Jim Hamilton’s World of Securities Regulation

Farewell to Jim Hamilton's World of Securities Regulation: Introducing VitalLaw.com

noreply@blogger.com (Unknown) — Tue, 28 May 2024 13:35:00 +0000

After 18 years, we have made the difficult decision to discontinue updates on the Jim's Hamilton World of Securities Regulation blog. We are grateful to our loyal readers who have supported us throughout this journey since Jim's first post in June 2006. However, we believe it is time to evolve and provide an even better platform for our customers to access valuable insights and stay up-to-date with the latest in securities regulation news.

In line with our mission to deliver value and actionable insights to our customers, we are pleased to announce that readers can now access our daily securities news stories and thought leadership on our platform at VitalLaw.com. Our team of experienced editors will continue to provide timely and accurate news coverage of the latest regulatory changes, enforcement actions, and significant court decisions that impact the securities industry.

Thank you for your continued support, and we look forward to serving you on VitalLaw.com.

CorpFin director clarifies disclosure of material cybersecurity incidents

noreply@blogger.com (Unknown) — Fri, 24 May 2024 09:00:00 +0000

By Rodney F. Tonkovic, J.D.

Erik Gerding, the Director of the SEC's Division of Corporation Finance, issued a statement on the requirement that public companies disclose material cybersecurity incidents. The statement is intended to clarify the distinction between the mandatory disclosure of a material cybersecurity incident and voluntary disclosures of other cybersecurity incidents. Gerding said that the statement is not meant to discourage voluntary disclosure of incidents but to encourage voluntary disclosures in a manner that does not confuse investors or dilute the value of disclosures of material incidents.

Disclosure rules. The SEC adopted final rules requiring, inter alia, disclosure of material cybersecurity incidents on Form 8-K. New Item 1.05 in Form 8-K requires the disclosure of any cybersecurity incident determined to be material, plus a description of the nature and impact of the incident. In December 2023, soon before some of the new requirements went into effect, Gerding discussed the rules, their rationale, and their mechanics.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

SEC fines ICE, NYSE $10 million for failing to notify about cyber breach

noreply@blogger.com (Unknown) — Thu, 23 May 2024 14:11:00 +0000

By Lene Powell, J.D.

The Intercontinental Exchange, Inc. (ICE) and nine subsidiaries including the New York Stock Exchange (NYSE) agreed to pay a $10 million penalty to resolve SEC charges relating to notification of a cyber intrusion. ICE knew of a likely breach of its corporate network but did not notify the SEC or its own legal and compliance personnel for several days, in violation of Regulation SCI (In the Matter of Intercontinental Exch. Inc., Exchange Act Release No. 100206 (May 22, 2024).

“When it comes to cybersecurity, especially events at critical market intermediaries, every second counts and four days can be an eternity,” said SEC Enforcement Director Gurbir Grewal. “Today’s order and penalty not only reflect the seriousness of the respondents’ violations, but also that several of them have been the subject of a number of prior SEC enforcement actions, including for violations of Reg SCI.”

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

CFTC keeps a wary eye on AI in financial markets

noreply@blogger.com (Unknown) — Wed, 22 May 2024 13:34:00 +0000

By Lene Powell, J.D.

While artificial intelligence offers dazzling new capabilities for financial market participants, AI also raises concerns about opaque “black box” technology and potential market volatility, fraud, and manipulation.

In a new Vital Briefing, Wolters Kluwer Senior Legal Analyst Lene Powell details CFTC actions to build an AI governance framework as it looks to address risks while avoiding heavy-handed regulation.

Read the full briefing and other securities news from Wolters Kluwer at VitalLaw.com.

House FSC advances resolution to disapprove SEC’s cyber regulation

noreply@blogger.com (Unknown) — Tue, 21 May 2024 11:00:00 +0000

By Mark S. Nelson, J.D.

