSOC) has published its final revised interpretive guidance to supersede its earlier 2012 guidance regarding the designation of non-bank systemically important financial institutions allowing the FSOC to require supervision and regulation by the Board of Governors of the Federal Reserve System.  The new guidance will be effective thirty days after the adopting release is published in the Federal Register.

The new FSOC guidance brings several key changes to the 2012 guidance, starting with an initial activities-based approach.  FSOC will monitor diverse financial markets, in consultation with relevant regulatory agencies, to identify products, activities or practices that could pose risks to financial stability (i.e., the likelihood that specific events or developments could impair financial markets to a degree that would be sufficient to inflict significant damage on the broader economy). If it identifies a potential risk to U.S. financial stability in the first step, then in the second step, FSOC will work with the relevant financial regulatory agencies to seek the implementation of appropriate actions to address the identified risk.  Any such actions would be subject to the usual administrative procedure constraints of rulemaking, although it would be FSOC rather than the primary financial regulatory agency that would be responsible for producing the cost-benefit analysis.  FSOC can still pursue an entity-specific approach though if a potential risk cannot be adequately addressed through an activities-based approach.

With respect to the entity-specific approach, FSOC has adopted a two-stage model to replace the previous three-stage process emphasised in its earlier 2012 guidance. The previous stage one, whose purpose was to use a certain number of standardised metrics to identify nonbank financial companies for further evaluation, has been removed. FSOC has included a significant number of adjustments that intend to facilitate FSOC’s transparency and engagement. One stated objective of these adjustments is to provide firms under review with stronger visibility into the aspects of their businesses that may present a risk to financial stability.

The final guidance also removes the six-category framework described in the 2012 Interpretative Guidance whose purpose was to shape the evaluating process for a potential determination.  FSOC’s analytical process for assessing the likelihood of a firm’s actual financial distress under section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act has been revised and includes factors such as leverage, reliance on short-term funding, maturity transformation, potential risks associated with asset reevaluation, etc. If FSOC identifies a firm for potential action under section 113, FSOC must perform a cost-benefit analysis prior to making a determination and may only proceed if the expected benefits to financial stability from the determination are determined to justify the expected costs that such a determination would impose.


4 December 2019

2019 FSOC Annual Report

FSOC published its 2019 annual report, which discusses emerging and potential threats and provides recommendations to alleviate them. According to FSOC, risks to U.S. financial stability remain moderate and much of the uncertainty stems from events outside the United States. Domestically, one key risk monitored by FSOC concerns the high level of debt and leverage in the corporate sector, which could exacerbate the effects of a sharp reversal in economic conditions. In addition, the cessation or degradation of LIBOR has the potential to significantly disrupt trading in many important types of financial contracts. For that purpose, FSOC recommends that the Alternative Reference Rates Committee (ARRC) continues its work to facilitate an orderly transition from LIBOR, notably through the promotion of the SOFR as an alternative reference rate.

In the report, FSOC identifies other types of domestic risks and actions to reduce them.  It suggests that the largest financial firms should maintain sufficient capital and liquidity to ensure their resiliency against economic and financial shocks. Close oversight of nonbank companies should continue as well. Given the critical role of central counterparties (CCPs), agencies should continue to monitor these actors, notably by promoting further recovery planning and development of resolution plans. In addition, authorities should undertake a focused review of the unexpected high volatility observed in mid-September 2019 in the critical market that is wholesale funding. Finally, relevant regulatory agencies should review the available data on private funds to assess whether and how these market players may pose a risk to financial stability.

Regarding digital aspects, cyber risk could be reduced through better cooperation between the private and public sectors. Authorities should also evaluate the risks notably posed by the increasingly automated trading systems, new emerging uses of digital assets and distributed ledger technology. FSOC recommends that regulators and market participants continue to work together to improve the coverage, quality and accessibility of financial data, as well as to improve data sharing among relevant authorities.


3 December 2019

SEC proposes proxy voting advice rule amendments

The U.S. Securities and Exchange Commission (SEC) issued two notices of proposed rulemaking amending the requirements to submit and resubmit shareholder proposals ('Shareholder Proposal’) and amending the rules governing proxy solicitations (‘Proxy Voting Advice Proposal’) that are designed to enhance the accuracy and transparency of the information that proxy advisors firms provide to investors and others who vote on behalf of investors.

