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Emerald Group Publishing Limited
Copyright © 2013, Emerald Group Publishing Limited
Article Type: Editor’s letter From: Journal of Investment Compliance, Volume 14, Issue 2
We begin with a summary of the 2013 annual “SEC Speaks” conference by Brian Rubin, Carmen Brun, Jaliya Faulkner, Michael Freedman, Kurt Lenz and Jae Yoon, discussing the Securities and Exchange Commission’s (SEC’s) accomplishments in 2012 and its agenda for 2013 and providing an overview of the SEC’s most important rulemaking, projects and policy priorities across all of its divisions. Then Edward Pittman, Brenden Carroll, and Sean Murphy address the Municipal Securities Rulemaking Board’s Rule G-37, one of the earliest “pay-to-play” rules and a model for other similar rules. They describe a settled enforcement action in response to a municipal securities dealer’s violation of the rule summarize an SEC Office of Compliance Inspections and Examinations National Examination Risk Alert that identifies several practices the SEC staff considers problematic and in violation of MSRB rules as well as several useful practices firms have incorporated into their pay-to-play compliance programs. Stacy Fuller and Kurt Decko discuss the SEC’s lifting of its moratorium on the use of derivatives by actively managed exchange-traded funds (ETFs) two and one-half years after the SEC announced that it was conducting a review of funds’ use of derivatives.
Michael Philipp and Ignacio Sandoval describe the separate but related relief issued by the Commodity Futures Trading Commission (CFTC) and the SEC that permits the commingling and portfolio margining of centrally cleared credit default swap (CDS) positions held in customer accounts. They were prompted to write the article because the absence of portfolio margining of cleared CDS brought into focus the parallel, yet potentially inconsistent, regulatory treatment of cleared CDS by the CFTC and the SEC. The portfolio margining solution adopted by the two regulators will help to alleviate margin inefficiencies in related markets and will help promote the management of systemic risk.
Noting that over the past few years the independence of compensation committees and their advisors has been a hot-button corporate governance issue, Doreen Lilienfeld, John Cannon, Amy Gitlitz Bennett, and George Spera explain the amendments to the listing standards of the New York Stock Exchange and NASDAQ Stock Market on the independence of compensation committees and their selection of advisors pursuant to the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010.
Edward Eisert, Tony Katz, Giovanni Carotenuto and Melanie Ball address Rule 15a-6 under the Securities Exchange Act of 1934, which provides conditional exemptions from broker-dealer registration for foreign broker-dealers that engage in certain specified activities involving US investors. They summarize the SEC staff’s responses to 16 frequently asked questions that supplement prior guidance on issues that commonly arise under the rule. Some of those FAQs were addressed in a Proposed Rule Amendment in 2008 that was overtaken by the financial crisis and not adopted. The issues they address are similar to those presented with respect to the extra-territorial reach of the CFTC, particularly as a result of amendments made thereto by the Dodd-Frank Act.
Tim Aron explains the European Market Infrastructure Regulation, known as EMIR, the EU regulation requiring that all standardized over-the-counter (OTC) derivatives contracts be cleared through a central counterparty (CCP) and reported to a trade repository (TR). Similar regulations, including sections of the Dodd-Frank Act in the US, were enacted following the financial crisis across the G-20 nations. Finally, Neil Macleod and Robert Gaut discuss the controversial and far-reaching EU Financial Transaction Tax and the UK’s legal challenge to it. The EU’s justification for the FTT was both to ensure that the financial sector made a contribution to the costs of the taxpayer-funded bailouts during the financial crisis and to help strengthen the EU single market. Many in the U.K are concerned about the potential adverse impact that the introduction of such a tax could have on London’s position as a major financial center.
The summary of FINRA Notices covers an SEC rule requiring the filing of private placement memoranda or other offering documents with the SEC, amendments certain FINRA margin requirements, guidance on the scope of the terms “customer” and “investment strategy” in FINRA’s suitability rule, amendments to a rule that provides authority to FINRA to initiate trading and quotation halts in circumstances when it is necessary to protect investors and the public, and a Trade Reporting Notice on the reduction in reporting periods for transactions in agency pass-through mortgage-backed traded TBA (to be announced).
Henry A. Davis