The House Financial Services Committee voted last week to report a Congressional Review Act (CRA) resolution disapproving the SEC’s latest cybersecurity disclosure regulation. The measure was one of three considered and reported by the committee and demonstrates how the month of May has been a busy one for securities legislation that also has seen Congress send a CRA resolution on SEC staff guidance to the White House and lay the groundwork for the full House to mull blockchain legislation in the coming week that, if enacted would divvy crypto regulatory authorities between the SEC and the CFTC. The cybersecurity resolution, along with two other bills dealing with SEC rulemaking reforms and the exclusion of personally identifiable information (PII) from the consolidated audit trail (CAT), were reported by the House FSC on party lines by votes of 27-22. The White House has already indicated a likely veto of the similar Senate resolution introduced last year.

Cyber CRA resolution. In terms of the timing of the cybersecurity CRA resolution, the resolution would repeal a regulation that is currently in effect and for which compliance is already required by most public companies, with the exception of smaller reporting companies, which must shortly comply with certain requirements by mid-June 2024, and with respect to inline XBRL mandates for all subject companies for which compliance is required by mid-December 2024. Thus, companies are now well into their efforts to comply with the SEC’s expanded, formal disclosure regime for cybersecurity incidents.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Delaware should wait and see on stockholder-agreement fallout, CII argues

noreply@blogger.com (Unknown) — Mon, 20 May 2024 11:00:00 +0000

By Anne Sherry, J.D.

The Council of Institutional Investors (CII) is urging the Delaware State Bar Association to hit pause on recommending that the state legislature overturn a judicial decision. CII said the decision earlier this year reflected a reasoned analysis whereby the Court of Chancery struck down parts of a stockholder agreement that constrained the board’s authority to act, but left in place other restrictions that were consistent with state law. But the industry group’s main issue with the proposed legislation is that there is no need to rush a law through without full analysis and debate.

The basis for the holding in West Palm Beach Firefighters’ Pension Fund v. Moelis & Company, No. 2023-0309-JTL (Del. Ch. Feb. 23, 2024), is that as a matter of Delaware corporate law, a corporation is managed by the board. The court accordingly struck down provisions of a stockholder agreement that compelled the board to recommend the stockholder’s designees for election; compelled filling a vacancy created by a departing designee with another designee; and enabled the stockholder to prevent the board from increasing the number of director seats.

Read the rest of the story and other securities news from Wolters Kluwer on VitalLaw.com.

Independent advisers report $128 trillion in assets under management as of year-end 2023

noreply@blogger.com (Unknown) — Fri, 17 May 2024 13:42:00 +0000

By Suzanne Cosgrove

A new investment adviser statistics report released Wednesday by the SEC’s Division of Investment Management reveals more than 15,000 registered investment advisers had approximately $128 trillion in regulatory assets under management (RAUM) as of December 2023, as the number of SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) also posted steady growth over the past 10 years.

The tallies in the report are based on aggregated data filed by investment advisers on the SEC’s Form ADV.

“Providing accessible, usable, aggregated data to the public is a critical part of the SEC’s role,” said SEC Chair Gary Gensler in a release. “This new report will give the public a clearer view into the investment advisory industry,” he added. “Such SEC-published data help the public better understand how our economy and securities markets function.”

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

SEC chief accountant urges accounting firm leaders to improve ‘tone at the top’

noreply@blogger.com (Unknown) — Thu, 16 May 2024 14:55:00 +0000

By Lene Powell, J.D.

A healthy “tone at the top” is crucial for public accounting firms in maintaining culture, professional skepticism, quality control systems, and public responsibility as gatekeepers of U.S. capital markets, SEC Chief Accountant Paul Munter said in a new statement. He encouraged firm leaders to instill an ethical culture by rewarding difficult stands, boosting candor and transparency, and structuring businesses appropriately, among other actions.

“[I]t is critical that leaders of public accounting firms lead by example and foster a healthy tone at the top by prioritizing integrity and professionalism over profit and growth,” said Munter.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

SEC, FinCEN propose new customer ID requirements for certain investment advisers

noreply@blogger.com (Unknown) — Wed, 15 May 2024 12:58:00 +0000

By Lene Powell, J.D.