The Shareholder Proposal would heighten the eligibility criteria to submit a proposal for inclusion in an issuer’s proxy statement by creating a three-tiered system based on the value of shares owned and the duration of ownership. It would also revise the submission and resubmission thresholds and impose additional requirements.

The Proxy Voting Advice Proposal would add conditions to the exemptions from the information and filing requirements of the proxy solicitation rules that proxy advisory firms currently rely on. In addition, it would codify recent SEC guidance regarding when the provision of proxy voting advice constitutes a solicitation for the purposes of the proxy rules. The Proxy Voting Advice Proposal would also provide examples to clarify when failure to disclose certain information in the proxy voting advice could be considered misleading. 


26 November 2019

Fraud enforcement

The SEC announced the revocation of the registration of a private credit manager for committing securities fraud in connection with hiding losses in its flagship fund abd attempting to sell $60 million of fake loans to clients.


25 November 2019

SEC re-proposes rules on the use of derivatives by registered investment companies

The SEC has re-proposed rule 18f-4 (FR version here) which is designed as an exemption from the senior securities restrictions of section 18 of the Investment Company Act.

Under the proposed rule, derivatives transactions will not be considered senior securities and need not be counted toward the asset coverage limits if:

  1. The fund adopts a written derivatives risk management program reasonably designed to manage the fund’s derivatives risks and to reasonably segregate the functions associated with the program from the portfolio management of the fund.  The program must include:
    1. A risk identification and assessment;
    2. Risk guidelines;
    3. Stress testing;
    4. Backtesting;
    5. Internal reporting and escalation; and
    6. Periodic review.
  2. The fund must comply daily with the relative VaR test (VaR of the fund’s portfolio cannot exceed 150% of the VaR of a designated reference index) or, if the derivatives risk manager is unable to identify a designated reference index that is appropriate for the fund taking into account the fund’s investments, investment objectives and strategy, the absolute VaR test (VaR of the fund’s portfolio cannot exceed 15% of the value of the fund’s net asset) and perform certain remediation and reporting if not in compliance.
  3. Funds meeting certain exceptions for limited derivatives users would not have to comply with 1 or 2 above.
  4. The fund’s board designates a derivatives risk manager;
  5. The derivatives risk manager provides a written representation and report to the board on the derivatives risk management program on implementation and annually thereafter
  6. Certain recordkeeping and retention requirements are met.

The proposed rule also covers how funds can use reverse repurchase agreements and unfunded commitment agreements without violating section 18’s limits.

The prior version of rule 18f-4 proposed in 2015 had four basic requirements that had to be met for registered investment companies to use derivatives transactions:

  1. a requirement to comply with one of two alternative portfolio limitations designed to limit the amount of leverage a fund may obtain through derivatives and other senior securities transactions;
  2. asset segregation for derivatives transactions, designed to enable a fund to meet its derivatives-related obligations;
  3. a derivatives risk management program requirement for funds that engage in more than limited derivatives transactions or that use complex derivatives; and
  4. reporting requirements regarding a fund’s derivatives usage.

The 2015 proposal also treated “financial commitment transactions” (e.g., reverse repurchase agreements, short sale borrowing) differently from other derivatives transactions.

The SEC appears to have moved away from the sorts of portfolio limits and asset segregation requirements it originally proposed in 2015.

AIMA’s joint response with MFA to the 2015 proposal can be accessed here.

The new proposing release also includes proposals for:

  • enhancing reporting on Form N-PORT, Form N-LIQUID and Form N-CEN to improve reporting around funds’ use of derivatives;
  • requiring broker-dealers and registered investment advisers to perform certain due diligence in relation to retail customers’ transactions in certain leveraged/inverse investment vehicles; and
  • allowing certain leveraged/inverse ETFs to operate without the expense and delay of obtaining an exemptive order.

Comments on this proposal are due 24 March 2020. 


