The U.S. House Financial Services Committee (FSC) approved four bills designed to encourage capital formation and amend gaps in Dodd-Frank. The most popular bill in both the House and Senate  reduces regulatory burdens on small companies, enabling them to raise capital and go public. The White House, which called for reforms to drive small business group, also supports the measure.

The proposed ruling establishes a new category of companies, “emerging growth companies.” These companies are defined as having less than $1 billion in annual revenues upon registration with the Securities and Exchange Commission (“SEC”). The law would provide the companies with an “on-ramp,” encouraging they go public before full compliance with SEF regulations. The regulations would be phased in over a five-year period, or until the company could afford the costs.

The committee approved the measure in a 54-1 vote. The U.S. House of Representatives will now vote on the bill.

Read more about the proposed measure.

© David Paul Ohmer

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

The Securities and Exchange Commission (“SEC”) adopted a rule that will raise the financial requirement for investors who pay performance fees, and exclude the investor’s home value from the net worth calculation. The increase in thresholds was a requirement of the Dodd-Frank Act. Excluding property value was not required by Dodd-Frank, but is consistent with other changes the SEC approved in December to determine who is an “accredited investor,” eligible to invest in certain unregistered securities opportunities.

Under the rule, registered investment advisers may charge clients performance fees if the client’s finances meets certain dollar thresholds, and are deemed to be “qualified clients.” Qualified clients are deemed able to bear the risks associated with performance fee arrangements.

To be considered a qualified client, individuals must have at least $1 million in assets under management with the adviser or a net worth of at least $2 million. Previously, qualified clients were required to have $750,000 under management, and a net worth of $1 million.

A grandfather provision to the ruling permits registered investment advisers to continue to charge clients performance fees for clients who were considered “qualified clients” before the rule change.

Under the revisions, the SEC will make adjustments to the thresholds every five years, accounting for inflation, to determine whether a client is a qualified client.

Read more about the changes in investment thresholds.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

The CFTC filed a federal court action in Puerto Rico, charging Angel Fernando Collazo and his companies, ACJ Capital, Inc. (ACJ) and Solid View Capital LLC with fraud and misappropriation. The defendants allegedly took $1 million from investors and misappropriated it. The CFTC froze the defendants’ assets and entered a preliminary injunction against Collazo and co.

The complaint alleges that Collazo solicited commodity pool participants (“CPO”) and claimed profitable returns. Allegedly, Collazo misappropriated the pool funds for personal uses, did not disclose the use of pool participant funds, misappropriated the profitability of pool trading accounts, and distributed false statements to the pool participants that showed substantial trading profits.

The CFTC will seek restitution to Collazo’s defrauded customers, disgorgement of gains, bans on trading and registration, and permanent injunctions against violations of CEA and CFTC regulations.

Read more about this enforcement action.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

The CFTC says it will move their enforcement staff to meet Dodd-Frank Act stipulations in 2012. Last year, the Commission failed to adequately supervise CME  Group Inc. (“CME”), the world’s largest future exchange, the Chicago Board of Trade, and ICE Futures Inc. The agency also neglected to meet its goals to set up automated surveillance alerts for the futures market and automating systems for market data.

CFTC Chairman Gary Gensler said of the shortcomings, “The agency’s performance is affected by the challenges of limited resources.”

The Commission said it planned to reassign staff in fiscal year 2013 to oversee applications for CFTC registration.

The CFTC and Securities Exchange Commission (“SEC”) are rewriting Dodd-Frank regulations, designing rules to have swaps guaranteed by central clearinghouses and traded on exchanges. The CFTC has been considering amendments to futures market oversight since last year, when MF Global collapsed. Gensler asked the agency’s staff to create policies to supervise organizations and brokers who self-regulate in the industry.