To boost efforts against money laundering and terrorist financing, the SEC and FinCEN jointly proposed a new rule requiring certain investment advisers to have customer identification programs (CIPs). The rule would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish, document, and maintain written CIPs to identify and verify the true identity of their customers (Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers, Release No. BSA-1 (May 13, 2024)).

SEC Chair Gary Gensler said the proposed rule is designed to make it more difficult to use false identities to establish customer relationships with investment advisers.

“I support this proposal because it could reduce the risk of terrorists and other criminals accessing U.S. financial markets to launder money, finance terrorism, or move funds for other illicit purposes,” said Gensler.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Nvidia plaintiffs deny any circuit split

noreply@blogger.com (Unknown) — Mon, 13 May 2024 14:16:00 +0000

By Anne Sherry, J.D.

The Supreme Court should not hear an appeal of a Ninth Circuit decision adverse to NVIDIA Corporation, according to the plaintiffs. The defendants’ cert petition argues that the Ninth Circuit panel created one circuit split by allowing an expert opinion to be used to prove falsity, and deepened another by allowing scienter claims to rest on speculation about what was in some internal reports. But the plaintiffs push back on the idea that there is a circuit split at all, arguing that the PSLRA’s stay on discovery means that some allegations will lack full evidentiary support in early stages of the litigation (NVIDIA Corp. v. E. Öhman J:or Fonder AB, Respondent's Brief in Opposition (U.S. May 6, 2024) (No. 23-970)).

Background. Last August, in a 2-1 decision, the appellate panel revived some claims alleging that the defendants fraudulently downplayed the extent to which Nvidia’s gaming revenues relied on the demand for cryptocurrency. Dissenting, Judge Sanchez observed that the complaint’s central falsity allegation was based entirely on a post-hoc analysis by an outside expert that relied on generic market research and questionable assumptions. Furthermore, the complaint did not put forward any internal report or data source that would have put executives on notice that their statements were false or misleading when made; the only specific allegation of an internal study supported the defendants’ statements.

Nvidia’s cert petition asks the Supreme Court to consider whether, as held by the Second, Third, Fifth, Seventh, and Tenth Circuits, plaintiffs alleging scienter must plead with particularity the contents of the internal documents on which they rely. Secondly, it asks whether plaintiffs can satisfy the PSLRA’s falsity requirement by relying on an expert opinion to substitute for particularized allegations of fact.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Crowdfunding, angel investment seen as top small-business capital raising alternatives

noreply@blogger.com (Unknown) — Fri, 10 May 2024 14:26:00 +0000

By Suzanne Cosgrove

While small and early-stage businesses often begin as start-ups funded with the help of friends and family, achieving “real success” often outstrips those friends’ and families’ available capital, said SEC Chairman Gary Gensler. “That’s why alternative methods of capital raising can play such a critical role” in the growth of small business, he added.

Addressing the SEC’s Small Business Capital Formation Advisory Committee ahead of its Monday meeting, Gensler noted angel investing and crowdfunding are two such alternatives that have played key roles in the development of vibrant private markets alongside public markets. Further, “I believe the U.S. economy has benefitted from capital formation in both the private and public markets,” he said.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

House disapproves SEC digital asset accounting and custody guidance

noreply@blogger.com (Unknown) — Thu, 09 May 2024 13:57:00 +0000

By Mark S. Nelson, J.D.

A Republican-led effort to overturn the SEC’s Staff Accounting Bulletin No. 121, which sought to provide guidance to firms on the proper methods to account for the custody of digital assets, picked up a few Democratic members’ votes on its way to passage in the House today. The use of the Congressional Review Act (CRA) has spiked in recent years, although most such resolutions still fail to take effect when a political party does not control both the White House and Congress. The Biden Administration has already telegraphed a presidential veto if the resolution were to reach the president’s desk. The resolution passed by a vote of 228-182 with 21 Democratic votes in favor of the resolution. The resolution now goes to the Senate.

