All posts by Anna T. Pinedo

Anna T. Pinedo is a partner in the New York office of Morrison & Foerster LLP. Her practice is concentrated on securities and derivatives. She represents issuers, investment banks/financial intermediaries, and investors in financing transactions, including public offerings and private placements of equity and debt securities, as well as structured notes and other hybrid and structured products. Ms. Pinedo's full bio can be found here.

A Trio of FINRA Notices Focused on Capital Formation Issues

On April 12, 2017, FINRA released three regulatory notices for comment that propose amendments to various FINRA rules affecting capital formation. In connection with its release of the notices, FINRA President and CEO Robert Cook noted FINRA’s continuing commitment to assessing its regulations and their role in facilitating capital formation. This initiative is part of the comprehensive self-evaluation and improvement initiative that FINRA announced several months ago called the FINRA 360 initiative. The initiative, FINRA’s recent request for comment on its engagement efforts, and these regulatory notices certainly reflect a new tone. In all three notices, as discussed further below, FINRA specifically requests that commenters address the economic impacts of the rules, including costs and benefits, and the specific effects on the capital formation process.

Read More Here

Additional contributors to this post:

Hillel T. Cohnhcohn@mofo.com

Lloyd S. Harmetzlharmetz@mofo.com

SEC Adopts T+2 Settlement Cycle for Securities Transactions

On March 22, 2017, as previously anticipated by the market, the SEC adopted an amendment to Rule 15c6-1 under the Securities Exchange Act of 1934 to shorten the standard settlement cycle for most broker-dealer transactions from three business days after the trade date (T+3) to two business days (T+2).  The SEC proposed the amendment on September 28, 2016, in connection with a variety of related changes to the SEC’s rules and the rules of self-regulatory organizations such as FINRA to facilitate the U.S.’s move to a T+2 settlement cycle.

According to the SEC, Rule 15c6-1, as amended, is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to the shortened standard settlement cycle.

Read More Here

Additional contributor to this post:

Matthew J. Kutnermkutner@mofo.com

FINRA’s Engagement Initiative

FINRA’s March 2017 announcement of its engagement initiative provides an opportunity for the industry to consider FINRA’s activities on a much broader level.

FINRA’s special notice reflects its previously announced plans to examine its rules and procedures based on its interaction with the industry.  For example, in his cover letter to FINRA’s 2017 examination priorities letter, Robert Cook, FINRA’s President and CEO, discussed his “never ending” listening tour of the industry.

Read More Here

Additional contributor to this post:

Lloyd S. Harmetzlharmetz@mofo.com

 

Shortening the Settlement Cycle

In 2017, broker-dealers will be required to devote significant time and attention to preparing for a shortened settlement cycle.  As a means of reducing credit risk, counterparty risk and overall systemic risk, the Securities and Exchange Commission (SEC) has moved forward with proposed rules that would amend Rule 15c6-1(a) in order to reduce the settlement cycle to two business days (T+2).

Continue reading Shortening the Settlement Cycle

FINRA Investor Study

Recently, FINRA published a report regarding its investor survey (FINRA Investors in the US 2016).  The report summarizes findings from an online survey addressing investor relationships with broker-dealers and advisers, investor understanding of fees charged for investment services and investor literacy.  The survey finds that a very small percentage of investors own “complex securities,” such as REITs, options and structured notes, which have been a focus of regulatory attention.  Most investors own principally individual stocks and mutual funds.  More than half of those investors surveyed rely on the services of a broker or other professional adviser for some of their investment decisions, with the percentage being somewhat higher for investors aged 55 and higher.  Approximately 16% of those surveyed use robo-advisers.  In making investment decisions, 49% expressed a preference for paper deliver of documents.  An overwhelming percentage of investors (68%) rely on information from the company in which they are investing in order to make their investment decisions.  The investor literacy component of the survey questions revealed that many investors do not have a complete understanding of concepts like short selling and buying stocks on margin, which suggests that broker-dealers and investment advisers have continued work ahead of them in terms of investor education.