22 November 2019

Improper allocation of trading expenses

The SEC issued an Order Instituting Administrative and Cease-And-Desist Proceedings, Making Findings and Imposing Remedial Sanctions and a Cease-And-Desist Order in the matter of Channing Capital Management LLC arising from Channing’s failure to adequately implement written policies and procedures governing the allocation of trading commission costs associated with aggregate (or block) securities trades on behalf of its clients.  Channing’s written trade aggregation and allocation policies and procedures required it to allocate the transaction costs associated with block trades on a pro-rata basis for all clients participating in a block trade. Separate written policies and procedures also in place required Channing to follow the requirements and restrictions outlined in each client’s investment management agreement, including limitations placed on trading commissions. As a result, Channing’s clients participating in the same block trade but at different commission rates. Channing agreed to cease and desist from engaging in similar activities in the future, was censured and fined $50,000.


13 November 2019

Reminder of 1 January 2020 effective date for amendments to the NFA's promotional materials rules and interpretive notices

In Notice to Members I-19-25, the NFA reminds members (including CPOs and CTAs) of the upcoming 1 January 2020 effective date of the revised requirements for member communications with the public and the use of promotional material.  The new requirements expand the scope of the prior rule significantly and members should consider the impact these changes will have on their operations.  These new requirements go further than what the SEC has recently proposed with regard to advertising by investment advisers.


5 November 2019

SEC proxy voting advice rule amendments

The SEC issued two notices of proposed rulemaking amending the requirements to submit and resubmit shareholder proposals ('Shareholder Proposal’) and amending the rules governing proxy solicitations (‘Proxy Voting Advice Proposal’) that are designed to enhance the accuracy and transparency of the information that proxy advisors firms provide to investors and others who vote on behalf of investors.

The Shareholder Proposal would heighten the eligibility criteria to submit a proposal for inclusion in an issuer’s proxy statement by creating a three-tiered system based on the value of shares owned and the duration of ownership. It would also revise the submission and resubmission thresholds and impose additional requirements,

The Proxy Voting Advice Proposal would add conditions to the exemptions from the information and filing requirements of the proxy solicitation rules that proxy advisory firms currently rely on. In addition, it would codify recent SEC guidance regarding when the provision of proxy voting advice constitutes a solicitation for the purposes of the proxy rules. The Proxy Voting Advice Proposal would also provide examples to clarify when failure to disclose certain information in the proxy voting advice could be considered misleading.

Comments on these proposals are due 3 February 2020.


4 November 2019

SEC proposes changes to advertising and cash solicitation rules for investment advisers

The SEC has proposed amendments to the rules that prohibit certain investment adviser advertisements and payments to solicitors, respectively, under the Advisers Act.  The SEC wants to modernise the rules to address market developments and to reflect advancements in technology; the expectations of investors seeking advisory services; the evolution of industry practices; and the need to improve the quality of information available to investors, enabling them to make more informed choices.

The proposed amendments to the Advertising Rule (Rule 206(4)-1) would:

  • replace the current rule’s broadly drawn limitations with more principles-based provisions;
  • update the definition of “advertisement”;
  • prohibit certain advertising practices, e.g., making a material claim or statement that is unsubstantiated;
  • permit the use of testimonials, endorsements, and third-party ratings (subject to certain conditions); and
  • include tailored requirements for the presentation of performance results based on an advertisement’s intended audience.

The proposed amendments to the Solicitation Rule (Rule 206(4)-3) would:

  • expand the scope to cover solicitation arrangements involving all forms of compensation, rather than only cash (subject to a new de minimis threshold);
  • modify the current solicitor disclosure to include additional information about a solicitors’ conflict of interest; and
  • update other aspects of the rule, such a who is disqualified from acting as a solicitor under the rule.

The SEC has also proposed amendments to Form ADV and the books and records rule (Rule 204-2) which would reflect the changes proposed to the advertising and solicitation rules.

Comments on these proposals are due 10 February 2020.