The contents of SAB No. 121 consist of three Q&A-style sets of guidance, although it is the first question regarding how to account for the safeguarding of crypto assets that has drawn the most attention. The SEC stated that a crypto firm should enter a liability and asset on its balance sheet for any custodied crypto and that the value of the safeguarding liability and the asset should be the fair market value of the crypto assets held for platform users. The remaining Q&As deal with disclosure matters and the time frame for applying the guidance to financial statements.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Securities Regulation Daily's Top 10 developments for April 2024

noreply@blogger.com (Unknown) — Wed, 08 May 2024 14:52:00 +0000

By Rodney F. Tonkovic, J.D.

The news in April, as in March, was dominated by the coming conflict over the SEC's climate risk disclosure rule. The battle lines have largely been drawn, and the sides have begun maneuvering for advantageous positions. In March, the final rule was given an effective date in May 2024, but the Commission has now stayed its effectiveness pending the outcome of the litigation. In light of the stay, the Commission asked the court to deny the accumulated motions for emergency stay of the rule. Soon after, a coalition of 18 states sought to join the litigation on the SEC's side. Legislatively, the House Financial Services Committee has advanced a resolution to disapprove the regulation.

In the courts, the big news involves the Supreme Court deciding that absent a misleading statement, pure omissions are not actionable as securities fraud. The ruling limits the type of federal securities fraud claims that may be brought by investors as the Court resolved a circuit split on whether a failure to make a disclosure required by Item 303 can support a private claim. Elsewhere, the Second Circuit affirmed the dismissal of Exchange Act claims against Coinbase due to insufficiently pleaded transaction-specific contracts. In the states, the Delaware Supreme Court held that the presence of one conflicted committee member precluded MFW cleansing of a controller-led spinoff.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Delaware’s circuit adopts de novo review for demand futility appeals

noreply@blogger.com (Unknown) — Tue, 07 May 2024 17:01:00 +0000

By Anne Sherry, J.D.

The Third Circuit adopted the de novo standard for reviewing dismissals of shareholder derivative actions for failure to plead demand futility. The decision overrules Blasband v. Rales (3d Cir. 1992) and other precedent to the extent they provide for abuse-of-discretion review in these cases (In re Cognizant Technology Solutions Corporation Derivative Litigation, No. 22-3027 (3d Cir. May 3, 2024).

The court’s en banc decision aligns its thinking on demand futility appeals with its current practice of reviewing other dismissals on the pleadings de novo. It also aligns the federal-court standard within the circuit with the standard adopted by the supreme courts of two of its constituent states (Delaware and New Jersey). The First, Second, Seventh, Eighth, and Tenth Circuits also exercise de novo review in demand futility cases.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Conservative legal group seeks to join SEC climate challenge

noreply@blogger.com (Unknown) — Mon, 06 May 2024 13:33:00 +0000

By Mark S. Nelson, J.D.

A new petition for review of the SEC’s climate risk disclosure regulation filed by the New Civil Liberties Alliance on behalf of the self-described conservative group National Center for Public Policy Research seeks to join an already crowded field vying for a role in the consolidated challenge to the regulation in the Eighth Circuit. The Judicial Panel on Multidistrict Litigation previously held a random drawing that resulted in the several petitions for review of the SEC’s climate regulation being sent to the Eighth Circuit, but that drawing only applied to petitions that were filed during a short window soon after the SEC adopted the final version of the regulation (National Center for Public Policy Research v. SEC, April 29, 2024).

The petition itself, as is typical, says little about what arguments the groups plan to assert in court, but a press release issued by the NCLA announcing the lawsuit suggests the groups will make arguments similar to those already suggested by other petitioners, including alleging that the SEC exceeded its authority and that some provisions in the climate regulation violate the First Amendment. Other petitions already filed in the case have made more specific arguments around the Administrative Procedure Act and the Supreme Court’s more recently articulated major questions doctrine.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Report examines Reg Crowdfunding results for women- and minority-owned businesses

noreply@blogger.com (Unknown) — Fri, 03 May 2024 15:17:00 +0000

By Anne Sherry, J.D.

