Excerpt from Fundamentals of Broker-Dealer Regulation 2016
On July 12, 2016, the U.S. Department of Justice (the “DOJ”) announced that investment firm ValueAct had entered into a consent decree in which it agreed to pay $11 million to settle charges that two of its affiliated funds acquired large stakes in Halliburton Company (“Halliburton”) and Baker Hughes Incorporated (“Baker Hughes”) in violation of the notification and waiting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The DOJ asserted that ValueAct was required to make an HSR Act filing, but ValueAct had asserted that no such filing was required due to the “investment-only” or so-called “passive investor” exemption. On the heels of such announcement, the Securities and Exchange Commission (the “SEC”) provided clarification that it does not view the inability to utilize the “passive investor” exemption under the HSR Act as equivalent to an investor not being considered “passive” for purposes of Section 13(d) under the Securities Exchange Act of 1934 (the “Exchange Act”).
The Financial Industry Regulatory Authority is once again taking a close look at member firm mutual fund sales practices and sales charge waivers (Mutual Fund Waiver Sweep) in the U.S. FINRA’s target exam letter seeks information about mutual fund sales to retirement plans and charitable accounts, as well as the sales charge waivers that mutual funds make available to eligible purchasers. FINRA’s Mutual Fund Waiver Sweep covers the period from January 1, 2011 through December 31, 2015 and, as drafted, seeks responses from FINRA member firms by June 10, 2016.
The Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) on January 11, 2016 announced its examination priorities for this year, which “address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, [and] clearing agencies.” The priorities, as in 2015, focus on the following: protecting retail investors and investors saving for retirement; assessing market-wide risks; and using data analytics to identify elevated risk profiles and signal potential illegal activity.
In a separate letter, OCIE identified its priorities for the national securities exchanges.