1 November 2019

NFA Notice to Members I-19-22

The NFA issued this notice to members to remind them that the NFA's Swaps PRoficiency Requirements come into effect 31 January 2020 and that each NFA member with associated persons required to take these requirements (which includes registered CPOs and CTAs -- see note regarding Notice to Members I-19-20 below) needs to designate at lest one Swaps Proficiancy Requirements Administrator (SPR Admin) to coordinate enrollment and track progress.  The SPR Admin must also be an ORS Security Manager.  The notice to members sets out how designations of an SPR Admin can be made.


31 October 2019

FTC proposes rule changes increasing reporting for funds making minority investments in foreign issuers

The U,S. Federal Trade Commission has proposed regulations that, if adopted, will increase the reporting obligations under the Hart Scott Rodino Antitrust Improvements Act (“HSR”) for many U.S. managed/non-U.S. domiciled investment funds and non-U.S. managed/non-U.S. domiciled investment funds making minority investments in non-U.S. issuers.  Such entities currently rely on the so-called “foreign to foreign” minority shareholding exemption provided by Regulation § 802.51(b) and would no longer be able to do so following these proposed changes which seek to narrow what constitutes a foreign entity or foreign issuer.  Minority investors may also find it very difficult to ascertain whether the company in which it wishes to invest is eligible for the “foreign to foreign” exemption due to proposed changes to the test for what constitutes an entity’s “principal offices.”  The proposed regulations, if adopted, will increase the number of HSR filings by investment funds (both U.S. and non-U.S. managed) making minority investments in the voting securities of Non-U.S. issuers.  Comments on this rule proposal are due by 30 December 2019


 

24 September 2019

OCIE risk alert on principal and agency cross trading compliance issues

The OCIE has published a risk alert listing examples of the most common compliance issues identified relating to principal trading and agency cross transactions under Section 206(3) of the Advisers Act, including: (i) conducting a principal transaction without meeting all the requirements of Section 206(3); (ii) failing to produce documentation of disclosure and consent; and (iii) engaging in agency cross transactions after communicating with clients that such transactions would not occur.

The risk alert reminds advisers (including both SEC-registered investment advisers and those relying on an exemption from registration) of the requirements under the Advisers Act and related rules.  OCIE encourages advisers to review their written policies and procedures and the implementation of those policies and procedures to ensure that they are compliant with principal trading and agency cross transaction provisions of the Advisers Act and the rules thereunder.


21 August 2019

Proxy voting guidance

The SEC has published guidance to assist investment advisers in fulfilling their proxy voting responsibilities.  The guidance states that investment advisers may establish a variety of voting arrangements with their clients to comply with their fiduciary duty.  For example, the investment adviser and its client may agree that proxy voting authority would not be exercised on certain types of matters if not in the best interest of a client. An investment adviser that retains a proxy advisory firm to assist in proxy voting should also review the proxy advisory firm’s policies and procedures for obtaining current and accurate information on which it makes its voting recommendations.

In a separate release, the SEC determined that proxy voting advice provided by proxy advisory firms would constitute a ‘solicitation’ under the federal proxy rules, thereby clarifying that they are subject to anti-fraud rules concerning materially false or misleading statements. 

In light of the guidance, AIMA encourages adviser members to review their policies and procedures on proxy voting.  Advisers should also consider other proxy regimes they are subjected to, including the EU’s Shareholder Rights Directive II.


12 August 2019

Insider Trading Enforcement

The SEC has announced it is taking enforcement action against a junior analyst at a global investment bank for violating the antifraud rules.  The analyst, during the course of his regular job, learned about a possible acquisition transaction and then proceeded to buy call options (in an account that was not subject to preclearance and the existence of which was concealed from his employer) that he made a profit on shortly after the acquisition transaction was complete of more than $98,000.  The SEC's complaint charges analyst with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief.  The US Attorney is also lodging criminal charges against the analyst.  


Reminder

Form SHL Due 30 August 2019

Investment advisers to U.S. funds with non-U.S. investors with a value of $100 million or more will need to consider whether they have an obligation to file Form SHL (the Treasury International Capital Benchmark Form) to report information regarding the foreign ownership of U.S. securities.  This Form is meant to be filed every five years and requires data of 30 June 2019 to be reported to the U.S. Treasury by no later than 30 August 2019.  The Federal Register notice can be reviewed here.