A report commissioned by the SEC’s Office of the Advocate for Small Business Capital Formation finds that investors undervalue crowdfunding offerings by women and minority entrepreneurs. If disparities in funding continue, Regulation Crowdfunding could perpetuate inequalities in business outcomes. The report suggests that government and Reg CF platforms should try to encourage participation by and offer support to women and minority entrepreneurs, as well as attempt to counter investor bias through educational programs.

Seven years of crowdfunding. The proportion of women among all individual entrepreneurs participating in Reg CF increased from 17.3 percent in 2016 to 22.5 percent in 2022. Reg CF startups also became more racially diverse, with the proportion of white entrepreneurs decreasing from 83.4 percent in 2016 to 73.0 percent in 2022. As for gender diversity, in 2016, 79.2 percent of founder teams using Reg CF were entirely male; 11.2 percent were mixed gender; and 9.6 percent were all female. By 2022 the proportion of mixed-gender and all-female teams had increased to 17.8 percent and 14.2 percent, respectively; only 68 percent of founder teams were all male.

While these numbers do show increasing diversity among Reg CF businesses, the report notes that participation by women and minority entrepreneurs still lags compared to the overall business owner population. According to the report, this underscores the critical need for policy intervention to increase the visibility and accessibility of Reg CF to women and minority business leaders.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Groups press CFTC on risks of AI in financial markets, caution on overregulation

noreply@blogger.com (Unknown) — Thu, 02 May 2024 14:32:00 +0000

By Lene Powell, J.D.

Accelerated use of “black box” artificial intelligence in financial markets could cause oversight challenges and market volatility, consumer groups warned in a comment letter to the CFTC. AI could also increase “herding” behavior and cybersecurity risk due to market dominance by a small number of AI technology companies. Better Markets exhorted the CFTC to address AI risks with “strong, targeted rules, aggressive enforcement, and ample expertise and resources.”

But industry groups FIA, SIFMA, and the U.S. Chamber of Commerce urged the CFTC to exercise regulatory restraint, saying that financial markets have been using AI for some time and existing regulatory frameworks have successfully adapted to technological change in the past. The associations asked the CFTC to take a principles-based approach and engage further with market participants.

The feedback was in response to a CFTC request for comment on AI use and risks in CFTC-regulated markets. The CFTC is collecting information as part of a broader staff effort to monitor the adoption of AI in CFTC-regulated markets, including machine learning and other uses of automation.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

CFTC amends capital and financial reporting requirements for SDs and MSPs

noreply@blogger.com (Unknown) — Wed, 01 May 2024 13:07:00 +0000

By Anne Sherry, J.D.

The CFTC finalized rules intended to make it easier for swap dealers and major swap participants to comply with financial reporting obligations and demonstrate compliance with minimum capital requirements. The rules codify previous CFTC staff letters regarding calculating capital and alternate financial reporting. They also revise certain Part 23 regulations regarding financial reporting. The final rule will apply to all financial reports with an “as of” reporting date of September 30, 2024, or later.

The Commission permits swap dealers to select one of three methods to calculate their capital requirements: the net liquid assets capital approach; the bank-based capital requirements; or the tangible net worth capital approach. The rules primarily affect swap dealers electing the tangible net worth capital approach, as well as non-U.S.-bank swap dealers. The Commission believes that adopting amendments consistent with important staff letters, while adding specificity or detail to existing requirements, will help swap dealers clearly demonstrate compliance.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

CFTC Commissioner Johnson urges vigilance in addressing AI integration risks at FIA L&C Panel

noreply@blogger.com (Unknown) — Tue, 30 Apr 2024 14:06:00 +0000

By Elena Eyber, J.D.

CFTC Commissioner Kristin N. Johnson delivered opening remarks at the FIA L&C Panel by emphasizing the significance of ongoing dialogues about the impact of emerging technologies like generative AI on financial markets. While these innovations hold promise for advancements in various sectors, Johnson cautioned against overlooking the potential risks associated with their integration without proper oversight.

