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An exhaustive analysis of the current state of play of both the old and new law and the regulations promulgated thereunder. A one‐stop analysis of the state of the requirements under the USA Patriot Act and particularly how it affects broker‐dealers.

Traditionally, full-service broker/dealers catering to institutional investors have bundled trade execution with investment research. Since 2018, new market regulation has forced broker/dealers to unbundle and to sell research separately. The purpose of this paper is to shed some light on the expected pricing of research.

A stylized model is presented in this study in which a monopolist fixed income, currencies and commodities (FICC) research provider faces a linear demand function and picks an appropriate price schedule.

It is shown that it is important to initiate the price discovery process using a low price and that some broker/dealers will not be able to identify a regulatory compliant price/quantity solution because their research-production fixed cost is very high compared to the research demand function they face.

There are three main findings from our model: pricing research at cost is not always possible; if there is a unique solution, an iterative approach only works when starting off with a low-enough initial price; and if there are two solutions, only the low-cost/high-volume solution can be discovered in an iterative process.

The results presented are important to broker/dealers about to discover the market demand for their FICC research publications on the back of the implementation of MiFID II. Having distributed FICC research for free in the past, they have no knowledge about the demand function (other than what is demanded at a price of zero). Because research publications are highly differentiated products, observing the pricing of competitors is insufficient. Iteratively gaining knowledge about the demand function using price adjustments and customer questionnaires becomes the most likely mean for discovering the demand function. It is important to initiate the price discovery process with a low price. Some broker/dealers will not be able to identify a regulatory compliant price/quantity solution because their research-production fixed cost is too high compared to the research demand function they face. Finally, it is shown that these broker/dealers with two possible equilibriums face difficulty in identifying the high-price/low-volume research equilibrium because of the non-converging nature of the iterative process.

To describe and analyze in detail an Interpretive Release (the “2006 Interpretation”) approved on July 12, 2006 by the US Securities and Exchange Commission (“SEC”) regarding the soft dollar safe harbor under Section 28(e) of the Securities Exchange Act of 1934.

Following a brief discussion of the history of soft dollars, describes and analyzes in greater detail relevant aspects of the 2006 Interpretation, including an explanation of the three‐part test concerning the use of soft dollars to pay for products and services under the safe harbor, a discussion of “mixed use” items, further detail on soft dollar arrangements, an explanation of liabilities and obligations of managers and broker dealers, and an implementation timeline.

Under the 2006 Interpretation, a money manager may rely on the safe harbor to acquire products or services only upon satisfaction of each part of a three‐part test. First, does the product or service meet the eligibility criteria of Section 28(e)(3)? Second, does the eligible product or service provide lawful and appropriate assistance in the performance of relevant responsibilities? Finally, may the money manager properly conclude, in good faith, that the commissions paid are reasonable in relation to the value of the research and brokerage products and services provided by the broker (in relation either to the particular transaction or to the money manager's overall responsibilities with respect to discretionary accounts)? The 2006 Interpretation also is relevant to broker‐dealers who may receive soft dollars. Under Section 28(e), a money manager can pay soft dollars only to broker‐dealers who “provide” research or brokerage services and “effect” transactions. Under the 2006 Interpretation, the circumstances under which broker‐dealers will be seen as “providing” services and “effecting” transactions will be interpreted more broadly than under past interpretations, allowing brokers and money managers greater flexibility to structure soft dollar and commission‐sharing arrangements in a manner that will better serve the interests of investors.

Provides a detailed analysis of the 2006 Interpretation concerning soft dollars.

The anti‐money‐laundering provisions of the USA Patriot Act of 2001 (the “Patriot Act”) continue to cause a profound transformation in the way the United States investment industry conducts its business. Over the past year under the authority of the Patriot Act, which amended the Bank Secrecy Act (“BSA”), the United States Department of Treasury (“Treasury”) and the relevant federal regulators have issued rules requiring a broad range of compliance mechanisms, including: the establishment of anti‐money‐laundering (“AML”) programs; the filing of suspicious activity reports; the prohibition against providing financial services to foreign shell banks (i.e., banks without physical locations); the maintenance of records with respect to accounts for foreign banks; and the sharing of transactional information among financial institutions and between financial institutions and law enforcement.

To provide an overview of the new uniform definition of “branch office” and to discuss how that definition will influence broker‐dealer supervisory programs.

Discusses the new definition of “branch office”, describes new NASD and New York Stock Exchange supervisory control system requirements and supervisory requirements for branch offices and other locations, and suggests guidelines for developing a branch office or remote office supervisory program.