18 July 2019

SEC Chairman's Remarks at SEC Staff Rountable

Chairman J. Clayton delivered this speech on "Our Periodic Reporting System and Regulatory Requirements" at the SEC Staff Roundtable on Short-Term/Long-Term Management of Public Companies.


15 July 2019

New CFTC Chairman

Dr. Heath P. Tarbert officially began his term today as the 14th Chairman of the CFTC, succeeding J. Christopher Giancarlo.


12 July 2019

SEC Staff Statement on Risks related to LIBOR Transition

The  SEC staff has published a statement highlighting the risks for market participants as they consider a transition awayfrom LIBOR. The statement encourages people to "identify existing contracts that extend past 2021 to determine their exposure to LIBOR and to consider whether contracts entered into in the future should reference an alternative rate to LIBOR or include effective fallback language" and provides guidance on how registrants might approach the risks associated with the discontinuation of LIBOR. 


9 July 2019

New SEC Commissioner Sworn In

Allison Herren Lee was sworn into office ysterday as an SEC Commissioner.


18 June 2019

SEC Publishes Concept Release on Harmonization of U.S. Securities Offering Exemptions

The SEC has published a concept release in which the SEC seeks comments on potential ways to improve the U.S. exempt offering framework.  The SEC is interested in promoting capital formation and improving investment opportunities while maintaining appropriate levels of investor protection.  The concept release walks through the array of exempt offerings and poses a number of questions around possible improvements to each.  Among these are the exemptions often used by alternative funds – Rule 506(b) and Rule 506(c) from Regulation D under the Securities Act of 1933, as amended.  The release also re-examines the “accredited investor” definition.  The SEC is also seeking comment about whether it should take steps to facilitate investment in exempt offerings through pooled investment funds (especially through closed-end funds, including interval funds) and whether retail investors should be allowed greater exposure to pre-IPO growth stage companies through pooled investment funds.  Comments on this concept release are due on 24 September 2019


6 June 2019

SEC Rulemaking (Standards of Care and Fiduciary Duty)

The SEC voted to adopt a package of rules and interpretations aimed at enhancing retail investors’ relationships with investment advisers and broker-dealers. Specifically, these actions include new Regulation Best Interest, the new Form CRS Relationship Summary, an SEC interpretation of the fiduciary duties of advisers and an SEC interpretation of the “solely incidental” clause of the broker-dealer exclusion under the Investment Advisers Act of 1940, as amended ('Advisers Act'). The Final Fiduciary Interpretation is intended to reaffirm, and in some cases clarify, certain aspects of an investment adviser’s fiduciary duty under the Advisers Act. It does not itself create any new legal obligations for advisers. Chairman Jay Clayton remarked that the new package of rules is “designed to increase transparency and comparability among firms, and to preserve access (in terms of choice and cost) to a variety of types of advice relationships and investment products” (his statement here). In a 3-to-1 vote, Commissioners Clayton, Hester Peirce and Elad Roisman voted in favour of the package with Commissioner Robert Jackson voting against (his statement here). Regulation Best Interest and Form CRS will become effective 60 days after they are published in the Federal Register and will include a transition period until 30 June 2020. The interpretations under the Advisers Act will become effective upon publication in the Federal Register.


4 June 2019

SEC Enforcement Action (Valuation)

The SEC has announced that a private fund manager in the mortgage-backed securities space has agreed to a $5 million to settle charges arising from compliance deficiencies that contributed to the firm failing to properly value securities held in the manager's flagship fund.  The fund manager's chief investment officer has also agreed to pay a penalty of $250,000.  According to the SEC, the firm "failed to have policies and procedures to address the risk that its traders were undervaluing securities and selling for a profit when needed.  The firm also failed to guard against its traders’ providing inaccurate information to a pricing vendor and then using the prices it got back to value bonds.  The CIO oversaw the valuation of certain assets in the flagship fund and approved valuations that the traders flagged as “undervalued” with notations to “mark up gradually.”  Also overseeing valuation was a committee comprised of the principal’s relatives and others without relevant expertise."