Read more about the CFTC’s possible organizational changes.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

The Indian government is investigating whether local Google and Yahoo branches violated the country’s foreign exchange (“forex”) laws. The Press Trust of India reported that Google may have breached a forex law while transferring money to Ireland and other foreign nations, and transferring investments from abroad.

The investigation is a continuation of a longstanding series of conflicts between web companies and Indian law. Last year, India enacted legislation deeming companies responsible for content posted on their websites, requiring content removal within 36 hours of a complaint.Google and Yahoo join 21 social networking websites, including Facebook, who have been brought to court in New Delhi for what the complainants call “objectionable content” on their websites. The content is deemed offensive to Hindus, Muslims, and/or Christians. Following complaint by an individual using the site, Google told one of the two Indian courts that it has removed some of the controversial content in compliance with the court order.

An official at the country’s finance ministry, which monitors forex transactions and money laundering activities, says that notices have been sent to the local units. A Google in India spokesperson said that the company has not yet received the notice. The spokesman told MarketWatch that, although he couldn’t comment on specific details, Google meets its obligation to shareholders, and makes “a very substantial contribution to local and national taxation and provide employment for close to 2,000 people in India.”

Read more about India’s forex investigation.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

President Obama will propose a 50 percent increase on the CFTC’s budget for the 2013 fiscal year, from a $205 million budget to $308 million.

The increase is intended to assist with the agency’s implementation of financial reforms and investigation into MF Global’s downfall. The MF Global investigation has been unfolding since October, and the Dodd-Frank Act enhanced the CFTC’s responsibilities.

Last year, the White House filed the same $308 million funding request for the 2012 fiscal year. The proposal failed to gain support in Congress, which instead increased the derivatives regulator’s budget by $3 million, up from the 2011 fiscal year. The CFTC’s budget has been a partisan debate, as Democrats seek additional resources and Republicans attempt to limit the agency’s spending as a mechanism to reduce government deficits.

It is predicted that the Obama administration will ask for user fees as funding for a large amount of the agency’s budget. The 2013 fiscal year will begin October 1.

Read more about the proposed increases to the CFTC’s budget.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

In the European equivalent of the Dodd-Frank Act, the European Union’s diplomats and European Parliament agreed to reconstruct the $700 trillion derivatives market. Reform in the European Markets Infrastructure Regulation (“EMIR”) will implement more safeguards on the derivatives market. EMIR is the European Commission’s answer to the G-20 mandate to make new regulation for the over-the-counter (“OTC”) derivatives market.

In the Financial Times, Michael Barnier, Europe’s top financial regulator, called the agreement an end to an era of “shady deals.” He said, “This will considerably increase financial stability and safety in the EU by preventing the situation where a collapse of one financial firm can cause the collapse of other financial firms. We are clearly learning the lesson of the 2008 crisis.”

EU banks, hedge funds, and other derivatives dealers will be encouraged to move away from unregulated OTC markets, which account for 95 percent of trades. Under the EMIR reform, trade repositories will audit OTC derivatives trading.  This is intended to prevent the financial system from default, and move control of OTC derivatives from opaque trading systems on Wall Street and large dealer banks in Europe to more transparent systems, viewed by market participants and regulators.

 Read more about the EU’s reforms.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

The CFTC finalized amendments involving guidelines for registration and compliance for commodity pool operators (“CPO”) and commodity trading advisors (“CTA”). The rule will require CPOs and CTAs to submit reports accounting for amount of assets in their pools and their use of capital. They will also describe counterpart risk, and trading and investment positions for each pool. The CFTC intends the amendments to increase transparency of futures and swaps markets and increase consumer protection.

Previously, operators were exempted from registering their CPOs if the operator only combined funds from qualified eligible persons (“QEP”) or accredited investors. Under the new rule, these operators are no longer exempt from registering pools comprised of funds from qualified eligible persons. Notices claiming exemption must now be annually filed with the CEA, and swap transactions must include disclosure documents describing certain risks.