Johnson highlighted three key interventions she has advocated for as a Commissioner. First, Johnson emphasized the need for heightened penalties for fraudulent or manipulative use of AI in financial markets, stressing the importance of adapting surveillance technologies to keep pace with market evolution. Second, Johnson called for a principles-based regulatory framework to address the increasing prevalence of AI, citing the CFTC's initiatives to understand AI's uses and potential risks. Third, Johnson proposed the establishment of an inter-agency task force to harmonize safeguards and ensure market stability and integrity.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

SEC sued over dealer rule’s impact on liquidity pools

noreply@blogger.com (Unknown) — Mon, 29 Apr 2024 12:52:00 +0000

By Anne Sherry, J.D.

Two crypto industry groups are suing the SEC over the agency’s Dealer Rule, which requires market participants who perform dealer functions to register with the Commission and join FINRA and the SIPC. Crypto Freedom Alliance of Texas and Blockchain Association cite six alleged violations of the Administrative Procedure Act in seeking an injunction blocking the rule. In the plaintiffs’ view, the new rule “represents simply the latest example of the Commission’s attempts to thoughtlessly apply rules geared toward traditional financial markets to the digital assets industry” (Crypto Freedom Alliance of Texas v. SEC, April 23, 2024).

Parties. Both plaintiffs are 501(c)(6) nonprofits devoted to promoting innovation in the digital assets industry. CFAT specifically advocates for the responsible development of crypto regulation in Texas, believing the state should play a leading role in fostering innovation and economic growth using blockchain technology. Blockchain Association’s members are software developers, infrastructure providers, exchanges, custodians, investors, and others supportive of the blockchain ecosystem. CFAT is a co-plaintiff in a pending lawsuit, also in the Northern District of Texas, that challenges SEC’s regulatory claim over crypto assets.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

DOL’s final fiduciary rule gets mixed reviews from industry groups

noreply@blogger.com (Unknown) — Fri, 26 Apr 2024 14:00:00 +0000

By Suzanne Cosgrove

The Department of Labor this week issued a final rule that defines the role of an investment advice fiduciary for purposes of Title I and Title II of ERISA, categorizing a person as an investment advice fiduciary if they provide recommendations to investors on a regular basis as part of their job, or if they represent that they are acting as a fiduciary under Title I or Title II of ERISA, or both.

The investment recommendations also must be provided “for a fee or other compensation, direct or indirect” as defined in the final rule, the DOL said.

The Department said the updated final rule better reflects the text and the purposes of ERISA and better protects the interests of retirement investors, compared with the previous regulatory definition, which was last finalized in 1975.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

Rulemaking petition seeks to cut 13F filing period by 90 percent

noreply@blogger.com (Unknown) — Thu, 25 Apr 2024 14:10:00 +0000

By Rodney F. Tonkovic, J.D.

Three groups representing the interests of over 2,400 public companies have filed a rulemaking petition asking to reduce the Form 13F filing period to 5 business days. Submitted by The Society for Corporate Governance ("Society"), the National Investor Relations Institute ("NIRI"), and NYSE Group, Inc. ("NYSE"), the petition asks the SEC to modernize its disclosure rules under Section 13(f). Doing so, the petitioners say, would improve the usefulness of Form 13F filings and increase investor confidence in the securities markets.

Form 13F. Under Exchange Act Section 13(f), institutional investment managers are required to file a report on Form 13F if they exercise investment discretion over accounts holding an aggregate fair market value of at least $100 million on the last trading day of any month. The reports must be filed within 45 days of the last day of each calendar quarter, and managers may request extensions beyond that period.

2013 petition. The new petition follows up on a 2013 petition on the same topic. The 2013 petition argued that the 45-day filing period us unnecessarily long and keeps material information from reaching shareholders on a timely basis. In addition, the existing timeframe could encourage managers to use the 45-day period to delay reporting significant purchases or sales until long after the fact. The petition asked the Commission to shorten the reporting period to two business days after the end of the calendar quarter.