23 May 2019

OCIE Risk Alert (Data Security)

OCIE has published a Risk Alert on Safeguarding Customer Records and Information in Network Storage – Use of Third Party Security Features.  The alert highlights risks associated with investment advisers storing electronic customer records and information in various network storage solutions including on a cloud-based storage system.


Week of 20 May 2019

Meetings this week:

Everyone logged in can see this.

Meetings in week of 20-24 May

Who Agency AIMA Staff
Robert Jackson, Commissioner SEC Jiri Krol
Raquel Fox, Director of Office of International Affairs SEC Jiri Krol

 


19 April 2019

CFTC Rulemaking (Annual Privacy Notices)

The CFTC revised its Regulation 160.8 to amend the requirements for registrants (including CPOs and CTAs) to provide annual privacy notices to customers in certain circumstances. The final rule can be reviewed here and has an effective date of 28 May 2019.


25 March 2019

NFA Swaps Proficiancy Exams

NFA has imposed a new swaps proficiency exam requirement on Associated Persons (“APs”) of registered CPOs and CTAs that trade CFTC-regulated swaps. APs will be able to take the exam beginning January 2020, and must pass the exam by 31 January 2021. Registered CPOs and CTAs that trade swaps should develop a program to ensure all APs pass the proficiency exam before 31 January 2021. Relevant background can be accessed through the links below:


12 March 2019

SEC Staff -- Division of Investment Management (Digital Assets)

Non-DVP Arrangements and Digital Assets Under the Custody Rule

On 12 March 2019, the staff of the Division of Investment Management of the US Securities and Exchange Commission published a letter to the Investment Adviser Association requesting comment from all interested parties on certain custody rule issues under the Investment Advisers Act of 1940 (“Advisers Act”).  The letter requests comment on (1) investment adviser and custodial trading practices that are not processed or settled on a delivery vs. payment basis (so called “Non-DVP transactions”) and (2) custody of digital assets. 

AIMA is considering whether it should write a letter to the staff providing some comments, but would like to hear from AIMA members as to whether or not they have concerns about these issues and if they have information that would be responsive to the staff’s questions, which are described in more detail below.  The staff is requesting comment on these issues because they consider the issues surrounding the custody rule important enough to address them via rulemaking, not via a staff no-action letter.  Accordingly, it may take several years to resolve these issues and your input is important to resolving them in a way that is both appropriate and cost-effective.

In any event, the staff has publicly indicated that it expects advisers to have controls in place to avoid misappropriation of customer funds regardless of the treatment of these types of transactions and assets under the custody rule (Rule 206(4)-2 under the Advisers Act).

Non-DVP Issues

If an adviser engages in Non-DVP transactions for a client (including a separate account client or a private fund where the adviser would not otherwise be deemed to have custody), it could be deemed to have custody under the custody rule.  This would mean that the adviser would have to comply with the custody rule for the separate account or fund.  For a separate account, this would include, among other things, having an annual surprise examination by an accounting firm.  For a fund, this would include, among other things, having annual audited financial statements sent to fund investors.

Some examples of what the staff considers to be Non-DVP transactions are:

  1. An adviser advises a separate account client and some of the investments made by the separate account are private funds.  The adviser has the authority to authorize the client’s custodian to wire funds to the private fund to pay the subscription amount or satisfy a capital call.  The adviser could also be authorized to request a redemption from the private fund.  The SEC staff does not believe that this is delivery vs. payment because the money is going into or out of the private fund (not into or out of an account in the client’s name).  In this case, sometimes the interests or shares in the private fund are also not held on the custodian’s books, which means that the custodian may not be able to confirm that the cash was in fact invested in the private fund.
  2. The adviser advises a client to invest in derivatives.  The adviser has the authority to cause the custodian to wire funds to satisfy margin calls or to settle the derivative on a net basis.  In the case of a margin call, the cash is going out of the client’s account and into the account of a derivative counterparty.
  3. The adviser advises a client to invest in loans - for example, in the syndicated loan market where ownership of a loan is transferred by the loan agent on receipt of notification from the buyer and the seller, without regard to whether and when payment is made.