The new reporting requirements will become effective on July 2, 2012. The CFTC approved the amendments by a 4-1 vote.

Additionally, the CFTC  proposed a rule that would reduce compliance burdens on registered investment advisors (“RIAs”).  Under the Investment Company Act of 1940, RIAs are registered with a state’s securities agency or the Securities and Exchange Commission (“SEC”), and are authorized to advise on securities. Under the amendments, RIAs are now required to register with both the SEC and with the CFTC as CPOs. Due to this cross-registration, RIAs may be subject to duplicate and potentially conflicting disclosure and reporting requirements. The proposed rule would synthesize CFTC and SEC requirements, and would therefore minimize RIA compliance burdens.

Read more about this CFTC amendment.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

The NFA fined Peregrine Financial Group Inc. for $700,000 on claims that it neglected to oversee its brokers and failed to implement anti-money laundering policies. According to the complaint, the Futures Commission Merchant (“FCM”) and forex dealer maximized commissions without regard for customers’ best interests. Allegedly, three of the group’s top executives, President Russell Wasendorf Jr., Director of Compliance Susan O’Meara, and Director of Managed Foreign Exchange Nolan J. Schiff, left four of its guaranteed introducing brokers (“GIBs”) unsupervised.  GIBs refer clients to open accounts at the futures firm. The compliant alleged that all four GIBs made deceptive sales solicitations. Wasendorf, O’Meara, and Schiff neither admitted nor denied the allegations in making their settlement.

In addition to the $700,000 settlement, the NFA ordered Peregrine to retain a consultant to review its existing procedures for supervising brokers and customer accounts and designate an AML officer. It is also prohibited from entering agreements with brokers for the next two years.

Peregrine has headquarters in Chicago and Cedar Falls, Iowa. The futures and forex broker also has branch offices in California, Florida, Illinois, Michigan, and New York.

Read more about the NFA settlement.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.

On February 7, the Securities Industry and Financial Markets (“SIFMA”) and the International Swaps and Derivatives Association (“ISDA”) asked a federal court to block CFTC position limits. Under the Dodd-Frank Act, the Commission curbed the number of contracts a trader can have, in an attempt to prevent excessive speculation in oil, gold and other commodity markets. The Wall Street groups claim that the caps would impose a burden on their industry, damage traders’ capacities to hedge against risks, and cause “irreparable harm” to consumers and markets.

SIFMA and ISDA represent J.P. Morgan, Goldman Sachs, Morgan Stanley, and hundreds of other securities firms, banks, and asset managers. In December, they filed two federal lawsuits against the CFTC. They also asked the US Appeals Court to delay the position limits. The appeals court dismissed the case in January on the grounds that a challenge to legislation must be heard by lower courts before it can be argued before the appeals court.

In yesterday’s most recent petition, the financial groups asked the U.S. District Judge Robert Wilkins to delay the CFTC’s rule while he considered their case. They told the court that a stay will “avoid imposing costs that the agency concedes will occur and that a majority of the (CFTC) commissioners determined would harm consumers and the markets as a whole.” According to the groups, the costs to the industry could never be recovered. They also said that the CFTC did not conduct the proper cost-benefit analysis before adopting the rule, and did not make any findings as to the limits necessity.

The CFTC narrowly approved the positions limit in October, squeaking by at 3 votes to 2. At the time, market analysts predicted that industry groups would bring legal action in the conservative D.C. Circuit courts, regarding the CFTC’s authority to preemptively impose position limits. In December, SIFMA and ISDA argued that the position limits were unjustified and went beyond the Commission’s authority. Traders call the limits politically motivated attempts to cap prices, that will increase price volatility and reduce liquidity.

Read more about the position limits.

CFTC LAW | Forex, Futures and Derivatives Regulatory News - Forex, Futures, and Commodities News and Analysis. Press release, rule summaries, and enforcement actions from the CFTC, NFA, SEC, FSA, and other agencies from around the world.