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

MSRB moves forward on market regulation proposals

noreply@blogger.com (Unknown) — Wed, 24 Apr 2024 15:34:00 +0000

By Anne Sherry, J.D.

At its recent quarterly meeting, the Board of Directors of the Municipal Securities Rulemaking Board advanced several market regulation and market transparency initiatives germane to its strategic plan. These include a request for comment on proposed changes to make associated person information from bank dealers available for display on MSRB.org. “Modernizing MSRB rules and technology is a key focus for the Board as it works to provide greater transparency while protecting and strengthening the municipal securities market," said MSRB Chair Meredith Hathorn.

Market regulation. The Board approved issuing a request for comment on proposed changes to MSRB Form A-12 to collect associated person information from bank dealers for display on MSRB.org, similar to information made available by the MSRB on associated persons of municipal advisors, as well as on certain potential technical amendments to Rule A-12.

Read the rest of the story and other securities news from Wolters Kluwer on VitalLaw.com.

SOX prohibition on record tampering applied outside of securities context

noreply@blogger.com (Unknown) — Tue, 23 Apr 2024 13:48:00 +0000

By Anne Sherry, J.D.

A pair of provisions inspired by Enron’s document destruction have applicability beyond the securities context. The D.C. Circuit recently held that the provisions apply to election fraud and to an obstruction charge in the prosecution of a January 6 participant. In oral argument in the appeal of the latter case, the Supreme Court grappled with how broadly to construe Sarbanes-Oxley’s prohibition on “otherwise obstruct[ing]” an official proceeding (U.S. v. Benton, April 19, 2024, Henderson, K.).

The criminal law provisions. Sarbanes-Oxley added several provisions to title 18 of the U.S. Code in the wake of Enron and other accounting scandals. Section 1512(c) sets forth the punishment for a person who “corruptly (1) alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding; or (2) otherwise obstructs, influences, or impedes any official proceeding, or attempts to do so.”

Section 1519 states the penalty for a person who “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case.”

Read the rest of the story and other securities news from Wolters Kluwer at VitalLaw.com.

The Panopticon is here: Legal org sues Gensler over CAT rule

noreply@blogger.com (Unknown) — Mon, 22 Apr 2024 13:04:00 +0000

By Rodney F. Tonkovic, J.D.

The National Center of Public Policy Research filed a complaint looking to block the SEC's Consolidate Audit Trail regulation. The NCPPR says that it is challenging the SEC's "shocking arrogation of power" to impose dystopian surveillance and suspicionless seizures and searches on millions of American investors. The complaint argues that the Commission lacks any authority, history, or oversight structure that would allow it to seize and surveil investors' private information. The complaint asks that the court declare Rule 613 to be null and void and that its implementation be enjoined (Davidson v. Gensler, April 16, 2024).

CAT rule. The SEC added Rule 242.613 in Release No. 34-67457 in 2012. The rule requires national securities exchanges to submit an NMS plan to implement a consolidated audit trail. The rule requires that the system be able to collect and accurately identify every order, cancellation, modification, and trade execution for all exchange-listed equities and equity options across all U.S. markets, from the time of order inception through routing, cancellation, modification, or execution.

CAT suit. The complaint argues that the SEC, with no statutory authority, adopted Rule 613, which has created what would be the largest database of securities data ever. The plaintiff National Center for Public Policy Research ("NCPPR") likens the operation of the rule to Jeremy Bentham's "Panopticon," a prison system featuring 24-hour surveillance. While the Panopticon would only apply to prisoners, the SEC's scheme seizes personally identifiable records for everyone who trades on an American exchange. There is nothing, the complaint says, in the securities laws that gives the SEC the power to regulate the investment decisions of Americans or to gather all investment data from them or their brokers.

Read the rest of the story and other securities news from Wolters Kluwer on VitalLaw.com.