The staff requests comment on the following questions:

  • •           What types of instruments trade on a Non-DVP basis? How do these instruments trade?
  • •         Describe the risks of misappropriation or loss associated with various types of Non-DVP trading. What controls do investment advisers have in place to address the risks of misappropriation related to such trading? What types of independent checks, other than a surprise examination, do investment advisers use currently to test these controls?
  • •         Are there particular types of securities transactions settled on a Non-DVP basis that present greater or lesser risk of misappropriation or loss?
  • •         What role do custodians play in the settlement process of Non-DVP trading? What role do they play in mitigating risks of misappropriation or loss arising from such trading?
  • •         For advisers who currently obtain surprise examinations, what is the marginal cost of adding accounts that trade on a Non-DVP basis to the list of client accounts provided to the accountant performing the surprise examination of a sample of client accounts?
  • •         What challenges do investment advisers have in obtaining surprise examinations regarding Non-DVP traded securities? How do advisers to unaudited private funds that are subject to surprise examinations address these challenges?
  • •         Are there types of external checks that could be more effective and less costly than surprise examinations with respect to Non-DVP traded securities?
  • •         To what extent do Non-DVP assets appear on client account statements from qualified custodians? To what extent does an investment adviser have any influence over, or input into whether and how such assets appear on account statements? Are there any assets that trade on a Non-DVP basis that would not appear on a qualified custodian’s account statements?
  • •        To what extent could evolving technologies, such as blockchain/distributed ledger technology (“DLT”), provide enhanced or diminished client protection in the context of Non-DVP trading?

Digital Assets

The staff is also interested in gathering additional information regarding digital assets to further inform its recommendations to the SEC.  The staff has requested comment on the following questions:

  •  •        What challenges do investment advisers face in complying with the custody rule with respect to digital assets? What considerations specific to the custody of digital assets should the staff evaluate when considering any amendments to the custody rule? For example, are there disclosures or records other than account statements that would similarly address the investor protection concerns underlying the Custody Rule’s requirement to deliver account statements?
  • •         To what extent are investment advisers construing digital assets as “funds,” “securities,” or neither, for purposes of the custody rule? What considerations are advisers applying to reach this conclusion?
  • •         To what extent are investment advisers including digital assets in calculating regulatory assets under management for purposes of meeting the thresholds for registering with the SEC? What considerations are included within this analysis?
  • •        To what extent do investment advisers use state chartered trust companies or foreign financial institutions to custody digital assets? Have these investment advisers experienced similarities/differences in custodial practices of such trust companies as compared to those of banks/broker-dealers?
  • •          What role do internal control reports, such as System and Organization Controls (“SOC”) 1 and SOC 2 reports (Type 1 and 2), play in an adviser’s evaluation of potential digital asset custodians? What role should they play?
  • •         How should concerns about misappropriation of digital assets be addressed and what are the most effective ways in which technology can be leveraged to address such concerns? How can client losses due to misappropriation of digital assets most effectively be remedied?
  • •          What is the settlement process of peer-to-peer digital asset transactions (i.e., transactions where there is no intermediary) and what risks does this process present? What is the settlement process for intermediated transactions in digital assets, such as those that execute on trading platforms or on the over-the-counter markets, and what risks does this process present?
  • •          To what extent do investment advisers construe digital assets as “securities” for purposes of determining whether they meet the definition of an “investment adviser” under section 202(a)(11) of the Advisers Act? What considerations are included in such an analysis?
  • •           To what extent can DLT be used more broadly for purposes of evidencing ownership of securities? Can DLT be useful for custody and recordkeeping purposes for other types of assets, and not just digital asset securities? What, if any, concerns are there about the use of DLT with respect to custody and recordkeeping?

Please let Jennifer Wood if you would like to contribute to a response.


 

 

Glossary

Glossary

AIF alternative investment fund
AIFM alternative investment fund manager
AIFMD Alternative Investment Fund Managers Directive (Directive 2011/61/EU)
CFTC Commodity Futures Trading Commission
CPO commodity pool operator
CTA commodity trading advisor
DOJ Department of Labor
NFA National Futures Association
OCIE SEC's Office of Compliance Inspections and Examinations
SEC Securities and Exchange Commission