In the current regulatory environment, no broker‐dealer should overlook regular and rigorous attention to supervision of branch offices and other remote locations. And in light of the new definition of a branch office, each broker‐dealer must include in its review and analysis a close evaluation of how the broker‐dealer supervises every location where broker‐dealer personnel engage in activities on behalf of the broker‐dealer and must document that evaluation.

Important reference for broker‐dealers’ branch office supervisory programs that underscores the need to pay proper attention to remote locations.

To explain the Customer Protection Rule Initiative announced by the Securities and Exchange Commission (SEC) and offer practical guidance for complying with Rule 15c3-3 under the Securities Exchange Act of 1934.

This article discusses Rule 15c3-3 under the Securities Exchange Act of 1934, related interpretative guidance, and the Customer Protection Rule Initiative announced in June 2016 by the SEC.

This article concludes that broker-dealers should take advantage of the Customer Protection Rule Initiative’s self-reporting mechanism and use this time to review their current account arrangements with banks, existing internal policies and procedures, and account documentation.

This article contains valuable information about the SEC’s Customer Protection Rule Initiative and practical compliance guidance from experienced securities lawyers.

The purpose of the paper is to describe the temporary and permanent exemptions issued by the Securities and Exchange Commission (SEC) to the large trader identification requirements under Rule 13h‐1.

Specifically, the paper provides: an explanation of the definition of a “large trader” as defined under Rule 13h‐1; an overview of the recordkeeping, reporting, and monitoring requirements under Rule 13h‐1; an explanation of the two‐tiered temporary exemption issued by the SEC; and an overview of the permanent exemption adopted by the SEC for certain capital market transactions in connection with determining whether a person is a large trader.

The SEC extended the April 30, 2012 compliance date under Rule 13h‐1 for registered broker‐dealers by 12 months to May 1, 2013; however, broker‐dealers that are either large traders, or have large trader customers that are either broker‐dealers or trade through a “sponsored access” arrangement, must be in compliance by November 30, 2012. The extension affords broker‐dealers additional time to develop, test, and implement recordkeeping and reporting systems required for compliance. Additionally, the SEC issued a permanent exemption for “dribble out” programs or offerings “crossed” on a national securities exchange, which were not originally exempted under the rule. The SEC determined that these transactions should not be counted for the purpose of determining whether a person meets the identifying activity level for a large trader given that the vast majority of primary offerings are excluded under the rule.

The paper provides practical guidance from experienced regulatory lawyers regarding an important proposed change.

As financial markets across the world become more integrated, the potential for financial shocks to be transmitted both from one jurisdiction to another and from one financial sector to another increases. At the same time differences in national regulatory arrangements can be the source of important competitive distortions between financial institutions. Against this background national authorities have been seeking to coordinate the regulation of securities firms and of banks undertaking securities business. This paper, which is published in two parts, aims to clarify some of the policy issues arising from recent convergence initiatives by examining the US capital adequacy rules for US investment firms and contrasting the US approach with European securities regulation as formulated in the Capital Adequacy Directive. The second part of this paper will be published in the next issue of Journal of Financial Regulation & Compliance.

The examination of broker‐dealers is an integral part of the United States Securities and Exchange commission's overall responsibility to enforce securities laws, protect investors, and ensure the maintenance of fair and orderly markets. This programme continues to evolve to keep pace with dynamic market developments. This paper provides an overview of the broker‐dealer examination process, and discusses several new developments in the examination programme. Particular focus is directed to the oversight of internal controls and risk management, and review of sales practices and supervisory procedures. Finally, there is a discussion of efforts undertaken to coordinate examinations by various state, federal and self‐regulatory authorities.

The purpose of this article is to inform the various securities market participants about new Exchange Act Rule 13h‐1, its specifics and the requirements it may impose.

The paper outlines the various requirements of the Rule and additional background information and some clarifications based on the SEC adopting release.

The Rule requires “large traders”, as defined in the Rule, to self‐identify to the SEC and to obtain from the SEC a large trader identification number (“LTID”) and provide the LTID to each US‐registered broker‐dealer through which it effects transactions in NMS securities. The Rule also requires US‐registered broker‐dealers to provide to the SEC, on request, data on large traders' transactions in NMS securities by the morning after the transactions are effected; and it requires US‐registered broker‐dealers to maintain books and records, and perform certain monitoring functions, with respect to these transactions. The SEC has also adopted Form 13H under Exchange Act Section 13(h). A large trader must submit to the SEC Form 13H as an “Initial Filing” to receive its LTID and file various periodic amendments thereafter.

The paper provides practical guidance from experienced securities lawyers. The authors hope the discussion in the paper will enable affected market participants, which include US‐ registered broker‐dealers as well as other persons within the Rule's definition of large trader, to be informed about and to prepare for compliance with the Rule.